M/s Global Soft, Bhubaneswar V. ACIT, Bhubaneswar

ITSSA 22/CTK/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8430 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2009
• Court: TRIBUNAL
• Department Lawyers: A K GAUTAM
• Assessee Lawyers: B PANDA
• Keywords: Income from undisclosed sources; Search and seizure; Peak credit
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T (SS) .A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 / ASSESSMENT YEAR S 2005 - 06 AND 2006 - 07 M/S.GLOBAL SOFT, B - 20, BJB NAGAR,BHUBANESWAR 751 014 PAN:AAMFM 5128 P - - - VERSUS - ASST. C OMMISSIONER OF INCOME - TAX, CIRCLE 1(2), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI B.PANDA, AR / FOR THE RESPONDENT: / SHRI A.K.GAUTAM, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THESE APPEALS BY THE ASSESSEE WERE DISPOSED OF BY THE TRIBUNAL ON AN EARLIER OCCASION DISMISSING THE APPEALS FOR WANT OF PROSECUTION. BY WAY OF MISC. PETITIONS, THE ASSESSEE PRAYED FOR RECALLING THE ORDERS TO BE HEARD ON THE BASIS OF FACTS AND CIRCUMSTANCES, WHICH WAS CONSIDERED FIT FOR RECALLING THE ORDERS BY THE TRIBUNAL AND THE CASES WERE FIXED FOR HEARING THEREAFTER. 2. FOR THE ASSESSMENT YEAR 2005 - 06, THE ASSESSING OFFICER HAD PASSED ORDER U/S.15 3A/144 WHICH WAS APPEALED AGAINST BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON A SOLITARY ADDITION BEING THE AMOUNT OF ADVANCE RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD., HYDERABAD FOR THE ASSESSEE TO EXECUTE DEVELOPMENT OF SOFTWARE AS PER REQUIREMENT ON THE BASIS OF AN AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE FIRM AND M/S.MANSREE INFOTECH PVT. LTD., HYDERABAD IN 2003. THE LEARNED CIT(A) CONFIRMED THE ADDITION BY DISMISSING THE ASSESSEE - APPELLANTS CONTENTION BEFORE HIM WHICH HAS BEEN APP EALED AGAINST BEFORE US. FOR THE ASSESSMENT I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 2 YEAR 2006 - 07, THE ASSESSING OFFICER PASSED THE ORDER U/S.143(3) REQUIRING THE ASSESSEE TO FILE A RETURN U/S.142(1) AND ON THE BASIS OF HIS CONSIDERING THAT FOR THE ASSESSMENT YEAR 2005 - 06 , ONE SOCIETY BY THE NAME OF ORISSA COMPUTER ACADEMY WAS SUBJECTED TO SEARCH U/S.132 ON 9 TH AUGUST, 2005, WHERE THE SENIOR PARTNER OF THE ASSESSEE FIRM BEFORE US WAS THE CHAIRMAN/DIRECTOR REQUIRED CONSIDERATION OF THE RECEIPTS IN THE BANK TO BE EXPLAINED ON THE BASIS OF INFORMAT ION AVAILABLE TO THE ASSESSING OFFICER OF CASH BEING DEPOSITED IN THE BANK FROM THE FINANCIAL INTELLIGENCE WING, MINISTRY OF FIN ANCE HAVING CONDUCTED ENQUIRY ON FEDERAL BANK OF INDIA, BAPUJI NAGAR, BHUBANESWAR. THE ASSESSING OFFICER THEREFORE PROCEEDED TO VERIFY THE SOURCES OF THE AMOUNTS DEPOSITED AND WITHDRAWN IN THE BANK ACCOUNTS NAMELY FEDERAL BANK ACCOUNT AND IDBI BANK ACCOUNT WHICH INFORMATION WERE VERIFIED BY ENQUIRING THE VARIOUS SAVINGS BANK ACCOUNTS OF THE PURPORTED EMPLOYEES OF THE ASSESSEE FIRM WHO MAY OR MAY NOT HAVE WORKED FOR DEVELOPING THE SOFTWARE AS AGREED TO BY THE ASSESSEE FIRM WITH M/S.MANSREE INFOTECH PVT. LTD. IN THE ABSENCE OF BOOKS OF ACCOUNT OR SATISFACTORY EXPLANATION, THE ASSESSING OFFICER SOUGHT TO ADD A SUM OF 63, 95,000 DEPOSITED IN THE BANK AS UNACCOUNTED INCOME AND BY DISALLOWING THE EXPENDITURE CLAIMED AS SALARY PAID TO THE EMPLOYEES FOR DEVELOPING THE SOFTWARE FOR M/S.MANSREE INFOTECH PVT. LTD., AMOUNTING TO 15,72,900. THE ASSESSEE HAD FILED RETURN IN RESP ONSE TO THE NOTICE U/S.142(1) FOR THE IMPUGNED ASSESSMENT YEAR DECLARING LOSS OF 1,53,696. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO IN HIS BRIEF ORDER AND WITHOUT CONSIDERING THE CONTENTION OF THE ASSESSEE APPELLANT BEFORE HIM REGARDING THE UNNECESSARY HUE AND CRY MADE BY THE ASSESSING OFFICER FOR OBTAINING STATEMENTS ON OATH OF THE VARIOUS DEPOSITORS OF MONEY IN THE BANK , WHETHER WERE EMPLOYEES OF THE ASSESSEE FIRM , CONFIRMED THE ADDITION BY I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 3 HOLDING THAT THE ASSESSEE OUGHT TO HAVE EXPLAINED THE SOURCE OF THOSE DEPOSITS WHEN HE HAD SUFFICIENT TIME TO EXPLAIN THE SAME. HE ALSO CONFIRMED THE DISALLOWANCE OF CLAIM OF SALARY AMOUNTING TO 15,72, 900 WHEN HE CATEGORICALLY NOTED THAT THE SALARY HAD BEEN PAID IN CASH AFTER WITHDRAWING THE SAME THROUGH BANK WHICH BANK ACCOUNT BALANCE WAS ACCEPTED BY THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A). 3. THE ASSESSEE IS IN APPEAL FOR DELETION O F BOTH THESE ADDITIONS CONFIRMED BY THE LEARNED CIT(A) BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT S , SUBMITTED THAT THE ASSESSEE FIRM IS A PARTNERSHIP FIRM WAS CONSTITUTED CONSISTING OF TWO OTHER PARTNERS APART FROM DR.B.C.DU TT WHO WAS THE SENIOR PARTNER AND WAS AN EXPERT IN INFORMATION TECHNOLOGY. IT WAS SUBMITTED THAT ASSESSMENT YEAR 2005 - 06 WAS THE BEGINNING WHEN THE AMOUNT WAS RECEIVED FROM ONE M/S.MANSREE INFOTECH PVT. LTD., WHICH FACT HAS BEEN NOTED BY THE ASSESSING OFFI CER ON THE PREMISE THAT THIS INFORMATION WAS AVAILABLE TO THE ASSESSING OFFICER BY WAY OF AN INCRIMINATING DOCUMENT FOUND AT THE TIME OF SEARCH OF ORISSA COMPUTER ACADEMY. HE CHOSE TO PASS THE ASSESSMENT U/S.153A WHEN NOTICE HAS BEEN ISSUED U/S.153C AND TH E ASSESSEE HAD NOT FILED ANY RETURN FOR THE IMPUGNED ASSESSMENT YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VERY FACT THAT THE ASSESSEE FIRM HAD CO ME INTO BE ING IN THE ASSESSMENT YEAR 2004 - 05 AND ON THE BASIS OF AN AGREEMENT ENTERED INTO WITH M/S.MANSREE INFOTECH PVT. LTD., THE ASSESSING OFFICER HAD NO REASON TO HOLD THAT THE DOCUMENT HAVING INSCRIBED THE AMOUNT AGREED TO BE PAID BY THE SAID M/S.MANSREE INFOTECH PVT. LTD., FOUND IN THE PREMISES OF ORISSA COMPUTER ACADEMY , COULD LEAD TO FRA MING OF ORDER EITHER/S.153C OR U/S.153A IN THE HANDS OF THE ASSESSEE FIRM AS PURPORTED. HE ARGUED THAT THE VERY FACT THAT THE ASSESSMENT HAS BEEN FRAMED U/S.153A/144 ON THE VERY I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 4 AMOUNT WHICH WAS RENDERED BY WAY OF AN AGREEMENT AND THE AMOUNT OF ADVANCE STO OD AS A LIABILITY COULD NOT BE TAXED AS INCOME FROM OTHER SOURCES WAS GLARING ON THE BASIS OF DOCUMENTS FOUND THEREFORE CANNOT BE SUBJECTED FOR A SEPARATE CONSIDERATION AS RECEIPT OUT OF THE BUSINESS ACTIVITIES FROM M/S.MANSREE INFOTECH PVT. LTD. HE ARGU ED THAT AN AMOUNT WHICH HAS BEEN AGREED UPON AND IT IS NOT INCRIMINATING CANNOT BE SUBJECTED TO ASSESSMENT U/S.153A OR U/S.153C IN ANY CASE. IN SUPPORT OF HIS CONTENTION HE HAS FILED A PAPER BOOK WHICH INTER ALIA INCLUDES THE COPY OF AGREEMENT INDICATING T HE SCOPE OF WORK TO BE CARRIED OUT BY THE ASSESSEE FIRM WHEN THE VARIOUS POPULAR BOOKS IN ENGLISH ARE TO BE UPLOADED O N THE WEB SITES BY THE ASSESSEE FIRM. HE POINTED OUT THAT THE BANK STATEMENTS FOR THE ASSESSMEN T YEAR 2005 - 06 CLEARLY INDICATE THAT THE AM OUNT HAS BEEN RECEIVED IN THE BANK AND THE WORK HAS NOT BEEN CARRIED OUT THEREFORE W AS TO BE HELD AS A LIABILITY AND BY NO STRETCH OF IMAGINATION CAN BE CONSIDERED AS INCOME FROM OTHER SOURCES IN THE IMPUGNED ASSESSMENT YEAR. HE FURTHER DELIBERATED ON THE FACT THAT IN THE SUBSEQUENT YEAR, THE ASSESSING OFFICER CONSIDERED THE ASSESSEES SUBMISSIONS UNDER THE PROVISIONS OF SECTION 143(3) WHICH SUM HAS AGAIN BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER BEING PART AND PARCEL OF THE JOINT CAPITAL CONTRIBUTION OF THE PARTNERS OF THE FIRM AND THE ADVANCE RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD.,. HE SUBMITTED THAT THE COPIES OF BANK ACCOUNT OF FEDERAL BANK AND IDBI CLEARLY INDICATE THAT NO BUSINESS ACTIVITIES WAS CARRIED OUT BY THE ASSESSEE FIRM TILL 31.3.2005 INSOFAR AS NO EXPENSES HAVE BEEN CLAIMED WHICH THE ASSESSING OFFICER CONSIDERED UNDER THE PROVISIONS OF SECTION 143(3) FOR THE SUBSEQUENT YEAR. THE ASSESSING OFFICER, WITHOUT EXAMINING THE FACTS, TREATED THIS AMOUNT UNDER THE PROVISIONS OF SECTION 68, WHI CH BY NO STRETCH OF IMAGINATION CAN BE CORRELATED WITH THE AMOUNT CONTRIBUTED BY THE PARTNERS IN THE FIRM AS HE HAS MADE NO ADDITION I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 5 ON ACCOUNT OF CAPITAL CONTRIBUTION BY PARTNERS FROM UNDISCLOSED SOURCES IN THE HANDS OF THE FIRM . THEREFORE, HE PRAYED THA T THE SAID ORDER OF THE ASSESSING OFFICER IS FIT FOR ANNULMENT IN VIEW OF THE FACT THAT THE NOTINGS BY THE ASSESSING OFFICER IN THE ORDER ARE CONTRADICTORY SO AS TO ASSUM E JURISDICTION U/S.153A/144. HE POINTED OUT THAT THE LEARNED CIT(A) SIMPLY PROCEEDED T O CONFIRM THE ACTION OF THE ASSESSING OFFICER IN SPITE OF THE ASSESSEE APPELLANT AGITAT ING THE FACT THAT THE SAID ORDER WAS ARBITRARY AND CONTRARY TO THE WEIGHT OF EVIDENCE ON RECORD AND WAS BAD I N LAW. THE LEARNED CIT(A) IN HIS BRIEF ORDER CONSIDERED THE R ECEIPTS AND PAYMENTS FROM M/S.MANSREE INFOTECH PVT. LTD., AND AGREED TO THE PROPOSITION THAT THERE WAS NO BUSINESS ACTIVIT Y CARRIED OUT BY THE ASSESSEE FIRM BUT BECAUSE THE ASSESSEE HAD NOT SUBMITTED ANY DOCUMENTARY EVIDENCE IN RESPECT OF THE MONEY RECEIVE D FROM M/S.MANSREE INFOTECH PVT. LTD., CONFIRMED THE SAME. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE VERY FACT THAT THE MONEY HA D BEEN RECE IVED AS ACKNOWLEDGED AS RECEIPT FROM M/S.MANSREE INFOTECH PVT. LTD., WAS ON THE BASIS OF AGREEM ENT AND THE SCOPE OF WORK TO BE CARRIED OUT COULD NOT BE NEGATED BY THE LEARNED CIT(A) AS DEVOID OF EVIDENCE. 5. FOR THE ASSESSMENT YEAR 2006 - 07, HE SUBMITTED THAT THE AMOUNTS RECEIVED ARE UNDISPUTED. THE AMOUNT OF CAPITAL CONTRIBUTION BY THE PARTNER S AND THE AMOUNT OF ADVANCE RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD., FOR EXECUTING OR CARRYING OUT THE DEVELOPMENT OF SOFTWARE WAS DEPOSITED IN THE BANKS AND WITHDRAWN AND RE - DEPOSITED WHICH FACT ALONE WAS CONSIDERED AS INFORMATION FLOWING FROM THE FI NANCIAL INTELLIGENCE OF THE MINISTRY OF FINANCE. THE LEARNED COUNSEL ARGUED THAT THE DEVELOPMENT OF SOFTWARE IS BASICALLY ON THE BASIS OF WORKING ON THE COMPUTERS BY VARIOUS STUDENTS AND TECHNOLOGY EXPERTS DOES NOT REQUIRE THE KIND OF EMPLOYMENT AS VISUALI ZED BY THE ASSESSING OFFICER AS CAN BE PERUSED IN HIS ORDER REQUIRING THE CONFIRMATIONS I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 6 OF VARIOUS DEPOSITORS AND HOLDERS OF BANK ACCOUNTS IN FEDERAL BANK ON THE BASIS OF CERTIFYING INTRODUCTION OF DEPOSITING OUT BY THE SENIOR PARTNER SHRI B.C. RATH TO THE BANK . HE SUBMITTED THAT THE VERY REASON THAT THE ASSESSING OFFICER DEVOTED EFFORTS, AS CAN BE PERUSED IN THE ORDER, I N OBTAINING STATEMENTS AND CONSIDERING A FINAL ADDITION IN THE HANDS OF THE ASSESSEE FIRM WAS NOT CONSIDERED APPROPRIATE FOR DELIBERATION B Y THE LEARNED CIT(A) FOR THE SIMPLE REASON THAT THE VERY BANK STATEMENT CLARIFIED THE RECEIPTS AND PAYMENTS IN THE BANK ACCOUNT WHEN THE AMOUNT WITHDRAWN IN CASH HAS BEEN RE - DEPOSITED IN CASH CANNOT BE CONSIDERED AS DEVOID OF EVIDENCE .HE PERUSED THE BANK STATEMENT WHERE WITHIN A GAP OF ONE MONTH THE AMOUNT OF 34 LAKHS HAS BEEN WITHDRAWN AND RE - DEPOSITED AND THE AMOUNT OF SALARY PAID BY CHEQUES FOR DEVELOPING THE SOFTWARE WAS NOT TO BE CONSIDERED IN THE LIGHT OF THE ASSESSING OFFICER TRYING TO CRYSTALLIZE HIS DOUBT OF ASSUMING THAT THE CASH WITHDRAWN OF LIKE AMOUNTS WAS DEPOSITED BY THE SAID SAVINGS BANK ACCOUNT HOLDERS INDIVIDUALLY. IF THAT BE SO, THE ASSESSING OFFICER OUGHT TO HAVE MADE SEPARATE ADDITION FOR THOSE AMOUNTS WHEN IT HAS BEEN CLEARLY INDICAT ED IN THE BANK STATEMENT THAT THE CASH HAD FLOWN FOR RE - DEPOSITING FROM THE SAME SOURCES. IT IS NEVER THE CASE OF THE ASSESSING OFFICER THAT AFTER HAVING VERIFIED THE VARIOUS INDIVIDUALS , WHO SUBMITTED HAD NOTHING TO DO WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE FIRM , AND BEING A DOCTORATE COMPUTER EXPERT AS SENIOR PARTNER , THE ASSESSEE FIRM CANNOT BE SUBJECTED TO HIS INTRODUCING THE INDIVIDUALS IN THE BANK FOR THE PURPOSE OF FACILITATING THEIR SAVINGS TO BE PROPERLY ROUTED THROUGH THE FIRM ONLY . IN ANY C ASE, THE LEARNED COUNSEL SUBMITTED THAT THE EFFORT MADE BY THE ASSESSING OFFICER TO ESTABLISH SOMETHING WHICH WAS NOT AT ALL REMOTELY CONNECTED TO THE FINAL ADDITION MADE BY HIM , THEREFORE, WAS APPROPRIATELY CONSIDERED BY THE LEARNED CIT(A) WHO IN HIS WIS DOM HAS NOT CONFIRMED THE ADDITION AS ASSESSED BY THE ASSESSING I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 7 OFFICER BUT BY BRING ING ON RECORD THAT IN VIEW OF THE ASSESSEE NOT MAINTAINING ANY BOOKS OF ACCOUNT AND THE ROUTING OF THE CASH DEPOSITS THROUG H DR. B.C. RATH , WAS THEREFORE APPROPRIATELY CONSI DERED IN THE HANDS OF THE FIRM AMOUNTING TO 63,95,000 AND WAS CONFIRMED. THE LEARNED COUNSEL SUBMITTED THAT THIS CONFIRMATION HAS GOT NO LEGS TO STAND ON INSOFAR AS THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE BANK STATEMENT BEING THE RECORD HE REQUIRED FOR CONSIDERING AS EVIDENCE BY ACCEPTING THE OPENING AND CLOSING BALANCE IN THE BANK AND HAVING ACCEPTED THAT 34 LAKHS WAS APPROPRIATELY DEPOSITED IN THE BANK DID NOT REQUIRE FURTHER EXPLANATION FOR WITHDRAWING AND RE - DEPOSITING IN THE LINE OF THE FINDING OF THE ASSESSING OFFICER THAT THE DEPOSITS BY THE INDIVIDUALS IN THEIR SAVINGS BANK ACCOUNT WHETHER WERE EMPLOYEES OF THE ASSESSEE FIRM AS IT HAD NO BEARING TO THE SAID ADDITION. HE PERUSED THE BALANCE SHEET AS ALSO REPRODUCED BY THE ASSESSING OFFICER IN HIS ORDER THAT CLEARLY INDICATE THAT THE ORIGINAL 34 LAKHS INCLUDED THE CONTRIBUTION BY THE PARTNERS AND THE ADVANCE RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD., HAD BEEN PROPERLY DISCLOSED WHEN THE BALANCE IN THE FEDERAL BANK AMOUNTING TO 18,25,534 AND 23,170 IN IDBI ACCOUNT AS DISCLOSED . THEREFORE, BY NO STRETCH OF IMAGINATION COULD THE SAME INCOME BE TAXED TWICE, ONCE AS INCOME FROM OTHER SOURCES IN AN EARLIER AND AGAIN AS DEPOSITS WITHDRAWN AND RE - DEPOSITED IN THE SUBSEQUENT YEAR WHEN THE ASSESSING OFFICER CHOS E TO SUM UP THE REVENUE ITEM WITH THE ADVANCE . INTERESTINGLY, THE LEARNED ASSESSING OFFICER ALSO SOUGHT TO DISALLOW THE CLAIM OF STA FF SALARY AMOUNTING TO 15,72,900 ON THE PREMISE THAT THE AMOUNT HAS NOT BEEN INCURRED AT ALL WHEN HE HIMSELF NOT ED THAT THE AMOUNT OF CHEQUES WERE DEPOSITED IN THE INDIVIDUAL BANK ACCOUNTS OF THE PURPORTED SOFTWARE DEVELOPERS WHOM THE SENIOR PARTNER SHRI B.C. RATH HAD INTRODUCED IN THE BANK AND THE INFORMATION WAS AVAILABLE THROUGH FINANCIAL INTELLIGENCE WING OF I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 8 MINISTRY OF FINANCE. THE LEARNED CIT(A) THEREAFTER COMPLICATED THE DECIPHERING OF THIS ISSUE BY CANVASSING THAT THE ASSESSEE ACCEPTS OR SUBMITS TH AT THE SALARY WAS PAID IN CASH AND WAS DEPOSITED BY THE INDIVIDUAL ACCOUNT HOLDERS IN CASH AND CHEQUES THEREFORE COULD NOT BE CONSIDERED AS DOCUMENTARY EVIDENCE FOR PAYING SALARY. HE POINTED OUT THAT THE VERY FACT THAT THE AMOUNT OF 34 LAKHS HAD BEEN CIRCULATED IN THE BANK BY WITHDRAWALS IN CASH AND RE - DEPOSITING IN CASH THE QUESTION FOR SALARY BEING PAID IN CASH CANNOT BE IDENTIFIED BY THE SAME AMOUNT WHICH HAS BEEN WITHDRAWN HAS BEEN TOTALLY LOST SIGHT OF BY THE LEARNED CIT(A) INSO FAR AS THE BALANCE HELD IN THE BANK AND THE EXPENDITURE CLAIMED TOGETHER INDICATE THAT THE ASSESSEE HELD THE CAPITAL OF THE PARTNERS AND THE AMOUNT RECEIVED IN ADVANCE FOR THE PURPOSE. HE SUBMITTED THAT THE AUTHORITIES BELOW MISINTERPRETED TH E FACTS TO CORRELATE TO THE FACT THAT A SEARCH AND SEIZURE OPERATION HAD BEEN CARRIED OUT ON ORISSA COMPUTER ACADEMY WHICH INCIDENTALLY HAD THE MAIN PARTNER SHRI B.C. RATH A S THE CHAIRMAN THEREFORE SHOULD BE APPROPRIATELY CONSIDERED FOR COMPUTING A UNDISCL OSED INCOME. HE PRAYED THAT WHEN THE ASSESSEE HAS BEEN ABLE TO EXPLAIN ALL THE RECEIPTS AND PAYMENTS IN A PARTICULAR BANK ACCOUNT, HERE WAS NO REQUIREMENT FOR THE ASSESSEE TO FURNISH THE BOOKS OF ACCOUNT WHEN THE EVIDENCE BROUGHT IN SUPPORT OF THE RECEIPTS AND PAYMENTS HAVE BEEN PLACED ON RECORD. HE PRAYED THAT THE AMOUNT OF ADDITION OF 63,95,000 BE DIRECTED TO BE DELETED AND THE DISALLOWA NCE OF SALARY AMOUNTING TO 15,72 ,900 MAY BE CONSIDERED AS EXPENDITURE FOR EARNING THE INCOME AS AGREED UPON BY THE ASSESSEE WITH ITS FIRST CLIENT NAMELY, M/S.MANSREE INFOTECH PVT. LTD. 6. THE LEARNED D R SUBMITTED THAT THE ASSESSING OFFICER ISSUED NOTICE U/S.153C ON THE BASIS OF AN INCRIMINATING DOCUMENT BEING THE RECEIPT OF ADVANCE FROM M/S.MANSREE INFOTECH PVT. LTD., WAS DEPOSITED IN THE IDBI BANK I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 9 WAS TO BE EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD N OT STARTED ITS BUSINESS BUT HAD CONTRIBUTED CAPITAL FROM ITS PARTNERS REQUIRED CONSIDERATION AND NO EXPLANATION WAS OFFERED BY THE ASSESSEE RESULTING IN AN ORDER U/S.144. THE LEARNED CIT(A) THEREAFTER WAS WITHIN HIS JURISDICTION TO CONFIRM THE SAME TO UPHO LD THAT THE ASSESSEE APPELLANT HAD GOT NO FURTHER DOCUMENTARY EVIDENCE TO FURNISH TO SUBSTANTIATE THE AMOUNT RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD. 7. FOR THE ASSESSMENT YEAR 2006 - 07 , THE LEARNED DR SUBMITTED THAT ON PERUSAL OF THE BANK ACCOUNTS, IT APPEARS THAT THE ASSESSING OFFICER GOT INFORMATION FROM THE VARIOUS ACCOUNT HOLDERS OF THE BANK, WHEREIN THE SENIOR PARTNER OF THE ASSESSEE FIRM HAD INTRODUCED THE ACCOUNT HOLDERS AND THE AMOUNTS DEPOSITED IN CASH BY THEM APPEARED TO HAVE FLOWN FROM THE WI THDRAWAL BY THE ASSESSEE FROM ITS TWO BANK ACCOUNTS, NAMELY FEDERAL BANK ACCOUNT AND IDBI BANK ACCOUNT. THE ASSESSEE IN ORDER TO EXPLAIN THE SAME OUGHT TO HAVE FURNISHED THE PEAK CREDIT WHEN THE ASSESSING OFFICER TRIED TO OBTAIN INFORMATION SEPARATELY FROM THE VARIOUS ACCOUNT HOLDERS AND WAS ABLE TO ESTABLISH THAT THE SUM OF 34 LAKHS WAS IN FACT CONTRIBUTED BY THE VARIOUS PARTNERS WHO ARE HOLDING ACCOUNT IN FEDERAL BANK, BAPUJI NAGAR, BHUBANESWAR AND HAD NOT BEEN ABLE TO EXPLAIN THE SOURCE THEREOF . IT IS NOT THE CASE OF THE ASSESSEE THAT WHEN THE SAID SUM DID NOT BELONG TO I T AS THE ASSESSING OFFICER HAS ONLY ADDED THE AMOUNTS WHICH STOOD DEPOSITED IN HIS BANK ACCOUNT WERE OVER AND ABOVE THE AMOUNT WHICH WAS CONSIDERED PAID AS SALARY TO THE SO CALLED EMPLOYEES FOR CARRYING OUT THE BUSINESS ACTIVITIES. HE SUBMITTED THAT THE LE ARNED CIT(A) IN HIS WISDOM HAS NOT ADJUDICATED ON THE ISSUE OF PEAK CREDIT INSOFAR AS THE ASSESSEE APPELLANT BEFORE HIM SUBMITTED THAT DR.B.C. RATH ALONE WAS THE PERSON THROUGH WHOM SUCH TRANSACTIONS TOOK PLACE THEREFORE, WERE TO BE EXPLAINED IN ITS ENTIRET Y AND NOT ON THE BASIS OF I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 10 THE ASSESSING OFFICERS FINDINGS REGARDING DISCLOSURE OF UNDISCLOSED INCOME THROUGH THE INDIVIDUAL BANK ACCOUNT HOLDERS. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART SUBMISSION. 8. WE HAVE HEARD THE RIVAL SUBMISS IONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO HOLD FOR THE ASSESSMENT YEAR 2005 - 06, THE ASSESSING OFFICER DID NOT HAVE ANY MATERIAL TO INITIATE PROCEEDINGS U/S.153A/144 WHEN IN THE ORDER IT SELF THE ASSESSING OFFICER MENTIONS THAT THE SEARCH OPERATION WERE CARRIED OUT AT THE PREMISES OF ONE ORISSA COMPUTER ACADEMY WHERE THE SENIOR PARTNER OF THE ASSESSEE FIRM WAS ONE OF THE DIRECTORS. BEING A PROFESSIONAL COMPUTER TECHNOLOGIST, THE SENIOR PAR TNER WAS EXECUTING AN AGREEMENT OF M/S.MANSREE INFOTECH PVT. LTD., ON THE BASIS OF WHICH DOES NOT DENY TO THE ASSESSEE THAT THE AMOUNT HAS BEEN RECEIVED AS ADVANCE FOR CARRYING OUT THE CREATING OF WEB SITES FOR ELECTRONIC BOOKS WHICH LIST HAS BEEN FURNISHE D AND PLACED ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US BY THE ASSESSEE FIRM . THE QUANTUM OF WORK DEFINITELY REQUIRED SUCH RECEIPTS IN ADVANCE AND EMPLOYMENT OF VARIOUS SOFTWARE DEVELOPERS IN CALL CENTERS WHICH MAY OR MAY NOT HAVE ASSOCIAT ION WITH ORISSA COMPUTER ACADEMY. THE LEARNED DR HAS CANDIDLY AGREED TO THE PROPOSITION THAT THE ASSESSMENT FRAMED U/S.153A/144 ON THE BASIS OF MATERIAL BROUGHT ON RECORD IN THE ORDER ITSELF DEPICTS THAT THE ASSESSING OFFICER WAS PROCEEDING WITH IT TO THE EXTENT THAT THE ADVANCE RECEIVED HAS BEEN TERMED AS INCOME FROM OTHER SOURCES WHEN THE INFORMATION FROM THE BANK OF THE AMOUNT HAVING BEEN RECEIVED AND DEPOSITED THERE WAS NOT UNDISCLOSED AT ALL. THE ABSENCE OF BOOKS OF ACCOUNT, THEREFORE, THE AGREEMENT CA NNOT BE SINGLED OUT WHEN THE BANK STATEMENT CLEARLY POINTS TO THE FACT THAT THE TOTAL AMOUNT THAT HAS BEEN DEPOSITED IN THE BANK IS ON I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 11 THE BASIS CONTRIBUTION BY THE PARTNERS AND THE ADVANCE RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD., CANNOT BECOME INCRI MINATING U/S.153C. THIS HAS NOT BEEN DEALT WITH BY THE ASSESSING OFFICER IN THE LIGHT OF HIS FRAMING THE ORDER U/S.153A.THE FACT THAT THE ORDER BECOMES VOID AB INITO AS BECAUSE THE VERY AGREEMENT WHICH RESULTED IN THE ASSESS EE FIRM OBTAINING ADVANCE OF 14 ,30,000 HAS BEEN SUBJECTED TO TAX AS INCOME FROM OTHER SOURCE THEREFORE CANNOT BE CONSIDERED AS A INCRIMINATING DOCUMENT OR INFORMATION AVAILABLE WITHIN THE AMBIT OF SECTION 153 C (I). IT WAS ONLY FOR APPRECIATING THE FACT THAT THE SAID SUM WAS A LIABILITY T ILL THE WORK IS RENDERED TO COMPUTING THE NET INCOME COULD NOT BE FORCED UPON BY THE ASSESSING OFFICER AS NO WORK HAD BEEN RENDERED TILL THEN. WE ARE OF THE OPINION THAT THE DEVELOPMENT OF SOFTWARE REQUIRES CONSIDERATION OTHER THAN THE CONCEPT OF TRADING IN GOODS AND TANGIBLE ASSETS WHICH WAS NOT THE CASE OF THE ASSESSEE IN THE FIRST PLACE. THE LEARNED CIT(A) THEREAFTER DID NOT ADDRESS THE ISSUE IN ITS ENTIRETY AS IT APPEARS ON PERUSAL OF HIS ORDER THAT HE REQUIRED FURTHER DOCUMENTARY EVIDENCE WHICH DOCUM ENTARY EVIDENCE WAS THE VERY BONE OF CONTENTION FOR INITIATING THE PROCEEDINGS U/S.153C/153A.IN VI EW THEREOF, WE HAVE NO HESITATION IN ALLOWING THE ASSESSEES APPEAL AND ANNULLING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2005 - 06 BY SETTING ASIDE THE ORDER OF THE LEARNED CIT(A). 9. FOR THE ASSESSMENT YEAR 2006 - 07,WE ARE INCLINED TO FIND THAT THE ASSESSING OFFICER IN HIS ENTHUSIASM AFTER HAVING OBTAINED THE STATEMENTS FROM VARIOUS DEPOSITORS WHO SE ACCOUNTS WERE INTRODUCED IN THE BANK BY SHRI B.C. RATH THE SENIOR PARTNER OF THE ASSESSEE FIRM AND ON THE BASIS OF INFORMA TION MADE AVAILABLE TO HIM FROM THE FINANCIAL INTELLIGENCE WING OF MINISTRY OF FINANCE OF DEALING S IN CASH , IN CONFIRMING THAT THE MAIN PARTNER HA D INTRODUCED SEVERAL PERSONS IN THE BANK FOR PARKING HIS UNDISCLOSED FUNDS , I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 12 PROCEEDED TO BRING TO TAX BEARS NO COVER UP OR INTERMINGLING OF FACTS. THE LIMITED SCOPE OF HIS ADDITION THEREFORE, CONFINED TO THE SUM OF 34 LAKHS WHICH HE HAD ACKNOWLEDGED, RECEIVED AND DEPOSITED IN THE BANK AS ON 31.3.2005 WAS CIRCULATED TWICE OF HAVING BEEN DRAWN AND RE - DEPOSITING IN CASH TO FIND ROUTED IN THE SEPARATE ACCOUNT HOLDERS RESULTED IN HIS COMPLICATING OF HIS UNDERSTAND ING DISALLOWANCE OF SALARY AS WELL TO THEM WHICH WAS PAID IN CHEQUES AND NOT CASH . ALL THESE FACTS ARE WAS IN NO WAY CONNECTED TO THE ASSESSEE FIRM. ON OUR PERUSAL OF THE ASSESSMENT ORDER AND ON THE SUBMISSION OF THE LEARNED COUNSEL, WE ARE INCLINED TO HOL D THAT NO EFFORT HAS BEEN MADE BY THE ASSESSING OFFICER EVEN TO COMPUTE THE PEAK CREDIT IN THE HANDS OF THE ASSESSEE FIRM THAT COULD BE SUBJECTED TO TAX AS INCOME FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER HAS ADDED THE VERY AMOUNTS OF WITHDRAWALS AND RE - DEPOSITS TWICE, WHEN ONCE HE AGREE D TO THE PROPOSITION THAT THE CAPITAL INTRODUCED BY THE PARTNERS OF THE ASSESSEE FIRM AND THE ADVANCE RECEIVED FROM M/S.MANSREE INFOTECH PVT. LTD., HAD ALREADY BEEN SUBJECTED TO VERIFICATION IN THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR. IN OTHER WORDS, THE ASSESSING OFFICER HAS SOUGHT TO TAX THE SUM OF 63,95,000 ON THE ERRONEOUS PROPOSITION THAT 34 LAKHS LOST ITS IDENTITY TWICE HAVING BECOME REVENUE AND A LIABILITY IN THE TWO YEARS. THE SAME INCOME CANNOT BE TAXED TWICE ON THE BASIS OF FINDING OF THE ASSESSING OFFICER THEREFORE IS FIT FOR DELETI ON IN T HE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER ALSO DID NOT MAKE ANY EFFORT TO ESTABLISH THAT THE SAID SUM OF 34 LAKHS WHICH THE VARIOUS DEPOSITORS HELD HAD TO BE VERIFIED FROM THE STATEMENTS HAD NOTHING TO DO WITH THE ASSESSEE FIRM OR THE SENIOR PAR TNER HAVING PAID SALARY BY CHEQUES HAS GOT NO ROLE TO PLAY IN OPERATING THE BANK ACCOUNT HAVING MERELY INTRODUCED THE ACCOUNT HOLDERS AS MANDATORILY REQUIRED BY BANKS . INSOFAR HOLDING THE SALARY AS BOGUS AMOUNTING TO 15,72,900 CANNOT STAND THE TEST ON THE GUIDELINES I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 13 ISSUED BY HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P LTD [216 CTR (SC) 195], WHICH ON OUR PERUSAL OF THE ASSESSMENT ORDER APPEARS TO HAVE BEEN TAXED AS BOGUS EXPENDITURE BUT CONSIDERED BY THE LEARNED CIT(A) OTHERWISE WHEN THE AMOUNT STANDS REDUCED IN THE BANK . THE LEARNED CIT(A) DID TRY TO CONSIDER THAT THE INCOME OF 14,30,000 ADVANCE WHICH THE ASSESSEE HA D RECEIVED IN THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE COULD NOT HAVE SPENT 15,72,900 DECLARING LOSS OF 1,53,696 BY IGNOR ING THE FACT THAT THE AMOUNT WAS NOT AVAILABLE TO ASSESSEE EITHER ON THE BASIS OF HI S FINDING THAT THE DEPOSITORS HAD BOGUS INCOME OR THE ASSESSEE HAD SPENT THE SAME FROM UNDISCLOSED SOURCES AND IN EITHER CASE, WE ARE INCLINED TO HOLD THAT THE DISALLOWANCE OF THE SALARY CLAIMED WAS NOT APPROPRIATE. HOWEVER, ON THE BASIS OF THE FINDINGS, W E ARE INCLINED TO HOLD THAT IN THE ABSENCE OF BOOKS OF ACCOUNT, THE LOSS CLAIMED BY THE ASSESSEE AMOUNTING TO 1,53,696 DOES NOT HAVE ANY BASIS ON THE BASIS OF FACTS ENUMERATED TOGETHER BY THE ASSESSING OFFICER AND THE LEARNED CIT(A). TO CONCLUDE THE ASSESSEES APPEAL SEEKING DELETION OF THE ADDITION OF 63,65,000 AND DISALLOWANCE OF SALARY AMOUNTING TO 15,72,900 IS ALLOWED. HOWEVER, IN VIEW OF THE FACTS AND CIRCUMSTANCES, AFTER PAYMENT OF SALARY THE CLAIM OF LOSS AT 1,53,696 IS DIRECTED TO BE CONSIDERED AT NIL, WHICH THE ASSESSING OFFICER SHOULD TAKE NOTE OF. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 8 TH APRIL, 2011 SD/ - SD/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUP TA), ACCOUNTANT MEMBER. ( ) DATE: 8 TH APRIL, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T(SS).A.NO. 22/CTK/2009 AND ITA NO.33/CTK/2009 14 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.GLOBAL SOFT, B - 20, BJB NAGAR,BHUBANESWAR 751 014 2 / THE RESPONDENT: M/S.GLOBAL SOFT, B - 20, BJB NAGAR,BHUBANESWAR 751 014 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY