Sri B.S.Neelakanta, Hyderabad V. ACIT, Hyderabad

ITSSA 19/HYD/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8524 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 28-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Unexplained expenditure; Business income; Document seized; Peak credit; Block assessment; Onus to prove; Documents seized
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.(SS)A. NO. 19/HYD/2010 (BLOCK PERIOD: 1989-90 TO 1998-99 AND 1.4.1999 TO 2 7.7.1999) SHRI B.S. NEELAKANTA HYDERABAD PAN: ABRPB5950A VS. ASST. CIT CIRCLE 6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI A.V. RAGHURAM RESPONDENT BY: SHRI V. SRINIVAS O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 30.09.2010 FOR TH E BLOCK PERIOD 1989-90 TO 1998-99 AND FROM 1.4.1999 TO 27.7 .1999. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE LEARNED CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE FAILED TO PROVE THE NEXUS BETWEEN RECORDED RECEIPTS AND UN RECORDED EXPENDITURE, IN SPITE OF THE FACT THAT, SUCH NEXUS IS EVIDENCED BY THE ENTRIES IN SEIZED BOOKS. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE DIRECTION OF THE HONBLE ITAT IS THAT, THE SEIZED MATERIAL SHOULD BE CONSIDERED IN ITS ENTIRETY AND NOT INSULATION AND THEREBY ERRED IN CONFIRMING THE ADDITION OF RS. 1,95,03,920 THAT IS MADE FOR THE SAME REASON, WHICH WAS NOT ACCEPTED BY THE HONBLE ITAT IN THEIR EARLIER ORDER. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THERE WAS A SEARCH OPERATION AT THE PREMISES OF THE ASSESSEE AND HIS G ROUP I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 2 CONCERNS ON 27.7.1999. DURING THE SAID SEARCH, THE ASSESSEE HAD ADMITTED AN AMOUNT OF RS. 90 LAKHS AS THE UNDIS CLOSED INCOME OF THE ENTIRE GROUP. AFTERWARDS THE ASSESSE E FILED BLOCK RETURNS ADMITTING UNDISCLOSED INCOME AT RS. 50 LAKH S ONLY. BASED ON THE SEIZED MATERIAL AND EXPLANATION FILED BY THE ASSESSEE DURING THE COURSE OF SEARCH AS WELL AS ASS ESSMENT PROCEEDINGS, THE ORIGINAL ASSESSMENT U/S. 158BC WAS COMPLETED ON 30.7.2001 AT AN UNDISCLOSED INCOME OF RS. 2,99,09,930 WHICH INCLUDES PEAK NEGATIVE BALANCE IN THE BOOKS OF ACCOUNTS PREPARED BY ASSESSING OFFICER W.R.T. UN ACCOUNTED TRANSACTIONS AT RS.1,95,03,920/-. WHILE FRAMING TH E ORIGINAL ASSESSMENT THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF SEARCH CERTAIN BOOKS OF ACCOUNT WERE SEIZED AND AMONG THE SEIZED DOCUMENTS THERE WERE SMALL NOTEBOOKS MARKED AS ACL/A9 TO ACL/A/22 AND TWO LEDGER BOOKS MARKED AS A CL/A55 AND ACL/UE/27 WHICH CONTAINED TRANSACTIONS REGARDIN G CASH RECEIPTS AND PAYMENTS OF VARIOUS CONCERNS FOR THE P ERIOD 1.8.1977 TO 27.7.1999 WHICH WERE WRITTEN BY MR. JAG ADISH, ACCOUNTANT OF THE ASSESSEE. IN THE COURSE OF THE O RIGINAL ASSESSMENT THE ENTRIES IN THE NOTEBOOKS WERE VERIFI ED WITH THE REGULAR BOOKS OF ACCOUNT AND IT WAS FOUND THAT THES E BOOKS WERE REFLECTING THE TOTAL TRANSACTIONS OF THE GROUP CONC ERNS OF THE ASSESSEE. THESE ENTRIES CONTAINED ACCOUNTED AND UN ACCOUNTED TRANSACTIONS. IN ORIGINAL ASSESSMENT THE ACCOUNT A SCERTAINED THAT THOSE BOOKS REFLECTED THE AMOUNTS RECEIVED FRO M AND I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 3 PAYMENTS MADE TO THE GROUP CONCERNS. THE SAME WAS ALSO CONFIRMED BY THE ASSESSEE BY HIS STATEMENT DATED 17 .7.2001. THE ASSESSEE ALSO CONFIRMED THAT SOME OF THE ENTRIE S WERE NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. AFTER V ERIFYING ALL THE ENTRIES THE NEGATIVE PEAK BALANCE WAS WORKED AND CO NFRONTED TO THE ASSESSEE AND A STATEMENT FROM HIM WAS RECORDED U/S. 131 OF THE ACT. THE ASSESSEE STATED THAT HE DID NOT H AVE ANY OBJECTION TO THE METHOD ADOPTED BY THE ASSESSING OF FICER. IT WAS ALSO STATED THAT NEGATIVE PEAK WAS SEEN BECAUSE A PART OF THE ACCOUNTED RECEIPTS HAD BEEN CONSIDERED AS UNACC OUNTED AND THE ASSESSEE STATED THAT THERE WOULD BE A POSIT IVE PEAK OF RS. 190 LAKHS WHICH SHOULD BE GIVEN SET OFF AGAINST THE NEGATIVE ARRIVED AT OUT OF THE UNACCOUNTED ENTRIES. THOUGH THE ASSESSEE WAS ASKED TO FURNISH SUPPORTING DOCUMENTS AND PROVE THE NEXUS BETWEEN THE ACCOUNTED AND UNACCOUNTED ENTRIES TO SU PPORT THE CLAIM OF SETOFF, HE HAS FAILED TO EXPLAIN THE SAME. 4. IN FIRST APPELLATE STAGE, THE CIT(A) ALLOWED PAR T RELIEF TO THE ASSESSEE. FURTHER APPEAL TO THE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDER DATED 4.12.2008 RESTORED THE ISSUE RELAT ING TO ADDITION ON ACCOUNT OF PEAK NEGATIVE BALANCE TO THE FILE OF ASSESSING OFFICER WITH THE FOLLOWING DIRECTIONS: WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE IN HIS STATEMENT RECORDED U/S 131 DATED 17.7.2001 REPRODUCED ABOVE I N PARA 6 I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 4 OF THE ORDER IN ANSWER TO QUESTION NO.8 STATED THA T HE HAS NO OBJECTION AS PER THE METHODOLOGY ADOPTED BUT HE AL SO STATED THAT THE SURPLUS OF ACCOUNTED TRANSACTION HAS BEEN MET FROM UNACCOUNTED PAYMENTS WHICH ARE ALSO EVIDENT FROM TH E ENTRIES RECORDED IN THE IMPUGNED SEIZED MATERIAL. WE FURTH ER FIND THAT IN ANSWER TO QUESTION NO.9, THE ASSESSEE HAS ALSO DEMONSTRATED AS TO HOW THE SAME WAS ACCOUNTED FOR A ND UTILISED FOR MEETING UNACCOUNTED PAYMENTS. WE FURT HER FIND THAT IT WAS ALSO STATED BY THE ASSESSEE THAT RS.1,85,00, 000 WERE SIPHONED OFF FROM ANDHRA BANK WHICH HAS ALSO BEEN C ONFIRMED BY THE BANK MANAGER IN HIS STATEMENT RECORDED ON 2. 9.1999 AND WAS NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS HENCE THE SAME SHOULD HAVE BEEN GIVEN SET OFF AGAINST THE NEG ATIVE PEAK BALANCE BUT NO SUCH SET OFF WAS ALLOWED BY THE ASSE SSING OFFICER. HOWEVER, WE FIND THAT BOTH THE PARTIES HA VE NOT BROUGHT ANY SUPPORTING MATERIAL ON RECORD TO SHOW AS TO HOW THE NEGATIVE PEAK CREDIT SUPPORTING MATERIAL ON RECORD TO SHOW AS TO HOW THE NEGATIVE PEAK CREDIT OF RS.1,95,03,920/- WA S WORKED OUT BY THE ASSESSING OFFICER AND WHICH PARTICULAR E NTRIES WERE NOT GIVEN SET OFF AGAINST THE SAID NEGATIVE PEAK BA LANCE AND THE UNEXPLAINED CASH CREDIT OF RS.3,38,000 AND ALSO THE RE IS NO MATERIAL TO PROVE THE NEXUS. IN THE ABSENCE THEREF ORE WE FIND NO BASIS TO APPLY THE RATIO OF THE DECISIONS RELIED ON BY THE PARTIES AND HENCE WE ARE OF THE VIEW THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY W E SET ASIDE THE I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 5 ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS AC COUNT AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVAT IONS HEREIN ABOVE AND ACCORDING TO LAW 5. DURING THE COURSE OF SET ASIDE ASSESSMENT PROCEE DINGS THE ASSESSING OFFICER AFFORDED AN OPPORTUNITY TO TH E ASSESSEE TO PROVE THE NEXUS BETWEEN THE ACCOUNTED AND UNACCOUNT ED ENTRIES. THE ASSESSING OFFICER FOUND THAT THE ASSE SSEE COULD NOT PROVE THE NEXUS AND EVEN HE COULD NOT SHOW ANY ACCOUNTED ENTRY WHICH WAS REFLECTED AS UNACCOUNTED RECEIPTS. ACCORDINGLY THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASS ESSEE THAT PART OF THE ACCOUNTED RECEIPTS IS REFLECTED AS UNAC COUNTED RECEIPTS. IT WAS ALSO SUBMITTED BY THE ASSESSEE BE FORE THE ASSESSING OFFICER THAT HE PRAYED BEFORE THE TRIBUNA L THAT THE SEIZED MATERIAL SHOULD BE READ AS A WHOLE AND WITHO UT SEGREGATING INTO RECORDED AND UNRECORDED AND THE TR IBUNAL HAD DIRECTED TO SEE WHETHER THE NEGATIVE PEAK WAS MET F ROM THE RECEIPTS RECORDED. THE ASSESSEE HAD PREPARED THE S TATEMENT AFTER MERGING ACCOUNTED AND UNACCOUNTED ENTRIES AND ARRIVED AT THE NEGATIVE PEAK BALANCE OF RS. 8,94,000/-. IT WA S ALSO CONTENDED THAT DURING THE COURSE OF SEARCH NO PHYSI CAL CASH WAS FOUND. 6. THE ASSESSING OFFICER OPINED THAT THE PLEA REGAR DING READING OF THE SEIZED MATERIAL AS A WHOLE COULD NOT BE ACCEPTED. I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 6 HE HELD THAT AFTER THOROUGH VERIFICATION OF ACCOUNT ED AND UNACCOUNTED ENTRIES AND AFTER COMPARING REGULAR BOO KS AND UNACCOUNTED BOOKS, MATCHING AMOUNTS AND DATES WERE ELIMINATED. THE ASSESSING OFFICER HELD THAT THERE IS NO MERIT IN THE PLEA THAT ACCOUNTED RECEIPTS WERE REFLECTED AS UNACCOUNTED RECEIPTS. THE CONTENTION THAT BOTH SETS OF ACCOUNT S SHOULD BE TAKEN TOGETHER WAS NOT ACCEPTED BY HIM AND THE ASSE SSEE COULD NOT PROVE THAT ANY ACCOUNTED ENTRY WAS TAKEN AS UNA CCOUNTED ONE. 7. WITH REGARD TO THE CLAIM OF SET OFF FOR THE AMOU NTS WITHDRAWN FROM THE ANDHRA BANK ACCOUNT ALSO, THE AS SESSING OFFICER HELD THAT THE AMOUNTS WERE WITHDRAWN DURING THE PERIOD JANUARY, 1991 TO SEPTEMBER, 1994 AND THE PEAK WORKI NG IS FOR THE PERIOD 1.4.1997 TO 27.7.1999. ACCORDINGLY HE D ID NOT ACCEPT THE CLAIM OF SET OFF AGAINST SUCH WITHDRAWALS. HE ALSO OBSERVED THAT IN THE EARLIER PROCEEDINGS THE AMOUNT STIPEND FROM THE ANDHRA BANK HAD BEEN MENTIONED AT RS. 1,85,00,000 W HEREAS IN THE SET ASIDE PROCEEDINGS THE WITHDRAWALS WERE S HOWN AT RS.1,18,54,640. ACCORDINGLY THE NEGATIVE PEAK BALA NCER OF RS. 1,95,03,920 WAS TREATED AS UNEXPLAINED INCOME OF TH E ASSESSEE. HE ALSO ADDED THE CASH DEPOSIT OF RS.3,3 8,000 IN BANK OF BARODA, MASAB TANK BRANCH TO THE TOTAL INCO ME OF THE ASSESSEE AS HE COULD NOT FURNISH ANY EXPLANATION. I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 7 8. BEFORE THE CIT(A) THE AR OF THE ASSESSEE FILED A COPY OF THE COMPUTERIZED STATEMENT, PREPARED BY THE ASSESSI NG OFFICER FOR WORKING OUT THE PEAK ALONG WITH A COPY OF THE O RDER PASSED BY THE CIT(A)-I, HYDERABAD DATED 6.3.2003 AND THAT OF THE ITAT ORDER DATED 4.12.2008 IN ASSESSEES CASE. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ITAT REMITTED T HE MATTER BACK TO THE ASSESSING OFFICER TO CONSIDER THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER HEARING THE ASSESSEE ON T HE ISSUE OF RS.1,85,00,000 WHICH WAS SIPHONED OFF FROM THE ANDH RA BANK WHICH HAS ALSO BEEN CONFIRMED BY THE BANK MANAGER W HICH WAS NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. BOT H THE PARTIES HAVE NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT HO W THE NEGATIVE PEAK CREDIT OF RS.1,95,03,920 WAS WORKED O UT BY THE ASSESSING OFFICER AND WHICH PARTICULAR ENTRIES WERE NOT GIVEN SET OFF AGAINST THE SAID NEGATIVE PEAK BALANCE AND THE UNEXPLAINED CASH CREDIT OF RS.3,38,000 AND THERE WA S NO MATERIAL TO PROVE THE NEXUS. 9. IN THE FRESH PROCEEDINGS THE ASSESSEE PRODUCED T HE BOOKS PREPARED BY THE THEN ASSESSING OFFICER AFTER COMPUTERISING THE SEIZED MATERIAL AND DEMONSTRATED THAT THERE WAS A NEGATIVE BALANCE OF RS.8,94,000 ONLYH AND EVE N THE SAME WAS MET OUT OF THE MONEY DRAWN FROM ANDHRA BAN K BANUR BRANCH. ACCORDINGLY, IT WAS SUBMITTED THAT NO ADDI TION WAS REQUIRED TO BE MADE. HOWEVER, THE ASSESSING OFFICE R ONCE AGAIN MADE THIS ADDITION STATING THAT THE ASSESSEE HAD FAILED TO I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 8 DISCHARGE THE ONUS CAST ON HIM. THE LEARNED COUNS EL FOR THE ASSESSEE RELIED ON THE DECISIONS IN THE CASES OF SM T. USHA TRIPATHI VS. ACIT (66 TTJ 508) (ALL.), ACIT VS. FER TILIZERS TRADERS (83 TTJ 473) (ALL.) BESIDES THE DECISIONS REPORTED IN 72 ITD 155 AND 102 ITD 375 FOR THE CONTENTION THAT THE SEIZED MATERIAL, IF CONSIDERED, SHOULD BE CONSIDERED IN ITS ENTIRETY AN D NOT IN PIECEMEAL. HE CLAIMED THAT ALL THE AMOUNTS WERE RE CORDED IN THE SEIZED BOOKS AND THE EXPENSES WERE MET FROM THE RE ONLY AND THE SAME WAS LIKE A DAY BOOK. THE REPRESENTATI VE OF THE ASSESSEE SUBMITTED THAT NO FURTHER PROOF IS REQUIRE D TO DEMONSTRATE THAT THE UNRECORDED EXPENDITURE WERE ME T FROM THE RECORDED RECEIPTS, AS THE RECEIPTS ARE ENTERED IN T HE SEIZED BOOKS FIRST AND ARE ENTERED IN THE REGULAR BOOKS ON LY LATER. 10. THE CIT(A) HAS DISMISSED THE APPEAL OF THE ASS ESSEE STATING THAT UNLESS AND UNTIL THERE WAS SOME EVIDEN CE TO PROVE THAT EVEN THE UNACCOUNTED ENTRIES SO SEGREGATED HAD ANY NEXUS WITH ACCOUNTED RECEIPTS, THERE COULD NOT HAVE BEEN A CASE TO CONSIDER THE UNACCOUNTED ENTRIES ALONG WITH SUCH AC COUNTED ENTRIES. IT IS ALSO CLEAR THAT THE APPELLANT HAS D ONE NOTHING TO ESTABLISH THIS CLAIM EVEN DURING APPELLATE PROCEEDI NGS. HE DID NOT FIND ANY REASON TO DIFFER FROM THE VIEW THAT TH E PEAK NEGATIVE BALANCE OF RS.1,95,03,920 IS TO BE TREATED AS UNEXP LAINED AMOUNTS BROUGHT INTO THE BUSINESS BY THE ASSESSEE A ND IS, THEREFORE, TO BE TREATED AS UNDISCLOSED INCOME. RE GARDING THE CLAIM OF SET OFF OUT OF THE WITHDRAWALS FROM ANDHRA BANK I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 9 ACCOUNT, THE CIT(A) HELD THAT THE ASSESSEE COULD NO T EXPLAIN AS TO HOW THE WITHDRAWALS MADE DURING THE PERIOD JANUA RY 1991 TO SEPTEMBER 1994 FROM THE SAME WOULD GO TO SET OFF TH E DEFICIT APPEARING IN THE WORKING MADE FOR THE PERIOD 1.4.19 097 TO 27.7.1999. HE ALSO HELD THAT THOUGH THE ITAT HAD D IRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM THERE IS NO FINDING OF THE ITAT THAT THIS CLAIM WAS TO BE ALLOWED. ON THE OTH ER HAND, EVEN DURING THE SET ASIDE ASSESSMENT PROCEEDINGS, THE AS SESSEE COULD NOT DEMONSTRATE AS TO HOW SUCH WITHDRAWALS CO ULD BE CONSIDERED AS AVAILABLE CARRIED FORWARD BALANCE AS ON 1.8.1997, SO AS TO BE CONSIDERED ALONG WITH THE RECEIPTS AND EXPENDITURE RECORDED IN THE SEIZED MATERIAL. ACCORDINGLY THE C IT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON ALL GROUNDS . 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED WRITTEN SUBMISSIONS BEFORE THE TRIBUNAL AND CONTENDED THAT BY SENDING THE MATTER BACK TO THE ASSESSING OFFICER THE ITAT H AS REJECTED THE GROUND ON THE ADDITION OF RS.1,95,03,920 ON ACC OUNT OF UNDISCLOSED INCOME. HOWEVER, THE ASSESSING OFFICER ADOPTED THE SAME STAND AND HELD THAT NEXUS BETWEEN THE RECO RDED RECEIPTS AND UNRECORDED EXPENDITURE IS NOT PROVE AN D THE LEARNED CIT(A) ALSO HAS CONFIRMED WITHOUT APPRECIAT ING THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSEE HAS ALRE ADY FILED COPIES OF THE SEIZED MATERIAL WHICH IS EVIDENT FROM THE SEIZED MATERIAL THAT IT IS A CONTROL BOOK AND OTHERWISE IT IS LIKE A CASH BOOK. ENTIRE RECEIPTS BOTH UNRECORDED AND RECORDED (WHICH FACT I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 10 CANNOT BE FOUND FROM THE SEIZED MATERIAL) ARE APPEA RING IN THIS MATERIAL AND EXPENDITURE IS MET OUT OF THESE RECEIP TS. THE EXPENDITURE INCLUDES BOTH RECORDED AND UNRECORDED. THEREFORE, THE QUESTION OF PROVING NEXUS BETWEEN RECORDED RECE IPTS AND UNRECORDED EXPENDITURE DOES NOT ARISE. ACCORDING T O THE LEARNED COUNSEL FOR THE ASSESSEE, UNRECORDED EXPENS ES HAVE MET BY SURPLUS AVAILABLE IN THE ACCOUNTED TRANSACTI ONS. HE SUBMITTED THAT THE SEIZED MATERIALS SHOULD BE CONSI DERED AS A WHOLE SINCE SURPLUS IN THE ACCOUNTING TRANSACTIONS WAS UTILISED IN MEETING THE UNACCOUNTED PAYMENTS AND THE PROPER SET OFF SHOULD BE GIVEN WHILE ARRIVING AT NEGATIVE CASH BAL ANCE. SINCE THE DEPARTMENT IS NOT IN POSSESSION OF ANY MATERIAL TO SUGGEST THAT UNRECORDED PAYMENTS MET BY ANY OTHER SOURCES T HAN RECORDED RECEIPTS AND THERE IS NO BASIS FOR ADDITIO N AND SEGREGATION OF RECORDED RECEIPTS AND EXPENDITURE FR OM THE UNRECORDED RECEIPTS AND EXPENDITURES TO ARRIVE AT A PEAK DEFICIT FROM UNRECORDED RECEIPTS AND EXPENDITURE. THE SYST EM OF SEGREGATING THE SEIZED MATERIALS AS RECORDED RECEIP TS AND PAYMENTS AND UNRECORDED RECEIPTS AND PAYMENTS WHICH GIVES DISTORT PICTURE OF THE FINANCIAL POSITION OF ASSESS EE. HE SUBMITTED THAT THE SEIZED MATERIALS SHOULD BE SEEN AS A WHOLE AND NOT IN A PIECEMEAL MANNER AND IF THE SEIZED MAT ERIALS WERE SEEN AS A WHOLE, FROM THE COMPUTERISED VERSION, THE RE IS A DEFICIT OF RS.8,94,000/- ONLY. FURTHER, HE SUBMITT ED THAT THE ASSESSING OFFICER COMPUTED THE PEAK NEGATIVE BALANC E WITHOUT I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 11 CONSIDERING THE OPENING BALANCE WHICH IS VERY RIDIC ULOUS. FOR THIS DEFICIT ASSESSEE HAS SUBMITTED THAT THE SEIZED MATERIALS DOES NOT CONTAIN ANY OPENING BALANCE. FURTHER, HE SUBMITTED THERE WERE CERTAIN AMOUNTS DRAWN FROM ANDHRA BANK, BRANCH, NOT REFLECTED IN THE ACCOUNTS WE SHALL BE GIVEN DUE CREDIT IN ADDITION TO CREDITS TO BE GIVEN TO AVAILABLE CASH BALANCE IN OTHER CONCERNS WHERE THE ASSESSEE WAS INTERESTED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO CASE FOR ANY ADDITION ON ACCOUNT OF THESE SEIZED BOOKS. FURTHER , HE SUBMITTED THAT THE ASSESSING OFFICER NOT FOLLOWED T HE DIRECTIONS OF THE TRIBUNAL IN PROSPECTIVE WHILE CONCLUDING THE ASSESSMENT IN THE SECOND GROUND. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS: I) BHAGAWANDAS ASSOCIATES VS. ITO. 119 ITD 1) (PUNE) II) KARTAR SINGH VS. CIT 111 ITR 184 (P&H) III) S.P. KOCHHAR VS. INCOME TAX OFFICER 145 ITR 2 55 (ALL) IV) SMT. SUDHADEVI & ORS. VS. ACIT 84 ITD 604 V) ACIT VS. SRI RANGANATHA TRADERS 94 ITD 227 (HYD) VI) DCM ESTATES & INFRASTRUCTURE LTD. 110 TTJ 604 (DEL) VII) WTA NOS. 9 TO 14/H/10 LATE SRI Y. RAMA REDDY (COPY ALREADY FILED) VIII) SMT. USHA TRIPATHI VS. ACIT 66 TTJ 508 (ALL) IX) DCIT VS. DHANVARSHA BUILDERS AND DEVELOPERS P. LTD. VS. 289 ITR (AT) 50 (PUNE ) X) ACIT VS. FERTILIZER TRADERS 83 TTJ 473 (ALL) 12. THE LEARNED DR SUBMITTED THAT THE TRIBUNAL HAD REMITTED THE MATTER BACK TO THE ASSESSING OFFICER TO CONSIDE R AFRESH. THE TRIBUNAL HAD DIRECTED THE ASSESSING OFFICER TO READ THE SEIZED DOCUMENTS AS A WHOLE. HE SUBMITTED THAT IN THE SEC OND ROUND I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 12 OF ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT IDEN TIFY ANY SPECIFIC ENTRY THAT DESERVED TO BE EXCLUDED, BUT DI D NOT GET EXCLUDED. IN SPITE OF FOUR RECORDED OPPORTUNITIES THE ASSESSEE WAS UNABLE TO IDENTIFY ANY SPECIFIC ENTRY TO BE EXC LUDED IN ADDITION TO THOSE THAT WERE ALREADY EXCLUDED BY THE ASSESSING OFFICER. BY THE LETTER DATED 16.12.09, THE ASSESSE E MERELY STATED THAT THE SEIZED MATERIAL BE TREATED AS A WH OLE, MEANING THAT THE ENTRIES IN THE SEIZED DOCUMENTS COULD NOT SEGREGATED INTO ACCOUNTED AND UNACCOUNTED. THE ASSESSING OFFIC ER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AND RESTORED THE A DDITION IN HIS CONSEQUENTIAL ORDER DATED 31.12.2009. THE CIT(A) B Y HIS ORDER DATED 30.9.2010 UPHELD THE ORDER OF THE ASSESSING O FFICER. THE LEARNED DR SUBMITTED THAT IN THE ABSENCE OF ANY SPE CIFIC INPUT FROM THE ASSESSEE IT WOULD NOT BE CORRECT TO INFER THAT CERTAIN ENTRIES WERE ERRONEOUSLY INCLUDED IN THE WORKING OF THE PEAK. THE ASSESSEE PROPOSITION SURPLUS IS TO BE SET OFF A GAINST DEFICIT IN UNACCOUNTED TRANSACTIONS IS BASICALLY UNTENABLE. ADMITTEDLY, THERE ARE TRANSACTIONS/ENTRIES NOT ACCOUNTED FOR IN THE REGULAR BOOKS. INSTEAD OF SQUARING UP WITH THIS THE ASSESS EE SEEKS TO NEUTRALISE THIS OR EXPLAIN THAT ACCOUNTED RECEIPTS ARE THE SOURCE FOR UNACCOUNTED PAYMENTS. THIS GOES AGAINST THE VE RY SCHEME OF A BLOCK ASSESSMENT. ACCORDINGLY THE LEARNED DR SUBMITTED THAT THE ORDER OF THE CIT(A) IS IN ACCORDANCE WITH LAW AND THE SAME MAY BE CONFIRMED I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 13 13. THE LEARNED DR FURTHER SUBMITTED THAT THE COMPU TERISED ENTRIES WERE THOROUGHLY VERIFIED MANUALLY TO ASCERT AIN WHETHER THEY WERE ACCOUNTED OR UNACCOUNTED TRANSACTIONS. T HIS WAS CONFRONTED TO THE ASSESSEE AND THE ASSESSEE DID ACC EPT THIS METHODOLOGY. THE ASSESSEE ONLY STATED THAT THERE W ERE CERTAIN ENTRIES THAT SHOULD NOT HAVE BEEN HELD AS UNACCOUNT ED BY VIRTUE OF THE FACT THAT ANOTHER PROXIMATE ENTRY WAS ENTERE D. THE CIT(A) OBSERVED SELECTIVE ENTRIES ON PAGES 11-12. ALL PAYMENTS WERE ACCOUNTED WHEREAS ALL MISSING ENTRIES RELATE T O RECEIPTS. THE LEARNED DR STATED THAT THE CIT(A) FOUND THE CLA IM OF THE ASSESSEE FOR FURTHER SET OFF RESTS ON INFERENCE AND NOT EVIDENCE. THE CIT(A) POINTED OUT ON PAGE 19 THAT THE ARGUMENT THAT SURPLUS IN ACCOUNTED TRANSACTIONS WAS A SOURCE FOR THE UNACCOUNTED PAYMENTS BESIDES BEING FACTUALLY UNVERI FIED, IS A FLAWED PROPOSITION, BECAUSE NOBODY USED ACCOUNTED M ONEY FOR UNACCOUNTED EXPENSES. REGARDING THE AVAILABILITY O F CASH BALANCE IN THE BANK BALANCE AS A SOURCE FOR DEFICIT THE ASSESSING OFFICER AS WELL AS THE CIT(A) OBSERVED TH AT THE TIME FRAMES ARE NOT COMPARABLE. THE CIT(A) FURTHER POIN TED OUT ON PAGE 19 THAT EVEN CASH IN BOOKS AS PER AVAILABLE FI NAL ACCOUNTS IS RS. 19 CRORES AS ON 31.3.1999 WHEREAS THE DEFICI T SOURCE IS WORKED OUT FOR THE PERIOD 21.10.98 TO 21.7.99. TH E LEARNED DR FURTHER SUBMITTED THAT THE TRIBUNAL ORDER VIDE PARA 9 SPECIFICALLY LIMITED TO GIVING THE ASSESSEE AN OPPORTUNITY TO ID ENTIFY WHICH PARTICULAR ENTRIES WERE NOT GIVEN SET OFF AGAINST T HE NEGATIVE I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 14 PEAK. THE RE-ASSESSMENT PROCEEDINGS CANNOT BE A FO RUM FOR THE ASSESSEE TO CANVASS THE ARGUMENT THAT ACCOUNTED AND UNACCOUNTED TRANSACTIONS SHOULD BE MERGED ESPECIALL Y WHEN THE ASSESSEE ACCEPTED THE METHODOLOGY FOLLOWED BY T HE ASSESSING OFFICER. FURTHER, HE SUBMITTED THAT THE ASSESSEE DOES NOT HAVE ANY OBJECTION TO THE METHOD ADOPTED B Y THE ASSESSING OFFICER WHILE DRAWING THE PEAK STATEMENT. HE ONLY STATED THAT PARTS OF THE ACCOUNTED RECEIPTS ARE REF LECTED AS UNACCOUNTED RECEIPTS WHILE MAKING THE PEAK WORKING. HOWEVER, WHILE PREPARING THE PEAK CREDIT STATEMENT, THE ACCO UNTED AND UNACCOUNTED ENTRIES WERE THOROUGHLY VERIFIED. THE REGULAR BOOKS OF ACCOUNTS AND THE UNACCOUNTED BOOKS WERE CO MPARED AND WHEREVER MATCHING AMOUNTS AND DATES WERE FOUND, THE SAME WERE ELIMINATED FROM THE STATEMENT. HENCE, THE ASSESSEES PLEA THAT PARTS OF THE ACCOUNTED RECEIPT S ARE REFLECTED AS UNACCOUNTED RECEIPTS CANNOT BE ACCEPTE D. BESIDES, AS ALL THE ACCOUNTED AND MATCHING ENTRIES ARE ELIMINATED WHILE PREPARING THE PEAK STATEMENT, THE SAME DOES NOT HAVE ANY BEARING UPON THE REGULAR BOOKS OF ACCO UNTS. AS THERE IS NO LINK BETWEEN THESE TWO SETS OF ACCOUNT, THE ASSESSE CONTENTION THAT BOTH THE ACCOUNTED AND UNACCOUNTED BOOKS SHOULD BE TAKEN TOGETHER, CANNOT BE ACCEPTED. FURT HER, THE ASSESSEES CLAIM IS NOT BASED ON ANY MATERIAL PROOF . THE ASSESSEE COULD NOT CITE ANY INSTANCE OF TAKING ANY ACCOUNTED ENTRY AS UNACCOUNTED. THE ONUS TO PROVE THE NEXUS LIES ON THE I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 15 ASSESSEE WHICH THE ASSESSEE FAILED TO FULFIL. THE ASSESSEES PLEA THAT SET OFF SHOULD BE GIVEN FOR THE AMOUNTS W ITHDRAWN FROM THE ANDHRA BANK ALSO CANNOT BE ACCEPTED BECAUSE AS HAS BEEN FOUND FROM THE BANK STATEMENT PRODUCED, THE WITHDRA WALS TOOK PLACE IN THE PERIOD FROM JANUARY 1991 TO SEPTEMBER, 1994. ON THE OTHER HAND, THE PEAK WORKING WAS MADE FOR THE P ERIOD FROM 1.4.1997 TO 27.7. 1999 (DATE OF SEARCH). HENCE, TH E ASSESSEES CLAIM FOR SET OFF OF THE DEFICIT AGAINST THE WITHDR AWAL MADE THREE YEARS BACK CANNOT BE ACCEPTED. BESIDES, THE ASSESS EES COULD NOT PRODUCE ANY SUPPORTING MATERIAL TO SHOW HOW THE AMOUNTS WITHDRAWN FROM THE BANK THREE YEARS BACK WAS PUT TO THE BUSINESS. IT MAY ALSO BE MENTIONED HERE THAT THE A SSESSEE, IN THE EARLIER PROCEEDINGS MENTIONED THAT THE AMOUNT S IPHONED OFF FROM ANDHRA BANK WAS RS.1,85,00,000. HOWEVER, IN T HE CURRENT ASSESSMENT PROCEEDINGS THE WITHDRAWAL FROM THE BANK ACCOUNT IS SHOWN TO BE RS.1,18,54,640/-. THE ASSESSEE IS F URNISHING THE INFORMATION WHICH IS SELF CONTRADICTORY. FINALLY H E RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF EITHER SI DE AND ALSO PERUSED THE MATERIAL ON RECORD AND ALSO CAREFU LLY GONE THROUGH THE VARIOUS CASE LAW CITED BY THE PARTIES. THE MAIN CONTROVERSY HEREIN IS WITH REGARD TO TREATING THE N EGATIVE PEAK BALANCE OF RS.1,95,03,920/- FROM THE UNACCOUNTED T RANSACTIONS AS UNDISCLOSED INCOME OF THE ASSESSEE. AS SEEN FRO M THE SEIZED MATERIAL, THERE ARE TWO KINDS OF TRANSACTION S. ONE IS I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 16 ACCOUNTED TRANSACTIONS AND THE OTHER ONE IS UNACCOU NTED TRANSACTIONS. THE ASSESSING OFFICER SEGREGATED SE IZED MATERIALS INTO TWO PARTS AS ACCOUNTED AND UNACCOUNT ED TRANSACTIONS AND ASCERTAINED THE PEAK NEGATIVE BALA NCE RELATING TO UNACCOUNTED TRANSACTIONS AND MADE ADDITION OF RS.1,95,03,920/-. IN OUR OPINION, ASCERTAINING OF THE PEAK CREDIT BALANCE OUT OF THE SEIZED MATERIALS ONLY FROM TRANS ACTIONS RELATING TO UNACCOUNTED TRANSACTIONS IS NOT CORRECT . THE ASSESSEE IS AN INDIVIDUAL OWNING GROUPS OF BUSINESS CONCERN FROM WHERE THE ASSESSEE RECEIVED THE CASH AND ALSO MAKES PAYMENTS TOWARDS VARIOUS EXPENSES. THE ENTIRE TRAN SACTIONS OF THE ASSESSEE ARE TO BE CONSIDERED AS A WHOLE AND DE FICIT OR SURPLUS TO BE ASCERTAINED AFTER CONSIDERING THE ENT IRE TRANSACTIONS SO AS TO ASCERTAIN THE UNDISCLOSED INC OME. IF WE HAVE NOT CONSIDERED THE ENTIRE SEIZED MATERIAL AS A WHOLE, IT WILL GIVE DISTORT PICTURE OF FINANCIAL POSITION OF THE A SSESSEE. THERE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSEE HAS MAD E PAYMENTS TOWARDS UNACCOUNTED TRANSACTIONS OUT OF AN Y UNACCOUNTED RECEIPTS. IT IS UNDISPUTED FACTS THAT THERE IS A SURPLUS FUND IN THE BOOKS OF ACCOUNT RELATING TO AC COUNTED TRANSACTIONS. THE SEIZED MATERIALS ARE TO BE CONSI DERED IN ITS ENTIRETY IF IT HAS TO BE RELIED UPON. IT CANNOT BE CONSIDERED TO THE EXTENT IT IS BENEFICIAL TO THE REVENUE AND IT NOT B E RELIED WHEN IT BECOMES DISADVANTAGEOUS TO THE REVENUE. IN OUR OPI NION, THE ASSESSING OFFICER IS REQUIRED TO ASCERTAIN THE COR RECT POSITION OF I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 17 THE TOTAL TRANSACTIONS BOTH ACCOUNTED AND UNACCOUNT ED AND HE HAS TO GIVE DUE CREDIT TO THE RECEIPTS AND PAYMENTS IN ACCOUNTED TRANSACTIONS. IN OTHER WORDS, IT IS NATU RAL TO ARRIVE TO THE CONCLUSIONS THAT THE ASSESSEE HAS USED HIS OWN ACCOUNTED RECEIPTS TO MEET THE UNACCOUNTED PAYMENTS. IT IS S O, BECAUSE THERE IS NO EVIDENCE THAT THE ASSESSEE HAS USED ANY OTHER UNACCOUNTED FUNDS TO MAKE UNACCOUNTED PAYMENTS. TH E ASSESSEE HAS ALSO MADE IT CLEAR IN ITS STATEMENTS R ECORDED U/S 131 ON 17.7.2001 AGREEING WITH THE METHODOLOGY ADOP TED BY THE ASSESSING OFFICER TO ARRIVE AT A PEAK CASH BALANCE FROM THE SEIZED MATERIAL WITH A RIDER THAT THE SURPLUS IN TH E ACCOUNTED TRANSACTIONS WAS USED TO MAKE PAYMENT TOWARDS UNACC OUNTED TRANSACTIONS. THIS IS EVIDENT FROM THE FOLLOWING Q UESTIONS & ANSWERS: Q.8: ON SEGREGATING ALL THE UNACCOUNTED TRANSACTIO NS OUT OF THE ENTRIES REFLECTED IN ABOVE SEIZED MATERIAL, THE PEA K CASH BALANCE WAS WORKED OUT WHICH RESULTED IN A NEGATIVE PEAK CA SH BALANCE OF RS.1,95,03,920/- AS ON 17.7.1999. PLEASE STATE AND CONFIRM WHETHER THE WORKING OF PEAK AND ENTRIES FED INTO TH E COMPUTER ARE CORRECTLY ENTERED? IF NOT PLEASE GIVE YOUR OB JECTIONS. ANS: I HAVE GONE THROUGH THE LISTS PREPARED BY THE DEPARTMENT IN OUR PRESENCE, VIZ., THE DATA ENTERED INTO COMPUTER RELATED TO THE TRANSACTIONS OF THE ENTIRE GROUP BOTH ACCOUNTED AND UNACCOUNTED, AND THE WORKING OF PEAK WHICH IS CONNE CTED WITH ONLY UNACCOUNTED TRANSACTIONS. I SUBMIT THAT I DO NOT HAVE ANY OBJECTION AS FAR AS THE METHODOLOGY ADOPTED. HOWEV ER, THERE IS A SURPLUS IN THE ACCOUNTED TRANSACTIONS WHICH I HAV E PAID TO MEET MY UNACCOUNTED PAYMENTS. THE ACCOUNTED SURPLU S IS ALSO EVIDENT FROM THE ENTRIES OF ABOVE REFERRED SEIZED M ATERIAL. Q.9: PLEASE ELABORATE? ANS: I WOULD LIKE TO DRAW TO YOUR KIND ATTENTION T O THE ENTRIES MADE IN THE MONTHLY NOTE BOOKS MARKED AS ACL/A/9 TO ACL/A/22 THAT AN ENTRY MAY BE APPEARING AS AMOUNT PAID TO BS N FROM A PARTICULAR CONCERN BUT THE SAME HAS BEEN TAKEN AS U NACCOUNTED AMOUNT RECEIVED BY ME. IN FACT THIS AMOUNT IS PART F THE TOTAL I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 18 AMOUNT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. IN OTHER WORDS, WITH YOUR PERMISSION I HEREWITH GIVE TWO EXA MPLES: 1) AS PER THE ANNEXURE MARKED ACL/A/10 AT P.NO.6 THE AMOUNT RECEIVED FROM URVASI BAR & RESTAURANT BY ME IS SHOWN AT RS.69,000/-. THIS IS THE PART OF THE AMOUNT OF RS.1,25,529/- WHICH WAS COLLECTED BY URVASHI BAR & RESTAURANT ON ACCOUNT OF FOOD AND LIQUORS SALES. THEREFORE, THE TOTAL SALES MADE ON THAT DAY WAS RECORDED IN THE REGULAR BOOKS OF ACCOUNT BUT PART OF THE AMOUNT I.E. RS.69,000/- WHICH WAS PAID TO ME WAS NOT RECORDED IN BSN A/C. THAT IS THE REASON WHY RS.69,000 HAS BEEN TAKEN AS UNACCOUNTED AMOUNT AS THERE IS NO MATCHING AMOUNT AVAILABLE IN THE BOOKS. BUT FACTUALLY, IT IS NOT SO. 2) SIMILARLY, FROM THE SEIZED ANNEXURE, I WOULD LIK E TO DRAW YOUR ATTENTION TO PAGE NO.5 WHICH REFLECT THE TRANSACTIONS THAT HAVE OCCURRED ON 26.9.98. ON THIS PAGE RS.81,500/- IS WRITTEN AGAINST URVASHI BAR AND RESTAURANT. AS PER THIS NOTINGS, RS.81,500/- WAS TAKEN BY ME FROM URVASHI BAR & RESTAURANT. THIS IS ALSO A PART OF THE SALE MADE ON THAT DAY THE TOTAL OF WHICH COMES TO RS.1,33,744/- . HOWEVER, THE AMOUNT TAKEN ON 26.9.98 WAS REFLECTED IN MY BOOKS WHICH EXACTLY MATCHES WITH THE NOTING MADE ON THE SEIZED BOOK. 15. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS PROTESTED THE ASCERTAINING THE NEGATIVE CASH BALANC E ONLY WITH REFERENCE TO UNACCOUNTED TRANSACTIONS. WHEN WE A RE ASCERTAINING THE PEAK NEGATIVE CASH BALANCE FROM TH E TOTAL TRANSACTIONS OUT OF THE SEIZED MATERIALS, THERE IS NO QUESTION OF MATCHING ANY UNACCOUNTED TRANSACTIONS WITH THE ACC OUNTED TRANSACTIONS IN REGULAR BOOKS OF ACCOUNTS. THE TOT ALITY OF THE TRANSACTIONS IS TO BE CONSIDERED AS A WHOLE AND THE RE IS NO QUESTION OR NECESSITY OF PRODUCING ANY EVIDENCE LIN KING UP OF THESE TRANSACTIONS. THERE CANNOT BE ANY PRESUMPTIO N TO THE FACTS THAT THE ASSESSEE HAS USED ONLY UNACCOUNTED R ECEIPTS TO I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 19 MEET THE UNACCOUNTED PAYMENTS. ADMITTEDLY, THE DEP ARTMENT HAS NO EVIDENCE ON HAND IN THE FORM SEIZED MATERIAL S TO SUGGEST THAT THE ASSESSEE HAS USED UNACCOUNTED RECEIPTS TO MAKE UNACCOUNTED PAYMENTS. THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IS THAT NO BUSINESS MAN WILL SPEN D ACCOUNTED, TAX SUFFERED PROFITS FOR UNACCOUNTED EXPENDITURE. THIS IS NOT GOSPEL TRUTH. IT IS NATURAL THAT WHEN A BUSINESSMA N REQUIRED TO MAKE PAYMENTS, HIS PRIORITY IS TO MAKE PAYMENTS EIT HER FROM ACCOUNTED RECEIPTS OR FROM UNACCOUNTED RECEIPTS RAT HER THAN SEEING THE SOURCES FROM HOW IT WAS EARNED. HE MAY NOT SEE AT THAT POINT OF TIME THE CONSEQUENCE OF MAKING PAYMEN T TOWARDS UNACCOUNTED TRANSACTIONS OUT OF ACCOUNTED RECEIPTS. BEING SO, THERE ARE EVERY CHANCES OF USING ACCOUNTED RECE IPTS FOR MAKING PAYMENTS TOWARDS UNACCOUNTED TRANSACTIONS. FURTHER, THE AMOUNT DRAWN FROM ANDHRA BANK IS ALSO TO BE CON SIDERED AS A SOURCE WHILE PREPARING THE CONSOLIDATED RECEIPT A ND PAYMENT ACCOUNT. IN ADDITION TO THIS, WHEN THERE IS NO PHY SICAL CASH BALANCE FOUND DURING THE COURSE OF SEARCH ACTION AS PER BOOKS OF ACCOUNTS, IT IS TO BE PRESUMED THAT THE CASH BAL ANCE REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE IS ONLY A PAPER FIGURE AND IT HAS BEEN ACTUALLY EXPENDED TOWARDS TH E VARIOUS EXPENDITURE INCURRED BY THE ASSESSEE IN THE BLOCK P ERIOD AND DUE CREDIT IS TO BE GIVEN TOWARDS THIS. IN THE PRE SENT CASE, THE PHYSICAL BALANCE FOUND DURING THE COURSE OF SEARCH ACTION IS NOT TALLYING WITH THE FIGURES REFLECTED IN THE CASH BOO K AND THERE IS I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 20 ALSO NO EVIDENCE THAT THE ASSESSEE HAS WITHDRAWN TH E CASH TO CREATE ANY UNACCOUNTED ASSETS THAN REFLECTED IN THE SEIZED MATERIALS. HENCE, IN OUR OPINION, IT IS FAIR TO CO NSIDER THE ENTIRE SEIZED MATERIAL RELATING TO BOTH THE ACCOUNTED TRAN SACTIONS AND UNACCOUNTED TRANSACTIONS ALONG WITH REGULAR BOOKS A ND PREPARE THE RECEIPTS AND PAYMENT ACCOUNT RELATING TO THE BL OCK PERIOD IN ITS ENTIRETY INCLUDING OPENING BALANCE IF ANY AVAIL ABLE AT THE BEGINNING OF THE BLOCK PERIOD. THEREAFTER, THE AS SESSING OFFICER HAS TO CONSIDER THE PEAK NEGATIVE CASH BALANCE, IF ANY AND TREAT THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE. TH E ASSESSEE HEREIN HAS FILED PAPER BOOKS CONTAINING FI VE VOLUMES WITH 925 PAGES REFLECTING THE SUMMARY OF ACCOUNT OF ALL TRANSACTIONS(CASH BOOK/ DAY BOOK) SHOWING THE RECE IPTS AND PAYMENTS COVERING THE BLOCK PERIOD. THE AR ALSO CO NTENTED THAT THE SAME WAS ALREADY FILED WITH THE LOWER AUTH ORITIES AND THIS WAS NOT EXAMINED BY THE ASSESSING OFFICER IN P ROPER PERSPECTIVES. HENCE, WE DIRECT THE ASSESSING OFFIC ER TO EXAMINE THE CORRECTNESS OF ENTIRE CASH BOOK/DAY BOOK COVERI NG THE BLOCK PERIOD W.R.T THE SEIZED MATERIAL IN ITS ENTIR ETY AND DECIDE THEREUPON IN THE LIGHT OF OUR DIRECTIONS GIVEN HERE IN ABOVE. 16. THE ASSESSEES COUNSEL HAS ALSO CONTENDED THA T THE ASSESSING OFFICER HAS NOT ACTED IN ACCORDANCE W ITH THE DIRECTIONS OF THE TRIBUNAL AS GIVEN IN ITS ORDER DA TED 4.12.2008. IN OUR OPINION, THE ASSESSING OFFICER CONSIDERED TH E ISSUE RELATING TO ADDITION OF RS.1,95,03,920/- ON A CCOUNT NEGATIVE I.T(SS).A. NO. 19/HYD/2010 SHRI B.S. NEELAKANTA ======================= 21 PEAK CASH BALANCE AND HE HAS NOT TRAVELLED BEYOND T HIS ISSUE. THE VARIOUS CASE LAW RELIED ON BY THE AUTHORISED RE PRESENTATIVE FOR THE ASSESSEE ON THIS ISSUE IS NOT APPLICABLE T O THE FACTS OF PRESENT CASE. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2011. SD/- SD/- SD/ - (G.C. GUPTA) VICE PRESIDENT SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 18 TH MARCH, 2011 TPRAO COPY FORWARDED TO: 1. SHRI B.S. NEELAKANTA, C/O. M/S. K. VASANT KUMAR, A.V. RAGHU RAM, P. VINOD & B. PEDDI RAJULU, ADVOCATES, F LAT NO. 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEER BAGH, HYDERABAD-500 001. 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-6(1 ), HYDERABAD. 3. THE CIT(A)-IV, HYDERABAD. 4 THE CIT-III, HYDERABAD 5. THE DR A BENCH, ITAT, HYDERABAD