Padmavathi Oil Producers, Hyderabad V. DCIT, Hyderabad

ITSSA 27/HYD/2009

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1903 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-03-2016
• Assessment Year: misc
• Appeal Filed On: 30-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Business income; Search and seizure; Document seized; Source of fund; Block assessment; Documents seized
• Section: 133A; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER IT(SS)A. NO. 27/HYD/2009 BLOCK PERIOD : 1986-87 TO 1996-97 PADMAVATHI OIL PRODUCERS, HYDERABAD VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-9(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SHRI B. KURMI NAIDU, DR DATE OF HEARING : 24-03-2016 DATE OF PRONOUNCEMENT : -05-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL FILED BY ASSESSEE, WHICH IS A PA RTNERSHIP FIRM. IT CARRIED ON BUSINESS OF MANUFACTURE AND SALE OF EDIBLE OIL. THE ASSESSEE FILED RETURN OF INCOME ON 31-03-1994; WHEREAS THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1993-94 TO 1 995-96 WERE FILED ON 29-01-1996. THE INCOME-TAX AUTHORITIES C ONDUCTED SEARCH AND SEIZURE OPERATIONS AT THE PREMISES OF THE AS SESSEE ON 31-01-1996. DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS, THE INCOME-TAX AUTHORITIES DID NOT FIND ANY INCRIMINATING MATERIAL OR ANY UNDISCLOSED ASSETS/INCOME. THE ASSESSING OFFI CER COMPLETED THE ASSESSMENT UNDER SEC.158BC ON 31-01-19 97. THE IT(SS)A.NO. 27/HYD/2009 :- 2 -: ASSESSEE FILED AN APPEAL BEFORE THE INCOME-TAX APPELL ATE TRIBUNAL IN IT(SS)A. NO.122/HYD/1997. THE TRIBUNAL WAS OF THE VIEW THAT A FRESH ASSESSMENT MAY BE MADE DE NOVO BY PROVIDING A N OPPORTUNITY TO THE ASSESSEE AND SET ASIDE THE ORDER. TH EREAFTER, THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE REQUI RING THE ASSESSEE TO EXPLAIN AS TO WHY THE ADDITIONS MADE IN THE ASSESSMENT U/S 158BC DATED 31-01-1997 SHOULD NOT BE MA DE. THE ASSESSEE SUBMITTED THAT THE ASSESSMENT U/S 158BC SHOULD H AVE BEEN BASED ON THE MATERIAL FOUND DURING THE SEARCH AND SINCE NO SUCH MATERIAL WAS FOUND, THE ASSESSING OFFICER CAN NO T MAKE ANY ADDITION TO THE UNDISCLOSED INCOME. THE ASSESSING OFFI CER, HOWEVER, DID NOT ACCEPT THE EXPLANATION SUBMITTED BY THE ASSESSEE AND RESORTED TO ESTIMATION OF NET PROFIT AT 3% OF THE TURN- OVER AS DETERMINED BY THE STATES TAX AUTHORITIES. THIS IS FOR THE ASSESSMENT YEARS 1992-93, 1993-94, 1994-95 AND 1995 -96. FOR THESE YEARS NO OTHER ADDITIONS WERE MADE. FOR THE ASSE SSMENT YEAR 1996-97, THE ASSESSING OFFICER OBSERVED THAT THERE WAS CASH BALANCE AND THE STOCK AVAILABLE TO AN EXTENT OF RS.9,4 6,956/- AND THAT THE SAME WAS NOT EXPLAINED. THE ASSESSING OFFICE R ACCORDINGLY TREATED THE SAME AS THE INCOME OF THE ASSESSEE. IT IS AGAINST THE SAID ORDER OF ASSESSMENT THE ASSESSEE IS FILING THE PR ESENT DIRECT APPEAL. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS, UNJUST AND CONTRARY TO THE FACTS OF THE CASE; 2. THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED T HE FACT THAT THERE ARE NO INFORMATION IN THE SEIZED DOCUMENTS TO SHOW THAT THE BUSINESS INCOME WAS NOT PROPERLY ADMITTED IN TH E RETURNS OF INCOME FILED AND, THEREFORE, THE ASSESSING OFFIC ER SHOULD NOT IT(SS)A.NO. 27/HYD/2009 :- 3 -: HAVE RESORTED TO ESTIMATION OF INCOME WHILE COMPLET ING THE ASSESSMENT U/S 158BC OF THE ACT; 3. THE ASSESSING OFFICER ERRED IN ESTIMATING THE NE T INCOME FOR THE ASSESSMENT YEARS 1992-93 TO 1995-96 AS UNDER: 1992-93 - RS.9,11,094/- 1993-04 - RS.8,05,404/- 1994-95 - RS.2,26,517/- 1995-96 - RS.5,02,376/- 4. THE ASSESSING OFFICER ERRED IN TREATING THE INVE STMENT IN OIL TANKERS AND IN MARUTI CAR AT RS.10,28,500/-- AS UND ISCLOSED INCOME OF THE APPELLANT FOR THE ASSESSMENT YEAR 199 4-95 WITHOUT CONSIDERING THE FACT THAT THE SAID AMOUNT W AS ALREADY RECORDED IN THE BALANCE SHEET; 5. THE ASSESSING OFFICER ERRED IN HOLDING THAT THER E IS ANY DIFFERENCE IN THE STOCKS ON THE DATE OF SEARCH AND FURTHER ERRED IN ARRIVING SUCH STOCK VARIATION AT RS.9,46,956; 6. THE ASSESSING OFFICER ERRED IN ADDING THE SAME F OR THE ASSESSMENT YEAR 1996-97. 7. THE ASSESSING OFFICER ERRED IN HOLDING THAT CASH OF RS.2.0 LAKHS WAS NOT PROPERLY EXPLAINED BY THE APPELLANT A ND FURTHER ERRED IN MAKING ADDITION OF THE SAID AMOUNT TOWARDS UNEXPLAINED CASH AVAILABLE. 8. WITHOUT PREJUDICE TO THE GROUNDS RAISED BY THE A PPELLANT, THE ASSESSING OFFICER CAN NOT MAKE THE ADDITIONS MADE I N THE ASSESSMENT YEAR 1996-97. HE OUGHT TO HAVE TELESCOPE D THE INCOME DETERMINED BY HIM OF RS.23,52,421/- TO THE A DDITION PROPOSED AGAINST THE UNEXPLAINED INVESTMENT OF RS.1 9,75,456; 9. THE ASSESSING OFFICER ERRED IN DETERMINING THE T OTAL UNDISCLOSED INCOME AT RS. 44,19,847/- 3. GROUND NO. 1 IS GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. IT(SS)A.NO. 27/HYD/2009 :- 4 -: 4. AS REGARDS GROUND NO.2, LD. COUNSEL SUBMITTED THAT T HE INCOME TAX AUTHORITIES DID NOT FIND ANY MATERIAL DURIN G THE COURSE OF SEARCH AND SEIZURE OPERATIONS TO SHOW THAT THERE IS ANY UNDISCLOSED INCOME. THE ASSESSING OFFICER MERELY RE SORTED TO ESTIMATION OF INCOME FROM THE BUSINESS ACTIVITY FOR THE ASSESSMENT YEARS 199293, 1993-94, 1994-95 AND 1995-96. LD. COU NSEL SUBMITTED THAT THE PROVISIONS OF SEC.158 BB OF THE I.T. ACT CLEARLY MENTION THAT THE UNDISCLOSED INCOME SHALL BE AN AMOUNT W HICH WAS NOT EARLIER DISCLOSED TO THE DEPARTMENT. HE SUBMITTE D THAT THE ASSESSEE ALREADY FILED THE RETURNS OF INCOME; EXPLAIN ED THE NATURE OF BUSINESS; ADMITTED THE TURN OVER AND ALSO ADMITTED THE INCOME. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT A ND RESORTED TO ESTIMATION OF THE NET INCOME. THIS TYPE OF ESTIMATION IS NOT PERMISSIBLE WHILE COMPLETING THE ASSESSMENT U/S 158BC OF THE I. T. ACT. 5. AS REGARDS GROUND NO. 3 REGARDING ESTIMATING THE N ET INCOME FOR THE AYS 1992-93 TO 1995-96, LD. COUNSEL SUBMITTED THAT FOR THE ASSESSMENT YEAR: 1992-93 RETURN OF INCOME WAS FILE D ON 31.03.1994. THERE IS NO INFORMATION TO THE EFFECT THA T THERE IS ANY UNDISCLOSED INCOME. THE ASSESSING OFFICER DID NOT CO MMENT ON THE RETURN OF INCOME OR ON THE ANNEXURES. HE ACCEPTED THE RETURN OF INCOME FILED. ONCE THE RETURN WAS VALIDLY FILED, THE A SSESSING OFFICER IS NOT JUSTIFIED IN RESORTING TO ESTIMATION OF IN COME; PARTICULARLY WHEN THE ASSESSING OFFICER WAS COMPLETING THE ASSESSMENT U/S 158BC WITHOUT ANY SEIZED MATERIAL. 5.1 AS FAR AS THE ASSESSMENT YEARS 1993-94 TO 1995-9 6 ARE CONCERNED, LD. COUNSEL SUBMITTED THAT THE RETURNS OF IN COME FOR THE THREE ASSESSMENT YEARS WERE FILED ON 29.01.1996. T HE IT(SS)A.NO. 27/HYD/2009 :- 5 -: ANNEXURES VIZ. THE PROFIT AND LOSS ACCOUNT AND OTHER FI NAL ACCOUNTS WERE ANNEXED TO THE RETURNS OF INCOMES. THE ASSESSING OFFICER PROVIDED AN OPPORTUNITY BY ISSUE OF SHOW CAUSE LETTER DATED 28.10.1996. AT PARA 2 OF THE SAID SHOW CAUSE LETTER, TH E ASSESSING OFFICER MENTIONED THAT THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET ETC. WERE NOT FURNISHED ALONG WITH THE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEARS 1993-94, 1994-95 AND 1995-96 . THE ASSESSING OFFICER ALSO REQUIRED THE ASSESSEE TO SUBMI T SALES TAX ASSESSMENT ORDERS. IN RESPONSE THERETO, THE ASSESSEE SU BMITTED LETTER DATED 09.12.1996. THE ASSESSEE, AT PARA 3 OF TH E SAID LETTER, MENTIONED THAT THE CONSTRUCTED TRADING AND PROFIT AND LOS S ACCOUNT, THE DETAILS OF EXPENSES WERE ALL BEING SUBMITTE D. THE ASSESSEE FILED THE SALES TAX ASSESSMENT ORDERS FOR THE FINANCIAL YEARS 1991-92 AND 1992-93 AND ALSO MENTIONED THAT THE ASSESSMENTS FOR THE LATER YEARS WERE NOT COMPLETED. 5.2 LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER, W HILE COMPLETING THE BLOCK PERIOD ASSESSMENTS, OBSERVED THAT T HE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEARS 1993- 94 TO 1995- 96 ARE NOT VALID AND, THEREFORE, TREATED THEM AS NOT FIL ED. IN THIS REGARD, THE LD. COUNSEL SUBMITTED THAT THE RETURNS OF INC OME FOR ALL THE ASSESSMENT YEARS WERE FILED ON 29.01.1996. 5.3 LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER RE QUIRED THE ASSESSEE TO FILE THE FINAL ACCOUNTS AND THE ASSESSEE F ILED THE FINAL ACCOUNTS. IT CAN ALSO BE SEEN FROM THE ASSESSMENT ORDER (PAGE 6), THE ASSESSING OFFICER MENTIONED AS UNDER: FOR THE ASSESSMENT YEARS 1993-94, 1994-95 AND 1995- 96 - 'RETURN OF INCOME FILED WITHOUT ANY TRADING A/C, P& L A/C AND B.S., EVEN THOUGH STATED IN THE STATEMENT OF TOTAL INCOME. HENCE IT(SS)A.NO. 27/HYD/2009 :- 6 -: TREATED AS DEFECTIVE RO AND HENCE A LETTER DT.26.8. 96 WAS ISSUED TO THE ASSESSEE. NO RESPONSE HENCE NOTICE U/ S 148 WAS ISSUED ON 7.10.96. BUT NO RETURN OF THE INCOME WAS FILED. HENCE RETURN OF INCOME IS TREATED AS NONEST'. THE SAID CO MMENT IS REPEATED FOR THE ASSESSMENT YEARS 1994-95 AND 1995- 96. IT IS SUBMITTED THAT THE ASSESSEE RESPONDED TO THE DEFECT LETTER VIDE LETTER FILED ON 09.12.1996 AND FILED THE TRADING, P ROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET FOR THE YEARS UNDER CONSIDERATION. 5.4 LD. COUNSEL SUBMITTED THAT ASSESSING OFFICER OBSERV ED THAT THERE ARE DEFECTS IN THE RETURNS OF INCOME FILED; THE SA ID DEFECTS WERE RECTIFIED BY THE ASSESSEE AND, THEREFORE, THE RETUR NS CANNOT BE HELD TO BE INVALID. 5.5 IT IS FURTHER SUBMITTED THAT THE MADRAS HIGH COURT IN TH E CASE OF CIT VS. K.RAMASWAMY REPORTED IN 296 ITR 358 HELD THAT EVEN WHEN THE RETURN OF INCOME WAS FILED BEYOND TIME , THE INCOME ADMITTED IN THE SAID RETURN OF INCOME CAN NOT BE CONSIDE RED AS UNDISCLOSED INCOME. 5.6 LD. COUNSEL SUBMITTED THAT THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1994-95 AND 1995-96 WERE WITHIN THE TI ME AS PER THE PROVISIONS OF SEC. 139(4), THOUGH FILING OF TH E RETURN OF INCOME FOR THE ASSESSMENT YEAR 1993-94 WAS DELAYED. THE DEFECTS IN THE RETURNS OF INCOME WERE RECTIFIED AND, THEREFORE , THE INCOMES ADMITTED CANNOT BE TREATED AS UNDISCLOSED. 5.7 IN VIEW OF THE ABOVE SUBMISSIONS, LD. COUNSEL SU BMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN RESORTING TO ESTIMATION OF INCOME ON THE TURNOVER ADMITTED. IT(SS)A.NO. 27/HYD/2009 :- 7 -: 6. AS REGARDS GROUND NO. 4 REGARDING TREATING THE INV ESTMENT IN OIL TANKERS AND IN MARUTI CAR AS UNDISCLOSED OF THE ASSESSEE BY THE AO, LD. COUNSEL SUBMITTED THAT AO MENTIONED AT PAGE 13 , PARA 6.3 OF THE ORDER THAT THE INVESTMENT IN OIL TANKER AND MAR UTHI CAR OF RS. 10,28,500/- WAS FOUND IN THE CONSTRUCTED TRADING AND PROFIT AND LOSS ACCOUNT FOR THE AY 1994-05. IT IS CLEAR FROM THE OBSERVATIONS MADE BY THE ASSESSING OFFICER THAT THE AMOU NTS WERE ADOPTED FROM THE FINAL ACCOUNTS FILED BY THE ASSESSEE. THEY WERE NOT FOUND DURING THE SEARCH AND SEIZURE OPERATIONS. IT CAN NOT BE CONSIDERED AS UNDISCLOSED INCOME. THE BALANCE SHEET ALSO SHOWS THE CAPITAL OF SRI V.DAYAKAR AND SMT.V.UMA, AMOUNT BORR OWED FROM VYSYA BANK LTD., WARANGAL, SBH, WARANGAL AND AL SO SUNDRY CREDITORS AS PER THE LIST. THE ASSESSING OFFICER ACCEP TED THE SUNDRY CREDITORS, THE LOANS TAKEN FROM THE BANKS AND THE CAPITA L. WHEN THE SOURCE IS ACCEPTED, THE ASSESSING OFFICER IS NOT J USTIFIED IN HOLDING THAT THE INVESTMENT WAS NOT EXPLAINED. THE ASSES SEE SUBMITS THAT THE ADDITION IS NOT BASED ON INFORMATION FO UND DURING THE SEARCH AND SEIZURE OPERATIONS AND THE SOURCE FOR INVESTMENT STANDS EXPLAINED IN THE BALANCE SHEET. 7. AS REGARDS GROUND NOS. 5 & 6 THAT THE AO ERRED IN HOLDING THAT THERE IS ANY DIFFERENCE IN THE STOCKS ON THE DATE O F SEARCH AND FURTHER ERRED IN ARRIVING SUCH STOCK VARIATION AT RS. 9,46,956/- AND THE AO ERRED IN ADDING THE SAME FOR AY 1996-07. LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER IN THE ORIGINAL ASS ESSMENT AT PAGE 27 MENTIONED THAT THERE WAS A WIDE VARIATION OF THE STOCK AS PER THE BOOKS AND ON FINAL VERIFICATION. SUCH VARIATI ON IS ARRIVED AT RS.7,46,956/-. THE WORKING OF SUCH VARIATION IS AT PA RA 5.2, PAGE 11 OF THE ASSESSMENT ORDER. THE FOLLOWING IS THE STOCK DIFFERENCE ARRIVED AT BY THE ASSESSING OFFICER. IT(SS)A.NO. 27/HYD/2009 :- 8 -: EXCESS SHORTAGE SUNFLOWER SEED 76,850 -- GROUND NUTS 70,456 -- GROUNDNUT CAKE 5,300 -- GROUNDNUT SEED -- 2,54,140 GROUNDNUT OIL -- 3,36,210 7.1 LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER AG GREGATED ALL 5 ITEMS AND ADDED THE SAME TO THE INCOME. HE CONTE NDED THAT THIS IS NOT CORRECT AND EXCESS STOCK CAN BE CONSIDERED BUT THE DEFICIT STOCK CAN NOT BE CONSIDERED FOR ASSESSMENT. TH EREFORE, THE ASSESSING OFFICER IS NOT CORRECT IN ARRIVING AT THE DI FFERENCE AT RS.7,46,956/-. 7.2 LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER RE SORTED TO ESTIMATION OF INCOME AND, THEREFORE, THE STOCK DIFFERENC E CANNOT SEPARATELY BE ADDED. THE ASSESSEE ALREADY ADMITTED RS .2,00,000/- TOWARDS STOCKS. 8. AS REGARDS GROUND NO. 7, THAT THE AO ERRED IN HOLD ING THAT CASH OF RS. 2.0 LAKHS WAS NOT PROPERLY EXPLAINED BY THE ASSESSEE AND FURTHER ERRED IN MAKING ADDITION OF THE SAID AMOU NT TOWARDS UNEXPLAINED CASH AVAILABLE, IS CONCERNED, LD. COUNS EL SUBMITTED THAT THE ACCORDING TO THE ASSESSING OFFICER THE BOOKS WE RE NOT MAINTAINED AND THEY WERE DEFECTIVE. THE PARTNER SRI V .DAYAKAR RAO DURING RECORDING HIS STATEMENT ON 01. 02. 1996 AC CEPTED AN ADDITION OF RS. 2,00,000/_ ON ACCOUNT OF CASH. THE ASSESSING OFFICER TREATED THE SAME AS THE UNDISCLOSED INCOME. I T IS SUBMITTED THAT THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS.4 ,00,000/_ COVERING THE STOCKS AND THE CASH. THEREFORE, THE ASSE SSING OFFICER IS NOT JUSTIFIED IN MAKING A SEPARATE ADDITION ON ACC OUNT OF STOCKS AND CASH. IT(SS)A.NO. 27/HYD/2009 :- 9 -: 9. LD. DR, ON THE OTHER HAND, FILED WRITTEN SUBMISSIONS IN SUPPORT OF REVENUES CASE, WHEREIN IT IS STATED AS FOLL OWS: A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT W AS INITIATED AGAINST THE ABOVE ASSESSEE ON 30-1-1996 W HEN IT WAS NOTICED THAT THE ASSESSEE FILED THE RETURNS OF INCO ME FOR THE ASSESSMENT YEARS 1993-4, 1994-95 AND 1995-96 ON 29- 01-1996 WITHOUT ENCLOSING THE PROFIT AND LOSS ACCOUNTS AND BALANCE SHEETS ALONG WITH NECESSARY ANNEXURES AS ALSO THE CHALLANS FOR THE PAYMENT OF SELF ASSESSMENT TAX U/S 140A. DURING THE COURSE OF SURVEY OPERATIONS DISCREPANCY OF STOCK OF RS. 7,46, 956/-, CERTAIN UNEXPLAINED INVESTMENTS AND EXCESS CASH OF RS. 2 LA KHS WAS FOUND. THEN THE SURVEY OPERATIONS WERE CONVERTED INTO SEAR CH UNDER SECTION 132 OF THE INCOME TAX ACT. DURING THE COURSE OF SEA RCH, NO BOOKS OF ACCOUNTS FOR THE EARLIER YEARS WERE FOUND AND ONLY CONTA BOOK AND STOCK BOOK FOR THE F.Y. 1996-97 WERE FOUND. 2. NOTICE U/S 158BC WAS ISSUED TO THE ASSESSEE. TH E ASSESSEE FILED THE RETURN OF INCOME DECLARING UNDIS CLOSED INCOME OF RS.4 LAKHS IN RESPONSE TO NOTICE U/S 158BC WAS OUT OF WHICH 1.5 LAKHS RELATED TO A.Y.1993-94 AND RS.2.5 LAKHS RELAT ED TO 199697. THE ASSESSMENT WAS COMPLETED ON 31-01-1997. ON FIRS T APPEAL, THE HON'BLE ITAT RESTORED THE MATTER TO THE FILE OF AO WITH DIRECTION FOR DE NOVO ASSESSMENT AFTER 'PROVIDING REASONABLE OPPO RTUNITY OF BEING HEARD VIDE ORDER IN IT(SS)A NO.120/H/1997 DT: 07.06 .2007 FOR BLOCK PERIOD 1986-87 TO 31-1-1997. 3. DURING THE COURSE OF FRESH ASSESSMENT PROCEEDIN GS, THE ASSESSEE WAS GIVEN VARIOUS OPPORTUNITIES TO SUBMIT ITS CASE. HOWEVER THE ASSESSEE HAS NOT SUBMITTED ANY BOOKS OF ACCOUNTS OR BILLS & VOUCHERS. THE ASSESSEE CONTENDED THAT THE B OOKS OF ACCOUNT HAVE BEEN MISPLACED AND IT IS NOT POSSIBLE TO PRODU CE THE SAME. THE ASSESSEE HIMSELF ACCEPTED THAT NO PROPER BOOKS OF A CCOUNTS MAINTAINED DURING THE COURSE OF POST-SEARCH PROCEED INGS. FURTHER, THE ASSESSEE HAS NOT EXPLAINED HOW HE WOULD SUBSTAN TIATE THE FINAL ACCOUNTS RELYING UPON BY IT IN THE ABSENCE OF THE B OOKS. FURTHER, THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE FOR THE PREPA RATION OF PROFIT IT(SS)A.NO. 27/HYD/2009 :- 10 -: AND LOSS ACCOUNT AND COMPUTATION OF INCOME. DURING THE COURSE OF FRESH ASSESSMENT PROCEEDINGS, THE ASSESSEE REITERAT ED THAT THE SUBMISSION MADE EARLIER AND NO NEW EVIDENCES/MATERI AL BROUGHT TO RECORD. 4. AS THE ASSESSEE FILED INVALID ROI AND THE RETUR N FILED WAS FILED WITHOUT ANY ENCLOSURES AS PROVISION U/S 139(9 ). IT IS TREATED AS IF NO RETURN OF INCOME WAS FILED AT ALL. 5. UNDER THESE CIRCUMSTANCES, THE AO RESORTED TO T HE ESTIMATION OF INCOME. THE ESTIMATION WAS MADE ON TH E BASIS OF INFORMATION GATHERED FROM THE SALES TAX DEPARTMENT AND THE INCOME WAS ASSESSED @ 3% OF TURN OVER REPORTED TO THE SALE S TAX AUTHORITIES. 6. WITH REGARD TO INVESTMENTS TOWARDS OIL TANKERS AND MARUTHI CAR, THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCES FOR THE PURCHASING OF TANKERS VEHICLES ALONG WITH THE D ETAILS OF SOURCE THEREOF. ENQUIRY FROM ING VYSYA BANK REVEALED THAT NO LOAN WAS OUTSTANDING AS ON 31-3-1994. HENCE, THE INVESTMENT IS TREATED AS UNEXPLAINED FOR A.Y.1994-95. 7. IN RESPECT OF VARIATIONS IN STOCK AS ON DATE OF SEARCH, IT WAS NOTICED THAT THERE IS AN EXCESS STOCK OF 1,56,606/- AND DEFICIT STOCK OF 5,96,300/-. THE ASSESSEE COULD NOT EXPLAIN THE D ISCREPANCY IN STOCK WITH NECESSARY EVIDENCE. HENCE, THE DIFFERENC E IN STOCK WAS ADDED AS UNEXPLAINED INCOME IN RESPECT OF FIRM. 8. THE ASSESSEE COULD NOT EXPLAIN THE CASH FOUND O F RS.2 LAKHS ON THE DATE OF SEARCH. HENCE, THE SAME WAS ADDED. 9.1 IN VIEW OF THE ABOVE, LD. DR SUBMITTED THAT THE AS SESSMENT MADE MAY BE SUSTAINED AND THE GROUNDS RAISED BY THE AS SESSEE MAY BE DISMISSED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE DOCUMENTS ON RECORD AND THE ORDER OF AO. AS THERE IS A SEARCH IN IT(SS)A.NO. 27/HYD/2009 :- 11 -: THE CASE OF THE FIRM, PROCEEDINGS U/S 158BC WERE INIT IATED, BUT, THE SCOPE OF ASSESSMENT U/S 158BC IS LIMITED TO THE DETER MINATION OF UNDISCLOSED INCOME CONSEQUENT TO SEARCH. IN THIS CA SE ASSESSEE HAS ALREADY FILED RETURNS OF INCOME MUCH BEFORE THE S EARCH PROCEEDINGS HAVE BEEN CONDUCTED. MAY BE THAT RETURNS WE RE NOT ACCOMPANIED BY THE RELEVANT STATEMENT OF ACCOUNTS, WHIC H MAKE THEM DEFECTIVE, BUT, NOT INVALID AS HELD BY THE AO IN TH E ORDERS. ASSESSEE SUBMITS THAT THOSE DEFICIENCIES HAVE BEEN FULF ILLED AND THOSE RETURNS ARE TO BE CONSIDERED AS VALID. AS SEEN F ROM THE SEQUENCE OF THE PROCEEDINGS INITIATED, ON THE BASIS O F THE RETURNS FILED FOR THREE YEARS AO STARTED SURVEY PROCEEDINGS WH ICH WERE LATER CONVERTED TO SEARCH PROCEEDINGS. THIS INDICATES THAT AS SESSEE DID FILE RETURNS MUCH BEFORE THE SO-CALLED SEARCH, SO AS PER THE PROVISIONS OF THE ACT AND ALSO THE JUDICIAL PRINCIPLES ON THE SUBJECT, THE TRANSACTIONS WHICH ARE RECORDED IN THE BOOKS OF AC COUNT OR DISCLOSED TO THE DEPARTMENT BY WAY OF RETURNS OR TAXES P AID CANNOT BE CONSIDERED AS UNDISCLOSED. EVEN THOUGH PROCEEDING S ARE U/S 158BC, THE BASIS FOR COMPUTING THE UNDISCLOSED INCOM E IN RESPECT OF THREE ASSESSMENT YEARS IS BY REJECTION OF BOOKS OF ACCOUNT AND TAKING THE DISCLOSED TURNOVER AS BASIS AND ESTIMATE THE INCOME AT 3%. WE ARE OF THE OPINION THAT THIS CANNOT BE DONE IN THE BLOCK ASSESSMENT PROCEEDINGS. THESE TURNOVERS WERE ALSO DIS CLOSED AND THERE IS NO VARIATION TO THE TURNOVER DISCLOSED. ASSES SEE HAS INDEED FILED P&L A/C AND BALANCE SHEETS SUBSEQUENTLY AND SO IF ANY ADDITIONS ARE REQUIRED TO BE DONE TO THE RETURNS FILED, AO IS COMPETENT TO DO ASSESSMENT ON THE ORIGINAL RETURNS, BUT, THAT DOES NOT MAKE IT AS UNDISCLOSED INCOME SO AS BRING IT TO TAX IN A BLOCK ASSESSMENT PROCEEDINGS. THEREFORE, EVEN THOUGH NO BOO KS OF ACCOUNT WERE FOUND IN THE COURSE OF SEARCH, BUT, TURN OVER DISCLOSED IS ACCOUNTED TURNOVER NOT ONLY IN THE STATEMENTS IT(SS)A.NO. 27/HYD/2009 :- 12 -: FURNISHED TO THE DEPARTMENTS BUT ALSO TO THE SALES TAX AUTHO RITIES. THERE IS NO UNDISCLOSED TURNOVER NOR THERE IS ANY UND ISCLOSED INCOMES IN THIS CASE. CONSEQUENTLY, WE ARE OF THE OPIN ION THAT AO IS NOT CORRECT IN ESTIMATING THE INCOME AT 3% ON THE DISC LOSED TURNOVER IN THE BLOCK ASSESSMENTS. WE TAKE SUPPORT FORM THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. K. RAMASWAMY, 296 ITR 258. THEREFORE, THE ENTIRE ADDI TIONS MADE BY ESTIMATING THE INCOME IN THE IMPUGNED YEARS ARE TO BE DELETED. 11. COMING TO THE ISSUE OF INVESTMENT IN OIL TANKERS AND MARUTHI CAR AGGREGATING TO RS. 10,28,500/- AS UNDISC LOSED INCOME, THESE ASSETS ARE REFLECTED IN THE CONSTRUCTED TR ADING & P&L A/C AND AS EXPLAINED BY THE ASSESSEE, THERE ARE SOURC ES INCLUDING THE BANK LOAN FROM THE SBH, WARANGAL AND VYSYA BANK A ND THERE ARE SOURCES FOR INVESTMENT AS EXPLAINED BY ASSESSEE IN ITS RECORDED TRANSACTIONS. AO, IN OUR OPINION, HAS NOT TAKEN INTO CO NSIDERATION THE SOURCE OF FUNDS AND SIMPLY BRUSHED ASIDE, TO MAKE INVESTMENT AS UNACCOUNTED INVESTMENT, WHEN IN FACT THOSE INVESTMENTS ARE REFLECTED IN THE STATEMENTS FURNISHED BY THE ASSESSEE A ND THERE IS NO INCRIMINATING MATERIAL TO STATE THAT THESE INVESTMENTS A RE OUTSIDE THE BOOKS OF ACCOUNT. CONSEQUENTLY, WE ARE NOT I N A POSITION TO APPROVE THE ACTION OF THE AO TO BRING TO TAX THE INVESTMENT IN OIL TANKERS AND MARUTI CAR. 12. COMING TO THE ISSUE OF DIFFERENCE IN STOCK, THER E IS BOTH EXCESS AND SHORTAGE IN THE COURSE OF SURVEY, WHICH WA S IDENTIFIED. AO CANNOT IGNORE THE DEFICIT STOCK WHICH COULD HAVE RE SULTED BY WAY OF SALES AND TO TAX THE DIFFERENCE OF RS. 7,46,956 BY ADDING BOTH. ASSESSEE HAS ALREADY ADMITTED EXCESS STOCK OF R S. 2 LAKHS IN THE RETURN FILED ON THE BASIS OF EXCESS STOCK FOUND IN CERTAIN ITEMS.. IT(SS)A.NO. 27/HYD/2009 :- 13 -: HE CANNOT TAX DEFICIT STOCK AS ASSESSEE HAS CERTAIN CASH ALSO WHICH COULD BE AS A RESULT OF SALES WHICH ARE NOT RECORDED. BE THAT AS IT MAY, WE ARE NOT APPROVING THE QUANTIFICATION OF THE STOC K AS DONE BY THE AO. CONSEQUENTLY, WE SET ASIDE THE ORDER OF THE A O AND DIRECT HIM TO TAKE ONLY THE AMOUNT OF STOCK EXCESS FOUND AND FURTHER GIVE CREDIT TO THE ALREADY DISCLOSED AMOUNT AND ARRIVE AT THE EXCESS STOCK SO AS TO CONSIDER IT AS UNDISCLOSED I NCOME IN THE BLOCK ASSESSMENT. AO IS DIRECTED TO REWORK OUT THE ADD ITION ACCORDINGLY. THESE GROUNDS 5 & 6 ARE PARTLY ALLOWED . 13. WITH REFERENCE TO THE ADDITION OF RS. 2 LAKHS CASH, THIS AMOUNT WAS ALREADY OFFERED BY ASSESSEE, THEREFORE, NO SEPARATE ADDITION IS REQUIRED TO BE MADE. IN CASE, AO HAS MADE DOUBLE ADDITION, THE SAME HAS TO BE DELETED. 14. LD. DR PLACED ON RECORD THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SURENDRA KUMAR VS. CIT, 340 ITR 173 WHEREIN IT WAS HELD THAT ESTIMATION CAN BE RESOR TED TO. WE ARE AFRAID THAT FACTS OF THE SAID CASE CANNOT BE APPLI ED TO ASSESSEES CASE, AS THERE WAS SEIZURE OF MATERIAL FOR CERTAIN PERIOD WHEREAS ADDITION ON ACCOUNT OF UNACCOUNTED PRODUCTION HAD BEEN MADE FOR THE ENTIRE PERIOD DURING THE BLOCK PERIOD. T HE HONBLE HIGH COURT HAS ACCEPTED THAT ADDITION OF UNRECORDED SAL ES FOR THE INTERVENING PERIOD WAS JUSTIFIED. THE SAME PRINCIPLE WAS ALSO UPHELD BY THE HONBLE AP HIGH COURT IN THE CASE OF RAJ NIK & CO. VS. ACIT, JUDGMENT DATED 18 TH APRIL, 2001 (2001 (3) ALD 791) WHEREIN ALSO IN THE SEIZURE OF UNACCOUNTED SALES FOR CERTAIN PERIOD, ESTIMATION WAS RESORTED TO FOR INTERVENING PERIOD. WHER EAS IN THE PRESENT CASE, THERE IS NO MATERIAL DISCLOSING ANY UNAC COUNTED TURNOVER. WHAT AO HAS RESORTED TO WAS REJECTING BOOKS O F ACCOUNT IT(SS)A.NO. 27/HYD/2009 :- 14 -: AND ESTIMATING THE INCOME ON THE DISCLOSED TURNOVER IN THE BLOCK ASSESSMENT. SINCE FACTS OF THE CASE ARE ENTIRELY DIFF ERENT, PRINCIPLES LAID DOWN IN THE ABOVE SAID DECISIONS RE LIED BY THE LD. DR CANNOT BE APPLIED TO THE CASE OF PRESENT ASSESSEE. 15. KEEPING IN MIND THE EVIDENCES ON RECORD, EXPLAN ATION OF THE ASSESSEE, WE HAVE NO HESITATION IN ALLOWING THE GROUND S 2, 3 & 4. GROUND NOS. 5 & 6 ARE RESTORED TO THE FILE OF THE AO TO WORK OUT AS DIRECTED AND GROUND NO. 7 IS ALLOWED SUBJECT TO ACCEP TING THE AMOUNT DISCLOSED BY THE ASSESSEE AS EXCESS CASH OF RS . 2 LAKHS. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MAY, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 13 TH MAY, 2016 KV COPY FORWARDED TO: 1. PADMAVATHI OIL PRODUCERS, C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H. NO. 3-6- 643, ST. NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029 2. DCIT, CIRCLE 9 (1), HYDERABAD 3 THE DR, ITAT, HYDERABAD IT(SS)A.NO. 27/HYD/2009 :- 15 -: S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER