ACIT, CHENNAI V. Shri S.Suresh, CHENNAI

ITSSA 26/CHNY/2011

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9286 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-05-2013
• Assessment Year: misc
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.(SS) A. NO. 26/MDS/2011 BLOCK ASSESSMENT YEAR : 1997-98 TO 2002-03 & PERIOD FROM 1.4.2002 TO 5.3.2003 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(5), CHENNAI - 600 034 . (APPELLANT) V. SHRI S. SURESH, FLAT NO. L-III FLOOR, 22, 1 ST MAIN ROAD, UNITED INDIA COLONY,KODAMBAKKAM, CHENNAI - 600 034. PAN : ALTPS 8069 H (RESPONDENT) APPELLANT BY : SMT. RUBY GEORGE, CIT-DR RESPONDENT BY : SHRI D. ANAND, ADVOCATE DATE OF HEARING : 09.05.2013 DATE OF PRONOUNCEMENT : 06.06.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, IT IS AGGRIE VED ON TWO ADDITIONS WHICH WERE DELETED BY THE CIT(APPEALS). FIRST ONE IS OF ` 3,50,911/- RELATING TO ALLEGED INCOME OF THE ASSESS EE FROM M/S ASIAN SHIPPING SERVICES AND SECOND ONE IS ON AN ADDITION OF ` 1,39,296/- RELATING TO ALLEGED INCOME FROM M/S ASIAN ROADWAYS. I.T.(SS) A. NO. 26/MDS/11 2 2. FACTS APROPOS ARE THAT ASSESSEE, WHO IS IN THE B USINESS OF MERCHANT EXPORTS AND ALSO RUNNING C&F AGENCIES, WAS SUBJECTED TO A SEARCH ON 5.3.2003. IN THE REGULAR RETURNS FILED B Y THE ASSESSEE, HE WAS ADMITTING INCOME FROM THE PROPRIETORSHIP CONCER NS, NAMELY, M/S ASIAN SHIPPING SERVICES AND M/S ASIAN ROADWAYS. AS SESSING OFFICER, DURING THE COURSE OF BLOCK ASSESSMENT, FOU ND THAT ASSESSEE HAD A NUMBER OF BANK ACCOUNTS AND HE WAS RUNNING CE RTAIN OTHER PROPRIETARY CONCERNS AS WELL. IT SEEMS CERTAIN FLO PPY DISCS WERE FOUND WHICH CONTAINED CERTAIN INCOMPLETE ACCOUNTS. IN HIS EXPLANATION, ASSESSEE ADMITTED THAT THE ACCOUNTS WE RE NOT PROPERLY MAINTAINED AND WERE INCOMPLETE. PRIOR TO SEARCH IN ASSESSEES PREMISES, THERE WAS A SEARCH IN ONE OF HIS EMPLOYEE S RESIDENCE, WHEREFROM A SUM OF ` 31,49,800/- WAS SEIZED. THE SAID EMPLOYEE IN HER SWORN STATEMENT MENTIONED THAT THE MONEY BELONG ED TO ASSESSEE. WITHDRAWALS FROM BANK ACCOUNTS MENTIONED BY THE EMPLOYEE WERE VERIFIED BY THE ASSESSING OFFICER AND FOUND TO BE CORRECT. ASSESSEE HAD FILED RETURN FOR THE BLOCK P ERIOD ADMITTING AN INCOME OF ` 43,60,000/-, WHICH INTER ALIA, COVERED THE AMOUNT FOUND FROM THE RESIDENCE OF HIS EMPLOYEE. HOWEVER, ASSES SING OFFICER WAS OF THE OPINION THAT ASSESSEE WAS UNABLE TO EXPLAIN VARIOUS CREDIT I.T.(SS) A. NO. 26/MDS/11 3 ENTRIES IN HIS BANK ACCOUNTS. AFTER CONSIDERING TH E CHEQUES, WHICH WERE DISHONOURED, ASSESSING OFFICER CAME TO A CONCL USION THAT TOTAL RECEIPTS WHICH WERE CREDITED IN THE BANK ACCOUNTS C AME TO ` 1,53,09,907/-. SINCE ASSESSEE HAD ADMITTED THE ACC OUNTS TO BE INCOMPLETE, ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE AT 10% OF THE GROSS RECEIPTS. ALONG WITH SUCH 10% GROSS RECEIPTS, ASSESSING OFFICER ALSO ESTIMATED 2% COMMISSION FROM OCEAN FREIGHT, OUT OF A TOTAL AMOUNT OF ` 2,22,08,992/- PAID BY THE ASSESSEE. FROM THE REGULAR RETURNS FILED, ASSESSING OFFICER FOUND THAT AGGREGATE INCOME ADMITTED FROM THE PROPRIETARY CONCERN, M/S A SIAN SHIPPING SERVICES CAME TO ` 16,24,260/- FOR ASSESSMENT YEARS 1999-2000 TO 2002-03. THIS AMOUNT WAS DEDUCTED FROM TOTAL ESTIM ATED INCOME OF ` 19,75,171/-, AND THE BALANCE ` 3,50,911/- WAS ADDED AS UNDISCLOSED INCOME. 3. IN HIS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS ONCE THE INCOME WAS ESTIMATED, THERE COULD BE N O FURTHER ADDITION. IN ANY CASE, AS PER ASSESSEE, THERE WAS NO REASON TO ESTIMATE INCOME FROM OCEAN FREIGHT AT 2% OF ` 2,22,08,992/- WHEN 10% OF THE GROSS RECEIPTS CREDITED IN THE BOOKS AND BANK ACCOUNTS WERE ALREADY CONSIDERED FOR ADDITION. LD. CIT(APPE ALS) WAS I.T.(SS) A. NO. 26/MDS/11 4 APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, DEFINITION OF UNDISCLOSED INCOME CONTAINING IN SECTION 158B(B) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') DID NOT ALLOW ANY ADDITIO N TO BE MADE ON ESTIMATE BASIS. IN THIS VIEW OF THE MATTER, HE DEL ETED THE ADDITION. 4. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT RETURNED INCOME OF THE ASSESSEE WAS LESS THAN THE ESTIMATED PROFITS WHICH HE DERIVED FR OM HIS PROPRIETARY CONCERN, NAMELY, M/S ASIAN SHIPPING SERVICES. ASSE SSEE HAD NOT MAINTAINED BOOKS OF ACCOUNTS AND THEREFORE, ASSESSI NG OFFICER WAS CONSTRAINED TO ESTIMATE SUCH INCOME. HENCE, ACCORD ING TO HER, THE ADDITION WAS PROPERLY MADE BY THE ASSESSING OFFICER . 5. PER CONTRA, LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF CIT(APPEALS). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT SEARCH IN THE CASE OF ASSE SSEE WAS INITIATED ON ACCOUNT OF SEIZURE OF CASH OF ` 31,49,800/- FROM THE RESIDENCE OF HIS EMPLOYEE SMT. S. SREEDEVI. ASSESSEE HAD IN THE BLOCK RETURN, ADMITTEDLY DISCLOSED A SUM OF ` 43,60,000/-, WHICH WAS MORE THAN THE CASH SEIZED FROM THE RESIDENCE OF HIS EMPLOYEE. FU RTHER TO THIS, I.T.(SS) A. NO. 26/MDS/11 5 ASSESSEE WAS ALSO SUBJECTED TO ESTIMATED ASSESSMENT ON THE CREDITS IN HIS BANK ACCOUNTS. ASSESSING OFFICER TOOK TOTAL CREDITS AS ` 1,53,09,907/- AND ESTIMATED THE INCOME AT 10% OF TH E RECEIPTS. HOWEVER, IN ADDITION TO THAT, ASSESSING OFFICER ALS O CONSIDERED 2% OF OCEAN FREIGHT OF ` 2,22,08,992/- PAID ALSO AS INCOME. THOUGH IT IS MENTIONED BY THE ASSESSING OFFICER THAT AT THE TIME OF SEARCH, THERE WAS INCRIMINATING MATERIAL EVIDENCING UNDISCLOSED I NCOME, NOTHING IS MENTIONED IN THE ASSESSMENT ORDER WHICH COULD POINT TO ANY INCOME HAVING BEEN EARNED BY THE ASSESSEE FROM M/S ASIAN S HIPPING SERVICES, IN ADDITION TO WHAT WAS RETURNED BY HIM I N HIS REGULAR RETURNS. ADMITTEDLY, ASSESSEE WAS FILING REGULAR R ETURNS FOR HIS INCOME FROM THE PROPRIETARY CONCERN, M/S ASIAN SHIP PING SERVICES. WITHOUT ANY EVIDENCE GATHERED AT THE TIME OF SEARCH , ADDITION UNDER SECTION 158B COULD NOT HAVE BEEN MADE. IN ANY CASE, ASSESSING OFFICER ESTIMATED 2% OF OCEAN FREIGHT OF ` 2,22,08,992/- ALSO FOR ADDITION, WHICH WAS IN ADDITION TO THE ESTIMATED AD DITION OF 10% ON GROSS RECEIPTS. SUCH AN ADDITION OF 2% OF ` 2,22,08,992/-, VIZ. ` 4,44,180/- COVERED MORE THAN THE DIFFERENCE OF ` 3,50,911/-. WE ARE OF THE OPINION THAT CIT(APPEALS) WAS JUSTIFIED IN D ELETING SUCH ADDITION. NO INTERFERENCE IS CALLED FOR. I.T.(SS) A. NO. 26/MDS/11 6 7. COMING TO THE NEXT ADDITION, WHICH WAS DELETED B Y THE CIT(APPEALS), VIZ. ` 1,39,296/-, THE SAID ADDITION WAS MADE BY THE ASSESSING OFFICER RELYING ON SECTION 44AE OF THE AC T. WE FIND THAT THERE IS NO DISPUTE THAT ASSESSEE WAS HAVING THREE GOODS CARRIAGES. HE HAD STARTED HIS GOODS CARRIAGE BUSINESS IN DECEM BER, 2001 IN THE NAME ASIAN ROADWAYS. IT IS AN ADMITTED POSITION THAT RETURN OF INCOME FILED BY THE ASSESSEE INCLUDED HIS INCOME FR OM ASIAN ROADWAYS, IN WHICH THE THREE GOODS CARRIAGES WERE H ELD. IF WE LOOK AT SECTION 44AE, AS IT STOOD AT THE RELEVANT POINT OF TIME, THE SUM THAT COULD BE CONSIDERED AS INCOME WAS ` 2000/- PER MONTH PER GOODS CARRIER UPTO 1.4.2003. HENCE FOR THREE GOODS CARRI AGES FOR THE PERIOD JANUARY, 2002 TO MARCH, 2002, THE INCOME COULD HAVE BEEN ` 18,000/-. ASSESSEE HAD ADMITTEDLY RETURNED A SUM O F ` 18,204/- IN HIS REGULAR RETURN FOR ASSESSMENT YEAR 2002-03. FO R THE PERIOD 1.4.2002 TO 5.3.2003, THE INCOME THAT COULD BE ESTI MATED UNDER SECTION 44AE WAS ONLY FOR ELEVEN MONTHS. BUT, NEVE RTHELESS, SINCE SEARCH TOOK PLACE ON 5.3.2003, THE TIME FOR FILING RETURN FOR ASSESSMENT YEAR 2003-04 WAS STILL LEFT AND PREVIOUS YEAR STILL TO COMPLETE. ADMITTEDLY, ASSESSEE HAD RETURNED INCOME FROM GOODS CARRIAGE BUSINESS UNDER SECTION 44AE IN THE REGULAR RETURN FOR ASSESSMENT YEAR 2003-04, WHICH COVERED THE PERIOD 1 .4.2002 TO I.T.(SS) A. NO. 26/MDS/11 7 31.3.2003. THEREFORE, IN OUR OPINION, THERE WAS NO THING WHATSOEVER LEFT FOR MAKING ADDITION UNDER SECTION 44AE OF THE ACT. THERE IS ALSO CONSIDERABLE DOUBT WHETHER SUCH AN ADDITION COULD H AVE BEEN MADE IN A BLOCK ASSESSMENT WHEN NO INCRIMINATING MATERIA L REGARDING ANY INCOME OF THE ASSESSEE OVER AND ABOVE WHAT WAS RETU RNED BY HIM FOR THE THREE OF GOODS CARRIAGES WERE FOUND AT THE TIME OF SEARCH. WE ARE OF THE OPINION THAT THIS ADDITION WAS ALSO RIGH TLY DELETED BY THE CIT(APPEALS). NO INTERFERENCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 6 TH OF JUNE, 2013, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 6 TH JUNE, 2013. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-II, CHENNAI/CI T/D.R./ GUARD FILE