DCIT, Bhubaneswar V. Karunakar Mohanty, Bhubaneswar

ITSSA 33/CTK/2001

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8255 (ITAT-CUTTACK)
• Duration Of Justice: 9 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 23-05-2011
• Assessment Year: misc
• Appeal Filed On: 15-10-2001
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business expenditure; Search and seizure; Documents seized; Capital expenditure
• Section: 69C; 142(1); 69

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. SL. NO . IT(SS)A & C.O.NOS. APPELLANT RESPONDENT 1. ITSSA NO. 33/CTK/2001 KARUNAKAR MOHAN TY , BHUBANESWAR. DCIT, CIRCLE 1, BHUBANEWSAR. 2. 3 . ITSSA NO. 34/CTK/2001 C.O.NO.78/CTK/2001 (FILED BY ASSESSEE) ACIT, CIRCLE 1(1),BBSR KARUNAKAR MOHANTY,BBSR 4. 5. ITSSA NO. 5/CTK/2002 C.O.38/CTK/2002 (FILED BY ASSESSEE ) ACIT, CIRCLE 1(1),BBSR BASANTI M OHANTY,BBSR 6. ITSSA NO. 6/CTK/2002 BASANTI MOHANTY , BBSR DCIT, CIRCLE 1(1),BBSR 7. ITSSA NO. 3/CTK/2002 SIBA PRASAD DAS , CUTTACK. ACIT,CIRCLE 1(1),BBSR 8. ITSSA NO. 4/CTK/2002 ACIT, CIRCLE 1(1),BBSR SIBA PRASAD DAS,CUTTACK. (BLOCK PERIOD 1990 - 91 TO 2 000 - 2001 ) FOR THE ASSESSEES : S/SHRI S.C.BHADRA, B.S.SUBUDHI AND B.MOHANTY,ARS FOR THE DEPARTMENT : SMT. PARAMITA TRIPATHY, DR ORDER PER BENCH : THESE APPEALS BY THE RESPECTIVE ASSESSEES AND THE REVENUE AS WELL ARE BEFORE US ON THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAVING ADJUDICATED THE ISSUES ON MERITS AND ON THE BASIS OF MATERIAL AVAILABLE TO HIM IN THE RESPECTIVE ASSESSMENT YEARS FOR THE RESPECTIVE ASSESSEES TO BE CONSIDERED IN ENTIRETY ARE THEREFORE BEING TAKEN UP TOGETHER FOR THE SAKE OF FACTS THAT HAVE BEEN INTERPOLATED BUT CONSIDERED UNILATERALLY BY THE ASSESSING OFFICER ON THE PREMISE THAT THE ASSESSEES DID NOT COOPERATE WITH THE ASSESSING OFFICER TO PROCEED WITH THE ASSESSMENT PROCEEDINGS U/S.158BC AND 158BD RESPECTIVELY. 2. THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FACTS ON MERIT ADDITIONS WHICH HAVE BEEN PROMINENTLY APPEALED AGAINST BY THE REVENUE IN THE CASE OF KARUNAKAR MOHANTY FOR THE BLOCK PERIOD 1990 - 91 TO PAGE 2 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) 2000 - 01 MAY KINDLY BE TAKEN UP TO GET A FAIR INTRODUCTION OF THE FACTS OF THE CASE OF THE ASSESSEE THAT ARE DEALT WITH BY THE LEARNED CIT (A) IN ACCORDANCE WITH THE UNDISPUTED FACTS BROUGHT ON RECORD. ITSSA NO. 33/CTK/2001, ITSSA NO. 34/CTK/2001 AND C.O.NO. 78/CTK/2001 (ASSESSEE KARUNAKAR MOHANTY). 3 . THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE WAS SUBJECTED TO A SEARCH & SEIZURE OPERATION U/S.132 OF THE INCOME - TAX ACT,1961 ON 29.6.1999 . DURING THE COURSE OF SEARCH PROCEEDINGS CERTAIN MATERIALS INDICATING THE ACCOUNTING OF VARIOUS PROJECT S HANDLED BY THE ASSESSEE BEING A CIVIL CONTRACTOR WERE SEIZED ALONG WITH THE OTHER DOCUMENTS SUCH AS BANK STATEMENTS, PASS BOOK, PROPERTY REGISTERED DEED, BILLS AND VOUCHERS FOR THE PURCHASE OF ASSETS AND FORMED THE BASIS FOR FRAMING ASSESSMENT U/S.158BC. IN RESPONSE TO NOTICE U/S.158BC, THE ASSESSEE FILED BELATED RETURNS WHICH WERE CONSIDERED FOR ASSESSING THE UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. A QUESTIONNAIRE U/S .142(1) WAS ISSUED AND DULY SERVED ON 16.1.2000 WHICH , IT WILL TRANSPIRE LATE R WAS PURPORTED THE NOTICE ISSUED U/S.143(2) AS SUBMITTED BY THE LEARNED DR IN VIEW OF ASSESSEE AGITATING THE NON - RECEIPT OF NOTICE U/S.143(2) ON TIME SEEKING QUASHING OF THE ASSESSMENT PROCEEDINGS IN VIEW OF THE HONBLE APEX COURT DECISION IN THE CASE OF ACIT V. HOTEL BLUE MOON [2010] 321 ITR 362 . THE LEARNED COUNSEL FOR THE ASSESSEE INSISTED THAT HIS PLACING RELIANCE ON THE SAID CITATION MAY KINDLY BE TAKEN ON RECORD IN VIEW OF THE FACT THAT THE BENCH HAS PREFERRED TO PROCEED WITH THE HEARING OF THE REVEN UES APPEAL FIRST WHICH MAINLY IS ON THE ISSUES O N MERIT ADDITIONS DELETED BY THE LEARNED CIT(A). 4. IN RESPECT OF GROUNDS NO.1 AND 2, SHE SUBMITTED THAT THE ASSESSING PAGE 3 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) OFFICER ESTIMATED PROFIT WHICH OUGHT TO HAVE BEEN EARNED BY THE ASSESSEE BASED ON THE TO TAL CONTRACT VALUE RECEIPTS VIS - - VIS AMOUNT DISCLOSED BY THE ASSESSEE IN THE INCOME - TAX RETURNS FOR THE IMPUGNED AYS WAS AS PER THE INFORMATION COLLECTED BY THE ASSESSING OFFICER FROM THE CONTRACTEES. THE ASSESSING OFFICER THEREFORE ESTIMATED GROSS MARGIN @20% OF THE TOTAL VALUE RECEIPTS AT RS.2,76,58,954 WHICH THE LEARNED CIT(A) DELETED IN VIEW OF THE ASSESSING OFFICER VISUALIZING AN ESTIMATION WHICH IS FAR BEYOND ANY PRACTICAL POSSIBILITY OF A CONTRACT EARNING SUCH HUGE MARGIN. SHE SUBMITTED THAT A FAIR MARGIN MAY BE CONSIDERED BETWEEN 10 TO 12% AS HAVE BEEN CONSIDERED BY THE VARIOUS TAXING AUTHORITIES AS WELL AS CONFIRMED BY THE TRIBUNAL IN VIEW OF THE FACT THAT THE LEARNED CIT(A) HAS SOUGHT TO RELY ON THE INCOME TAX RETURNS FILED BY THE ASSESSEE DURIN G THE COURSE OF REGULAR ASSESSMENTS WHICH HAVE BEEN FURTHER INCORPORATED IN THE RETURNS FILED IN PURSUANCE TO NOTICE U/S.158BC. WITH RESPECT TO GROUND NO.3, THE LEARNED DR POINTED OUT THAT THE ADDITION OF RS.3,42,68,696 WAS MADE BASED ON THE PROFORMA BALAN CE SHEET SUBMITTED TO THE BANK FOR THE FOUR YEARS FOR THE BLOCK PERIOD WERE ON THE BASIS OF QUOTATIONS OBTAINED FOR THE PURPOSE OF TENDERING TO THE DEPARTMENT ALONG WITH SUPPLY OF MACHINERIES AS WAS ALREADY DISCLOSED BY THE ASSESSEE IN ITS BALANCE SHEET. T HE LEARNED CIT(A) ON THE OTHER HAND DELETED THIS ADDITION BY HOLDING THAT THE ADDITIONS MADE ARE BASED ON QUOTATIONS RECEIVED AND THE PROFORMA BALANCE SHEET DO NOT DEPICT THE TRUE AND CORRECT PICTURE OF THE ASSESSEE HOLDING INCOME UN DISCLOSED THEREIN THERE FORE BECOMES USELESS FOR THE PURPOSE OF COMPUTING THE UNDISCLOSED INCOME WITHOUT CORRESPONDING FINDINGS . SHE POINTED OUT THAT THESE DOCUMENTS HAVE BEEN FURNISHED TO THE EXECUTIVE ENGINEER AS TENDER DOCUMENTS BECOM ES PART OF THE BUSINESS TRANSACTIONS OF T HE ASSESSEE PAGE 4 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) THEREFORE COULD NOT BE CONSIDERED AS DEVOID OF MERIT. THE ASSESSEE HIMSELF AGREES TO THE PROPOSITION THAT THE VERY MACHINERIES AND ASSETS WHICH ARE HELD AND DISCLOSED IN THE BALANCE SHEET ARE ALREADY THERE THEREFORE THE ASSESSEE HAS NOT COME FO RWARD TO DISLODGE THE CLAIM THAT THE MACHINERIES SHOWN IN THE PROFORMA BALANCE SHEETS WERE NOT HELD BY IT. SHE PROPOSED TO DELIBERATE FURTHER ON THE ISSUE AS THE ASSESSEES WIFE I S PURPORTED TO HAVE BEEN HOLDING THE MACHINERIES TO EARN INCOME O N THE BASIS OF THE FINDING THAT THE ASSESSEE FINANC ED T HE SAME. SHE SUBMITTED THAT IT W AS AN INTERNAL ARRANGEMENT TO MAKE THE ASSETS HE LD BY THE WIFE OF THE ASSESSEE WAS ACTUALLY BY THE ASSESSEE IN FURNISHING THE PROFORMA BALANCE SHEET TO BE CONSIDER ED AS HIS OWN. ON GROUND NO.4, THE LEARNED DR SUBMITTED THAT THE ADDITIONS WERE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED RECEIPTS FROM SALE OF CEMENT AND OTHER CONSTRUCTION MATERIALS AT SITE. THIS INFORMATION WAS COLLECTED BY THE ASSESSING OFFICER FROM ANOTH ER PERSON PREMISES INSOFAR AS HE CATEGORICALLY COMPUTED THE AMOUNT OF CEMENT AND STEEL UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS WHICH SOURCE HA D NOT BEEN EXPLAINED ANYWHERE. A SUM OF RS.12,36,180 THEREFORE WAS BROUGHT TO TAX WHICH THE LEARN ED CIT(A) HELD WAS A CONSEQUENTIAL ADDITION ON MERE HEARSAY INSOFAR AS THE BASIS FOR ADDITION WAS FROM NEIGHBOR S PREMISES AND NOT RELATING TO THE PROJECT WORK CARRIED OUT BY THE ASSESSEE AT THE SITE. SHE POINTED OUT THAT THIS ADDITION WAS OVER AND ABOVE THE PURPORTED ESTIMATION OF GROSS MARGIN AND THE PROFORMA BALANCE SHEET ASSETS THEREFORE CANNOT BE CONSIDERED AS ADDITION ON BASELESS EVIDENCE. IN GROUND NO.4, SHE ARGUED THAT THE ASSESSING OFFICER COMPUTED THE ADDITION BEING UNEXPLAINED EXPENDITURE IN VI EW OF THE FACT THAT HAVING ESTIMATED THE PROFIT @20%, THE DIFFERENCE BETWEEN THE PROFIT DECLARED AND THE PROFIT ESTIMATED BY THE PAGE 5 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) ASSESSING OFFICER WAS TO BE TERMED AS UNEXPLAINED EXPENDITURE. SHE SUBMITTED THAT THE SUM OF RS.22,06,000 WAS ON THE BASIS OF S UCH MATERIALS, WHICH THE LEARNED CIT(A) HELD THAT AS THESE DOCUMENTS WERE NOT FOUND IN THE SEARCHED PREMISES AND THEREFORE DID NOT INDICATE THAT THE UNEXPLAINED EXPENDITURE WAS INCURRED BY THE ASSESSEE. SHE POINTED OUT THAT , AS WILL BE CLEAR LATER ON THE A PPEAL OF SRI SIBA PRASAD DAS, THE PURPORTED EMPLOYEE WHO WAS ENGAGED AT TWO SITES HAD NOTED THE EXPENDITURE IN A DIARY FOR CLAIM OF INCOME THERE FROM AFTER FURNISHING THE DETAILS THEREFORE COULD NOT BE SAID TO BE EXPENDITURE INCURRED BY OTHER PERSON BUT WA S ON BEHALF OF THE ASSESSEE. SHE SUBMITTED THAT THESE EXPENSES WERE TO BE ACCOUNTED FOR AS IS EVIDEN T, WHICH ALL INCRIMINATING DOCUMENTS HAVE BEEN FURNISHED IN THE VOLUMINOUS PAPER BOOK FILED BY THE DEPARTMENT. SHE AGREED THAT THESE DOCUMENTS MAY KINDLY BE PERUSED IN VIEW TO HOLD A VIEW THAT THE NOTINGS THEREIN CANNOT BE HELD TO BE BELONGING TO SOMEBODY ELSE FOR THE PU RPOSE OF CONCEALING EXPENDITURE OVER AND ABOVE WHAT HAD BEEN NOTED IN THE REGULAR BOOKS OF ACCOUNT. SIMILARLY IN GROUND NO.6, THE ASSESSING O FFICER AGITATED THE DELETION OF RS.80,09,189 BASED ON THE DOCUMENTS AS PER KM O - 34 BEING UNEXPLAINED EXPENDITURE IN THE FINANCIAL YEAR 1997 - 98. THESE EXPENDITURES WERE INCURRED NOT ON THE BASIS OF REGULAR BOOKS OF ACCOUNT HAS BEEN TIME AND AGAIN SUBMITTED T O THE LEARNED CIT(A) INSOFAR AS HE HAS WRITTEN A LENGTHY ORDER INCORPORATING THE ASSESSEES SUBMISSION AND THE ASSESSING OFFICERS ORDER IN MA NY PAGES. SHE SUBMITTED THAT THESE EXPENSES WERE OVER AND ABOVE THE ESTIMATED NET PROFIT ARE JUSTIFIED TO BE BRO UGHT TO TAX UNDER THE PROVISIONS OF SECTION 158BC. ON GROUND NOS.7 TO 17, SHE SUMMED UP HER ARGUMENT ON MERIT ADDITIONS TOTALING TO RS.1,19,10,856 BEING UNEXPLAINED INVESTMENT IN HOUSE, SHARES, LAND, MACHINERIES ETC., AS PER THE DOCUMENTS, PAGE 6 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) PAPERS, INFORMAT ION , LOOSE SHEETS COLLECTED BY THE ASSESSING OFFICER DURING THE SEARCH PROCEEDINGS. IN SUPPORT OF HER CONTENTION SHE HAS RELIED ON THE DOCUMENTS IN THE PAPER BOOK WHICH MAY KINDLY BE PERUSED. SHE SUBMITTED THAT THE LEARNED CIT(A) DELETED THE ENTIRE ADDI TION BY HOLDING THAT ALL THE INFORMATION AND DOCUMENTS COLLECTED AND PUT TO USE AGAINST THE ASSESSEE AS SUCH ARE DOCUMENTS ARE IRRELEVANT AND BASELESS INSOFAR AS THE ASSE SSEE HAD ALL THE BASIC MATERIAL TO ESTABLISH THAT THEY WERE DISCLOSED TO THE DEPARTMEN T AS PART AND PARCEL OF THE FINANCIAL STATEMENT AVAILABLE TO THE DEPARTMENT WHEN HUGE INCOME HAS BEEN SHOWN IN RESPECT OF ALL AYS ARE SUFFICIENT TO ESTABLISH THAT THESE ASSETS HAVE BEEN ROUTED THROUGH PROPER BANKING CHANNELS THEREFORE CANNOT BE BROUGHT TO TAX PURSUANT TO SEARCH AND SEIZURE U/S.132 AS UNDISCLOSED INCOME. 5. ON THE ASSESSEES APPEAL AGITATING THE SOLE ADDITION CONFIRMED BY THE LEARNED CIT(A) A SUM OF RS.7,68,000 , SHE SUPPORTED THE CONTENTION OF THE LEARNED CIT(A) BY INDICATING THAT THESE DEPO SITS REMAINED UNEXPLAINED BY THE ASSESSEE ON A SPECIFIC QUERY BY THE LEARNED CIT(A) TO THE ASSESSEE. THESE DEPOSITS WERE MADE IN THE NAMES OF FOUR DIFFERENT PERSONS WERE BELONGED TO THE ASSESSEE WAS NOT CATEGORICALLY DENIED AND WAS ADDITION OVER AN D ABOV E WHAT HAS BEEN DELETED BY THE LEARNED CIT(A) ON THE FACTS AND CIRCUMSTANCE AS HAVE BEEN PUT FORTH UPON. 6. THE LEARNED COUNSEL FOR THE ASSESSEE FULLY SUPPORTED THE ORDER OF THE LEARNED CIT(A) BY FILING THE C.O. EXCEPT ON THE ISSUE WHICH THE ASSESSEE HAS A PPEALED BEING THE SUM OF RS.7,68,000 WHICH DEPOSITS ARE RS.3,50,000 IN BANK OF INDIA, SAHIDNAGAR,BHUBANESWAR DURING THE FINANCIAL YEAR 1994 - 95 IN THE NAME OF N.MOHAPATRA, N.TRIPATHY AND S.MOHAPATRA. THERE WAS NO SEIZED MATERIAL AND THE FACT THAT THIS STATE MENT DID NOT INDICATE THAT THE PAGE 7 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) AMOUNT BELONGED TO THE ASSESSEE. IT WAS ERRONEOUS ON THE PART OF THE LEARNED CIT(A) THAT HAVING DELETED THE MAJOR ADDITIONS BY THE ASSESSING OFFICER HE ONLY SOUGHT TO HOLD BACK THAT THE UNACCOUNTED INVESTMENT OF RS. 7,68,000 DURING THE FINANCIAL YEAR 1997 - 98 IN THE NAME OF THREE PERSONS WAS MADE IN THE BANK OF INDIA, SAHIDNAGAR, BHUBANMESWA R BY THE ASSESSEE . APPARENTLY THE ASSESSING OFFICER DID NOT DEEM IT FIT TO INVESTIGATE THE SAME WHETHER RS.7,68,000 BELONGING TO THESE THR EE PERSONS COULD BE ASSUMED UNDER JURISDICTION U/S.15 8BC THAT THE MONEY BELONG S TO THE ASSESSEE SHRI KARUNAKAR MOHANTY , AS HA S BEEN RIGHTLY POINTED OUT BY THE LEARNED DR THAT THESE DOCUMENTS FOUND IN THE PREMISES BEING BANK STATEMENT INDICATING DEPOSITS I N THE BANK ACCOUNT DO NOT BELONG TO THE ASSESSEE , COULD AT BEST BE CONSIDERED FOR TAXATION U/S.158BD IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. THE LEARNED CIT(A) THEREFORE, HAVING DELETED THE UNDISCLOSED INCOME ON THE BASIS OF SEARCH MATERIAL , MIS APPLIED HIS JURISDICTION TO THE FA C T THAT CASH DEPOSITED BY THE ACCOUNT HOLDERS MUST BE BELONGING TO THE ASSESSEE NAMELY, KARUNAKAR MOHANTY . IT WAS BROUGHT TO THE KNOWLEDGE OF THE LEARNED CIT(A) THAT THE SAID ACCOUNT HOLDERS ARE RELATED TO THE ASSESSEE WH O HAD HELPED IN PROCURING MACHINERIES FOR THE ASSES SEES WIFE BUSINESS WHICH HE H AS ALREADY HELD , WAS TO PROCURE ON THE BASIS OF THEIR STANDING GUARANTEE TO THE BANK FOR LOANS OBTAINED WHICH MARGIN WAS HELD BY THEM IN THEIR ACCOUNT COULD NOT BE IDENTIFIED AS THAT BELONGING TO THE ASSESSEE. 8. IN SO FAR AS THE REVENUES APPEAL IS CONCERNE D, HE FULLY SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT PURSUANCE TO NON - ISSUANCE OF NOTICE U/S.143(2) THE LEARNED DR HAS INSISTED THAT THE NOTICE ISSUED U /S.142(1) WAS AKIN TO ISSUING NOTICE U/ S.143(2) HAS NO LEGS TO STAND ON. SHE HAS ALSO FILED THE DETAILS OF 142(1) NOTICE WITH A CATEGORICAL NOTING THAT TILL PAGE 8 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) SUCH TIME NO RETURN HAD BEEN FILED IN PURSUANCE TO NOTICE U/S.158BC. FOR THIS PROPOSITION HE HAS FILED THE COPIES OF THE RETURNS FILED IN PURSUANCE TO THE NOTICE U/S.142(1) WHICH THEREAFTER WAS TO BE SUPPLEMENTED BY ISSUE OF NOTICE U/S.143(2). HONBLE APEX COURT IN THE CASE OF ACIT V. HOTEL BLUE MOON [2010] 321 ITR 362 HAS HELD THAT IF THE ASSESSING O FFICER FOR ANY REASON REPUDIATE THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S.158BC(A), HE MUST NECESSARILY ISSUE NOTICE U/S.143(2) WITHIN THE TIME SPECIFIED IN THE PROVISO TO SECTION 143(2) WHICH BURDEN CANNOT BE RESTRICTING THE SCOPE AND MEA NING OF THE EXPRESSION INSOFAR AS MAY APPLY. FURTHER SECTION 158BH PROVIDES FOR OTHER APPLICATION OF THE ACT WHICH SPECIFICALLY INDICATES SECTION 142 AND SUB - SECTION (2) AND (3) OF SECTION 143. 9. THE LEARNED COUNSEL FOR THE ASSESSEE INSISTED ON RELYING ON THE SAID DECISION INSOFAR AS IT WAS THE LEARNED CIT(A) WAS TO FULLY APPRECIATE THE ASSESSEES CASE ON THE BASIS OF UNILATERAL ASSESSMENT FRAMED BY THE ASSESSING OFFICER . HE WAS CONSTRAINED TO CONSIDER THE ARBITRARY AND UNCALLED FOR ADDI TIONS MADE BY TH E ASSESSING OFFICER CONTRADICTING HIS OWN VERIFICATION OF THE SEARCHED MATERIAL. THE ASSESSING OFFICER HAD NOT CONSIDERED , THAT THE ASSESSEE BEING A CIVIL CONTRACTOR CARRYING OUT VARIOUS CONTRACTS IN DIFFERENT SITES , WAS TO MAINTAIN BASIC RECORD OF EXPENDI TURE ETC., DULY AUTHORIZED TO THE MANAGER AT SITE WAS TO INCUR EXPENDITURE AS AND WHEN THEY WERE INCURRED ON THE ALLOTMENT OF THE PROJECT BY THE DEPARTMENT . HAVING RETURNED BETWEEN 8 TO 10% INCOME FROM CIVIL CONTRACTS, THE ASSESSING OFFICER HIMSELF HAS ACC EPTED THAT NO FURTHER ADDITION C OULD BE MADE ON THE BASIS OF PART DOCUMENTS SEIZED WHICH MAY OR MAY NOT HAVE INCLUDED THE PART OF THE REGULAR RETURN FILED BY THE ASSESSEE EARLIER THEREFORE ONLY MAGNIFIED THE ADDITION TO THE EXTENT THAT THE ASSESSING OFFICE R FAILED TO PAGE 9 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) CORRELATE THE INCOME GENERATED ON THE BASIS OF GROSS RECEIPTS IN THE RESPECTIVE ASSESSMENT YEARS . THIS CANNOT BE SUBJECTED TO FURTHER TAXATION AS UNDISCLOSED INCOME PURELY ON THE BASIS OF ESTIMATING THE UNIMAGINABLE MARGIN OF 20% ON GROSS RECEI PTS. THE LEARNED DR HERSELF AGREED TO THE PROPOSITION THAT THE MARGIN MAY BE COMPUTED AT 10% TO 12% AS WOULD BE ACCEPTED BY THE ASSESSING AUTHORITIES AND CONFIRMED BY APPELLATE AUTHORITIES IN ABSENCE OF BOOKS OF ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSE E VEHEMENTLY ARGUED THAT THE UNDISCLOSED INCOME CANNOT BE BROUGHT TO TAX ON ESTIMATION WHEN THE SEARCHED DOCUMENTS ARE THE BASIS FOR COMPUTING SUCH INCOME. SIMILARLY, THE PROFORMA BALANCE SHEETS ARE NOT DOCUMENTS WHICH COULD REVEAL THE REAL INCOME CONCEALE D BY THE ASSESSEE WHO HAVE BEEN SEARCHED U/S.132. SUCH FINANCIAL STATEMENT , AS IS KNOWN TO THE BANKS AND TO THE DEPARTMENT , ARE FOR ESTIMATING INCOME IN ORDER TO HOLD ASSETS WHICH ARE THE PRIME REQUIREMENT FOR UNDERTAKING A PROJECT WHICH THE ASSESSEE HAS TENDERED FOR. WHEN THESE ADDITIONS ARE PURELY O N THE BASIS OF EITHER MERITS INDICATED THEREIN OR THE ASSETS HELD THEREIN WAS SPECIFICALLY EXPLAINED TO BE FORMING PART OF THE REGULAR RETURN BY THE ASSESSEE , THE LEARNED CIT(A) RIGHTLY CONSIDERED THAT THESE A DDITIONS CANNOT BE MADE ON QUANTITATIVE BASIS BY THE DEPARTMENT AND THE PROFORMA BALANCE SHEETS BECOME IRRELEVANT MA TERIAL FOR HOLDING THAT THE INCOME DECLARED THEREIN IS TRUE. WITH RESPECT OF THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURES ON CEMENT AND OTHER CONSTRUCTION MATERIAL, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT ONCE THE DEPARTMENT ACKNOWLEDGE S A CONTRACT WITH MATERIAL AND CEMENT BEING AVAILABLE AS LEVY AND NON - LEVY HAS TO BE PROCURED BY THE DEPARTMENT WAS TO BE UTILIZED IN THE VERY PROJECT THEREFORE HAS BEEN PROPERLY BILLED A ND REIMBURSED BY THE DEPARTMENT WHEN PURCHASES BY THE ASSESSEE WERE ON PAGE 10 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) URGENT BASIS. THERE WAS NO MATERIAL WITH THE ASSESSING OFFICER TO CONSIDER RS.12,36,180 WORTH OF STEEL AND CEMENT AS NOT BELONGING TO TH E ASSESSEE BUT TO BE U SED AS UNACCOUNTED EXPENDITURE O N HIS OWN WHEN EVIDENCE CLEARLY INDICATES THAT THE INFORMATION COLLECTED BY THE ASSESSING OFFICER WAS FROM NEIGHBOR. IN ANY CASE HAVING COMPUTED THE INCOME FROM GROSS RECEIPTS, IT WAS THE DUTY OF THE AS SESSING OFFICER TO IDENTIFY INCURRING OF THESE EXPENDITURE S UTILIZED IN THOSE VERY PROJECTS AGAINS T WHICH NO FURTHER RECEIPTS HAS BEEN ACKNOWLEDGED BY THE ASSESSEE AS REIMBURSEMENT OF THE STEEL AND CEMENT PURPORTED TO HAVE BEEN PURCHASED BY THE ASSESSEE. O N THE ISSUE OF ASSESSEE MAINTAINING AUTHORIZED PERSONS AS MANAGER AT DIFFERENT SITES WERE TO BE REIMBURSED ON THE BASIS OF EXPENDITURE INCURRED AT THESE SITES WAS ON DAY TO DAY BASIS. THESE DOCUMENTS WERE COLLECTED BY THE ASSESSING OFFICER AND PUT TO USE B Y HIM WITHOUT INDICATING WHETHER HE HAD ALREADY CONSIDERED THEM IN THE TOTAL GROSS RECEIPTS OF MORE THAN RS.12 CRORES IN THE BLOCK PERIOD. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE LEARNED ASSESSING OFFICER WAS AWARE OF APPROXIMATELY RS.12 CRORE S WORTH OF CONTRACT HAVING BEEN RENDERED BY THE ASSESSEE SHRI KARUNAKAR MOHANTY WAS NOT TO CONDUCT THE BUS INESS ALONE AND HAD TO DEPEND ON MANAGERS WHO C OULD BE TRUSTED FOR INCURRING EXPENDITURE TO THE BENEFIT OF THE ASSESSEE AS A MATTER OF REWARD IN SHARI NG THE RESIDUAL PROFIT OF THE PROJECT. IT WAS NOTICED , THEREFORE , USEFUL FOR THE INTERNAL ADMINISTRATION BETWEEN THE MANAGER AND THE ASSESSEE , CANNOT BE SUPER IMPOSED FOR ADDITION AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE WHEN THE ASSESSING OFFICE R HAS ALREADY RELIED ON THE DOCUMENTS SUCH AS GROSS RECEIPTS FOR THE BLOCK PERIOD , ALONG WITH THE PROFORMA BALANCE SHEETS , INDICATING HOLDING OF ASSETS AGAINST 20% INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT ONCE HAVING COME TO THE PAGE 11 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) FINDING ON ALL THESE ADDITIONS FOR ESTIMATION , THE ASSESSING OFFICER ERRED IN HOLDING THE INTERNAL EXCHANGE OF INFORMATION OF INCURRING EXPENSES AND EXPECTATION OF A REWARD BY EMPLOYEE , TO BE FURNISHED TO THE ASSESSEE , AS AND WHEN THE OCCASION COMES. ON THE REMAINING GROUNDS AS ARGUED BY THE LEARNED DR , HE SUBMITTED THAT ALL THESE ADDITIONS ON THE BASIS OF SEIZED MATERIAL ARE PART AND PARCEL OF THE REGULAR BOOKS OF ACCOUNT INSOFAR AS BANK ENTRIES HAVE BEEN DULY INCORPORATED IN THE BOOKS OF ACCOUNT INDICATING PURCHASE OF ASSETS. THE ASSESSING OFFICER FAILED TO COMPARE THE SEIZED MATERIAL NAMELY THE PROFORMA INVOICES WHICH THE LEARNED DR POINTED OUT IN THE PAPER BOOK AS FILED BY HER , CLEARLY INDICATE THAT THEY ARE PROFORMA INVOICES THAT HAVE BEEN RELIED UPON BY THE ASSES SING OFFICER OUGHT TO HAVE BEEN VERIFIED BY THE ORIGINAL BILLS RAISED AND DISCLOSED IN THE REGULAR RETURNS NOT TO BE DENIED TO HAVE BEEN ALREADY RENDERED TO TAX IN THE REGULAR RETURNS. THE LEARNED CIT(A) WAS THEREFORE FULLY JUSTIFIED IN HOLDING THAT THESE ADDITIONS ARE BASELESS AND THE INFORMATION, DOCUMENTS, PAPERS ETC., COLLECTED DURING THE SEARCH OPERATION HAVE BEEN APPLIED AGAINST THE ASSESSEE UNILATERALLY WITHOUT SEEKING ASSISTANCE FROM THE ASSESSEE WITHOUT MANDATORY OF ISSUING NOTICE U/S.143(2) AS HA S BEEN DEALT WITH BY THE HONBLE SUPREME COURT IN THE CASE OF ACIT V. HOTEL BLUE MOON (SUPRA). 10. ON THE ASSESSEES APPEAL RETAINING RS.7,68,000 BY THE LEARNED CIT(A), THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER WHO PROCE EDED TO TAX THE ASSESSEES WIFE NAMELY SMT. BASANTI MOHANTY AGREED TO THE PROPOSITION THAT HUSBAND GUARANTEES THE LOAN TO WIFE CONDUCTING BUSINESS OF STONE CRUSHER SEPARATELY AND HOLDING MACHINERY TO BE AGAINST SUBSIDIES AND LOAN GRANTED BY THE GOVERNMENT AGENCIES. APART PAGE 12 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) FROM TAX ING AMOUNTS WHICH HAVE BEEN CONSIDERED ON SUSPICIO N AND PRESUMPTIONS , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THAT THE DEPOSITS WERE IN CASH IN RESPECT OF DIFFERENT ACCOUNT HOLDERS, BY NO STRETCH OF IMAGINATION COULD BE CON SIDERED AS INVOLVING THE ASSESSEE. THE LEARNED CIT(A) THEREFORE ERRED IN HOLDING BY RESORTING TO THE SAME PRES UMPTION THAT THE DOCUMENTS SEARCHED IN THE CASE OF THE ASSESSEE WERE HELD WITH THE ASSESSEE PURELY AS A GUARANTOR , HAVING THE PROFORMA INVOICES W HEN THE DEPOSITS WERE DULY CERTIFIED BY THE BANK BELONGING TO THE THREE ACCOUNT HOLDERS WHO ALONE COULD OPERATE AND UTILIZE THE SAID SUM, THE ASSESSEES WIFE HAVING NO SEPARATE BANK ACCOUNT. THE LEARNED CIT(A) THEREFORE FAILED TO OBSERVE THAT THESE TWO DEP OSITS BELONG ED TO OTHER PERSONS WOULD HAVE NO VALIDITY AND SANCTITY IN THE EYE OF LAW AS BELONGING TO THE ASSESSEE WITHOUT ANY CORROBORATIVE EVIDENCE. IN ANY CASE THIS AMOUNT CANNOT BE TAXED IN ASSESSEES NAME WHEN THE SUBJECT OF THIS ADDITION OUGHT TO HAV E BEEN CONSIDERED IN THE NAME OF ASSESSEES WIFE WHICH HAS BEEN CONSIDERED BY THE LEARNED CIT(A) BY WAY OF SEPARATE PROCEEDINGS. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER HAVING PERUSED THE PAPER BOOK SUBM ITTED BY THE LEARNED DR BEING THE SEARCH MATERIAL AND ON THE BASIS OF THE SUBMISSIONS OF THE LEARNED DR SMT. PARAMITA TRIPATHY AT A THRESHOLD WHE RE IT HAS BEEN SUBMITTED THAT THE RATE OF RETURN FROM THE GROSS RECEIPT AT 20% APPEARS TO B E UNREASONABLY HIGH, A RATE OF 1 0 % TO 12% MAY BE ACCEPTED FOR TAXATION APPEARS TO BE A PLEA TO HOLD THAT THE ASSESSING OFFICER WAS BOUND TO ESTIMATE INCOME ON THE BASIS OF UNDISCLOSED GROSS RECEIPTS IN THE BUSINESS OF THE ASSESSEE WHEN THE ASSESSING OFFICER DID NOT ISSUE NOT ICE U/S.143(2). WE HAVE PERUSED THE ORDER OF THE LEARNED CIT(A) AT LENGTH AND FIND THAT THE PAGE 13 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) ASSESSEE WOULD HAVE EXPLAINED THE ASSESSING OFFICER THE SAME MATERIAL AS BEFORE THE ASSESSING OFFICER BY WAY OF REGULAR RETURNS WHICH HAS BEEN INCORPORATED BY THE LEARNED CIT(A) IN HIS ORDER AFTER REPRODUCING THE ASSESSMENT ORDER IN TOTO . HIS FINDING THEREFORE CONFINED TO PAGES 61 TO 78 WHICH SUM UP HIS DECISIONS IN VERY CLEAR TERMS THAT HAVING RESORTED TO THE ASSESSMENT U/S.158BC BY ESTIMATING THE GROSS RECEIPTS, THE ASSESSING OFFICER WAS BOUND TO COMPARE THE SAME AGAINST THE RETURN FIL ED IN PURSUANCE TO NOTICE U/S.1 58BC BY THE ASSESSEE. HE WOULD HAVE FOUND THAT THE INCOMES WHICH HE PROPOSED TO TAX ON THE BASIS OF S EIZED MATERIAL ALREADY STOO D TO TEST AS HAV ING BE EN FILED FOR BY WAY OF REGULAR RETURN S . THE INCOMES GENERATED THEREFORE HAVING SUFFERED TAX AND TDS HAVING BEEN GIVEN CREDIT BY THE DEPARTMENT , THE ASSESSEE WAS FREE TO USE THE INCOME EITHER BY USING IN ITS BUSINESS CONTINUOUSLY OR BY WAY OF PURCHASING AS SETS WHICH HE DID BY FURNISHING PROFORMA BALANCE SHEET IN ORDER TO CLAIM THAT THE ASSETS ARE HELD BY HIM FOR THE PURPOSE OF EXECUTING PARTICULAR CONTRACTS WHICH HE HAD TENDERED AS BEING CAPABLE OF. SIMILARLY IN ORDER TO OBTAIN LOAN FROM BANK FOR THE PURCH ASE OF MACHINERY, HE HAD TO SUBMIT PROFORMA BALANCE SHEET WHICH WOULD INDICATE THAT HE HAS THE CAPACITY TO REFUND THE EQUATED MONTHLY INSTALLMENT OF THE TERM LOANS TO BE GRANTED . THE DOCUMENTS SEIZED THEREFORE ONLY INDICATE THAT THE METHOD ADOPTED BY THE A SSESSEE DOES NOT HAVE ANY ILLEGALITY TO CONSIDER THE SAME AS INCRIMINATING. WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT HAVING CONSIDERED THE TOTAL TAXABILITY OF INCOME GENERATED BY EXECUTING CONTRACTS REQUIRE NO FURTHER A SSESSMENT OF INCOME ON THE BASIS OF EXPENDITURE INCURRED OR ASSETS HELD BY THE ASSESSEE WHEN SUCH ESTIMATION LE A D TO THE FINDING THAT THIS INCOME WAS SUFFICIENT TO HOLD ASSETS OR INCUR EXPENDITURE THERE FROM . IT S NOT PAGE 14 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) THE CASE OF THE ASSESSEE CLAIMING EXPEN DITURE UNDER THE PROVISIONS OF SECTION 69C AND NEITHER THE ASSESSING OFFICER HAS SOUGHT TO MAKE ADDITION UNDER THE PROVISIONS OF SECTIONS 69 OR 68. THE ASSESSEE HAD DEPUTED MANAGERS AT SITES ONE OF THEM BEING SHRI SIBA PRASAD DAS WHO FAITHFULLY RENDERED HI S SERVICE TO THE ASSESSEE SHRI KARUNAKAR MOHANTY WHO HAD PROMISED A REWARD ON SATISFACTORY COMPLETION OF THE PROJECT WHICH HE WAS MANAGING TWO SITES. HE WAS TO KEEP RECORD OF EXPENDITURES AT SITES TO SUBSTANTIATE HIS CLAIM FOR AN AWARD FROM THE ASSESSEE W HICH HAS BEEN IMPLICATED AGAINST HIM WHICH APPEAL WILL BE DISPOSED LATER. IN ANY CASE, THE EXPENDITURE, AS THE LEARNED DR POINTED OUT , IN OVER AND ABOVE WHAT HAS BEEN CONSIDERED BY THE ASSESSING OFFICER FOR HAVING INCURRED FOR EARNING 20% GROSS MARGIN DO ES NOT APPEAR TO BE JUSTIFIED INSOFAR AS THE FACTS AND CIRCUMSTANCES CLEARLY INDICATE THAT THE ASSESSING OFFICER SOUGHT TO PICK AND CHOSE METHOD ON THE BASIS OF SAME MATERIAL ONLY WITHOUT SYNCHRONIZING THE SAME WITH THE REGULAR INCOME GENERATED WHETHER CO ULD BE UTILIZED IN FURTHERANCE OF REGULAR BUSINESS OF THE ASSESSEE. AN INCOME CAN BE COMPUTED ON RATE OF RETURN WHEN NEITHER THE TENDERER LOSES HIS LEGITIMATE INCOME AND NOR THE DEPARTMENT LOSES WHEN IT HAS PAID FOR THE VERY MATERIAL WHICH IS SUPPOSED TO HAVE BEEN UTILIZED FOR THE CONTRACT. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS SIPHONED OF THE MATERIAL SUPPLIED BY THE DEPARTMENT FOR SALE OUTSIDE THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) THEREFORE, WAS WITHIN HIS JURISDICTION TO H OLD THAT THE ASSESSING OFFICER OUGHT TO HAVE BROUGHT ON RECORD SUBSTANTIVE EVIDENCE TO ESTABLISH THAT THESE EXPENSES AGAINST RECEIPTS AND UTILIZATION OF CEMENT AND STEEL WERE OVER AND ABOVE THEN WHAT IS ACKNOWLEDGED BY THE DEPARTMENT WHO HAD PAID FOR THE WORK DONE BY THE ASSESSEE. IN OTHER WORDS, THE ASSESSING OFFICER HAS PAGE 15 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) ACCEPTED THE TOTAL GROSS RECEIPTS AS RETURNED BY THE ASSESSEE BY WAY OF REGULAR RETURNS WHICH HAVE BEEN CONFIRMED BY THE ASSESSING OFFICER IN HIS ORDER U/S.158BC BY ESTIMATING GROSS MARGI N @20% THEREOF. THE APPEAL FILED BY THE REVENUE THEREFORE IS BOUND TO BE DISMISSED AND WE UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. 12. IN ASSESSEES APPEAL, WE ARE INCLINED TO FIND FAVOUR IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESS EE THAT ONCE HAVING ADJUDICATED THE MAJOR ISSUES IN RESPECT OF IDENTIFYING THE NATURE OF INCOME TO BE CONSIDERED IN THE HANDS OF THE ASSESSEE, THE LEARNED CIT(A) OUGHT NOT TO HAVE PROCEEDED TO CONSIDER THE DEPOSITS HELD BY DIFFERENT ACCOUNT HOLDERS BEING R ELATIVES OF THE ASSESSEE BUT HAD ONLY STOOD GUARANTEE FOR THE PURCHASE OF MACHINERIES TO BE UTILIZED IN THE BUSINESS OF ASSESSEES WIFE. NO EFFORT HAS BEEN MADE BY THE LEARNED CIT(A) TO ESTABLISH THAT THIS AMOUNT COULD NOT BE TAXED IN THE HANDS OF THE ASSE SSEE ONLY AND NOT HIS WIFE WHEN HE WAS ABLE TO IDENTIFY LARGE AMOUNT AND DELETE THE SAME IN THE CASE OF THE ASSESSEES WIFE WHICH WE WILL DEAL WITH HERE AFTER. THE APPEAL FILED BY THE ASSESSEE I S THEREFORE BOUND TO BE ALLOWED. THE ADDITIONS CONFIRMED BY T HE LEARNED CIT(A) AT RS.7,68,000 IS DIRECTED TO BE DELETED. 13. IN VIEW OF THE ABOVE, THE CROSS OBJECTION FILED BY THE ASSESSEE RESPONDENT ARE T HEREFORE ALLOWED TO THE EXTENT IT SUPPORTS THE ORDER OF THE LEARNED CIT(A). ITSSA NO. 5/CTK/2002, C.O.38/CTK/ 2002 AND ITSSA NO. 6/CTK/2002 (SMT.BASANTI MOHANTY ASSESSEE) PAGE 16 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) 14. SMT. BASANTI MOHANTY, WIFE OF SHRI KARUNAKAR MOHANTY WAS SUBJECTED TO SEARCH AND SEIZURE OPERATION ON THE SAME DATE. WHEN NOTICE U/S.158BC WAS ISSUED RETURN WAS FILED AFTER THE ISSUE OF NO TICE U/S.142(1) WHICH HAS ALSO BEEN SUBJECTED TO AGITATION REQUIRING ISSUE OF NOTICE U/S.143(2) WHEN THE ASSESSMENT FOR THE BLOCK PERIOD WAS COMPLETED ON THE INCOME OF RS.1,23,98,533 VIDE ORDER DT.2 3.6.2001. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CONTENTION OF THE ASSESSEE APPELLANT AND TOOK NOTE OF THE ASSESSEE BEING SEPARATELY ASSESSED HOLDING LAND AND MACHINERIES FOR THE PURPOSE OF ITS BUSINESS. THE LEARNED CIT(A) PARTLY ALLOWED THE ASSESSEES CONTENTION A GAINST WHICH THE REVENUE HAS PREFERRED AN APPEAL ON THE DELETION OF ADDITIONS BY THE LEARNED CIT(A) WHICH HAS BEEN SUPPORTED BY THE ASSESSEE BY WAY OF FILING CROSS OBJECTION. A SEPARATE APPEAL HAS ALSO BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LE ARNED CIT(A) IN PART CONFIRMING THE DETERMINATION OF UNDISCLOSED INCOME. 15. INITIATING HER ARGUMENTS, THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION IN RESPECT OF INVESTMENT ON LAND BY THE ASSESSING OFFICER. SHE SUBMITTED THAT THE ADDITION IN THE VALUE OF LAND WAS CONSIDERED BY THE ASSESSING OFFICER AFTER OBTAINING DVOS REPORT WHICH HAS NOT BEEN REBUTTED BY THE ASSESSEE. THE BUILDING ON THE LAND AND THE MACHINERY WERE HELD BY THE ASSESSEE NAMELY SMT .BASANTI MOHANTY IN PU RSUANCE TO HAVING DECLARED THE SAME UNDER VDIS,1997 WAS NOT BEFORE THE ASSESSING OFFICER. THE SEARCH MATERIAL INDICATED THAT THE ACQUISITION OF LAND DURING THE BLOCK PERIOD TH EREFORE COULD NOT BE RELATED TO THE VDIS 1997 ACQUISITION WHICH IS AN AFTERTHOUGH T. SHE PRAYED THAT THIS DELETION MAY KINDLY BE RESTORED. SIMILARLY IN THE MACHINERY ACQUISITION AGAINST LOAN WAS PAGE 17 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) ESTIMATED WHEN THE LEARNED CIT(A) SOUGHT TO DELETE THE SAME AS LACK ING EVIDENCE. SHE POINTED OUT THAT IT WAS THE LACK OF COOPERATION OF THE ASS ESSEE BEFORE THE ASSESSING OFFICER INSOFAR AS THE INCOME GENERATED IN THE NAME OF SMT.BASANTI MOHANTY WHO OWNED M/S.UTKAL STONE CRUSHER WAS SUBJECTED TO ON THE SPOT SCRUTINY WHICH LED TO THE FINDING OF GENERATION OF INCOME IN ACCORDANCE WITH THE VOLUMINOUS BUSINESS CONDUCTED ON THE DATE OF INSPECTION. THEREFORE, THE COMPUTATION OF THE LEARNED ASSESSING OFFICER ON THIS SCORE IS BOUND TO BE RESTORED. 16. ON THE ASSESSEES APPEAL, SHE POINTED OUT THAT THE PART ADDITION AS CONFIRMED AND SUSTAINED BY THE LEARNED CIT(A) THEREFORE ARISES OUT OF THE SAME FACT AGAINST WHICH NO FURTHER EVIDENCE COULD BE BROUGHT ON RECORD BY THE ASSESSEE IS BOUND TO BE CONFIRMED. THE RESIDUAL AMOUNT THEREFORE REQUIRE S NO FURTHER SCRUTINY INSOFAR AS THE LEARNED CIT(A) HAS BASED HIS DELE T ION OF THE MAJORITY ONLY ON THE INFORMATION OF INCOME CONSIDERED UNDISCLOSED BY THE ASSESSING OFFICER. 17. THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A) INSOFAR AS FROM THE VERY BEGINNING THE ASSESSEE HAS BEEN SUBMITTIN G THAT THE DOCUMENTS SEIZED TO BE USED AGAINST THE ASSESSEE NAMELY SMT.BASANTI MOHANTY OUGHT TO HAVE BEEN SUBJECTED TO TAXATION U/S.158BD. THERE WAS NO SUCH EXERCISE UNDERTAKEN IN VIEW OF THE FACT THAT THE ASSESSEES HUSBAND WAS ALSO NOT NOTI FIED U/S.143(2 ) WHEN THE ASSESSEE FILED THE BELATED RETURN AS WAS FILED BY SMT. BASANTI MOHANTY AS NIL UNDISCLOSED INCOME IN PURSUANCE TO NOTICE U/S.158BC. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS BEEN CONDUCTING STONE CR USHING BUSINESS FROM 1983 - 84 AND HAD ULTIMATELY MADE A DECLARATION PAGE 18 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) UNDER THE VDIS, 1997 WHEN IN ACCORDANCE WITH THE SAID PROVISIONS ALL THE MACHINERIES AND THE LAND HOLDINGS WERE INSCRIBED IN THE REGULAR BOOKS OF ACCOUNT FOR GENERATING INCOME THERE FROM. THE LEARNED CIT(A) WA S PLEASED TO HOLD THAT THE VARIOUS PLOTS OF LAND AND THE SITES OF STONE CRUSHING TOOK PLACE WAS NOT TO BE TAXED AS UNDISCLOSED INCOME MORE SO BECAUSE THE DVO HA D VALUED THE SAME AT A HIGHER FIGURE. THIS IS A MERE A REASON THAT ONCE AN ASSET HAS BEEN BROUGH T TO USE IN THE MAIN STREAM CANNOT BE VALUED FOR THE PURPOSE OF DETERMINING UNDISCLOSED INCOME. THE ASSESSEE WAS HOLDING CASH WHICH HAS BEEN SUBJECTED TO TAX UNDER THE VDIS THEREFORE CANNOT BE SEPARATELY TAXED WAS CONSIDERED BY THE LEARNED CIT(A) IN ACCORD ANCE WITH THE PROVISIONS OF THE I.T.ACT. THE EFFORTS MADE BY THE LEARNED CIT(A) TO ULTIMATELY DETERMINE THE RESIDUAL INCOME BECOMES AN EXERCISE IN FUTILITY INSOFAR AS THE VERY INCOME WHICH HE HAS CONFIRMED STOOD RETURNED AND WAS BELOW TAXABLE LIMIT AFTER THE VDIS DECLARATION IN ASSESSMENT YEAR 199 8 - 9 9 . THAT APART THE SAID ASSET WAS IN EXISTENCE WAS ON THE BASIS OF CASH AVAILABLE THEREFORE COULD NOT BE SUBJECTED TO SCRUTINY UNDER ANY OTHER PROVISIONS OF THE I.T.ACT. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO HOLD THAT THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE INCOME GENERATION ON THE BASIS OF SPOT ENQUIRY AGAINST WHICH NO DOCUMENTARY EVIDENCE COULD BE SUBSTANTIATED VIS - - VIS THE REGULAR INCOME GENERATED BY THE ASSESSEE AND RENDERED TO TAXATION MAY BE BELOW TAXABLE LMIT. THE RESIDUAL AMOUNT CONFIRMED BY THE LEARNED CIT(A) THEREFORE DOES NOT REACH THE TAXABLE LIMIT FOR THE RESPECTIVE AYS IN THE BLOCK PERIOD. TH E INCOME GENERATION HAS BEEN SU PPORTED BY THE ASSESSEE CLAIMING TO HOLD THE SAME IN PAGE 19 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) THE FORM OF MACHINERY AND OTHER ASSETS AND LAND IN THE NAME OF SMT.BASANTI MOHANTY THEREFORE COULD NOT BE SUBJECTED TO TAX ON THE BASIS OF SEARCH MATERIAL NAMELY THE DEED S , BANK STATEMENT AND THE DVOS REPORT AND INSPECTORS REPORT MAKING ARITHMETICAL COMPUTATION OF INCOME ON DAY TO DAY BASIS IN ACCORDANCE WITH THE CAPACITY OF THE CRUSHERS AND SALE THEREOF. THE AUTHORITIES BELOW DID NOT MAKE ANY EFFORT , AT LEAST TO COMPUTE THE SUPPRESSION THEREOF , WHETHER BY THE ASSESSEES HUSBAND OR SOLD IN THE OPEN MARKET FOR THE PURPOSE OF GENERATING INCOME. AS HAS BEEN MENTIONED BY US IN THE CASE OF SHRI KARUNAKAR MOHANTY, THE ASSESSING OFFICER HAS ONLY PROCEEDED TO ESTIMATE INC OME IN THE FORM OF THE GROSS MARGIN AND NOT ON THE BASIS OF INPUTS. WE DO NOT FIND ANY MERIT IN PART SUSTENANCE OF THE LEARNED CIT(A) ON THE BASIS OF FACTS AND FIGURES WHICH WE HAVE BEEN PRODUCED BEFORE US. THE APPROPRIATE VALUATION DEFINITELY LACKS EVIDEN TIARY VALUE INSOFAR AS THE ASSESSEE HAS PURCHASED HER ASSETS ON THE BASIS OF LEASE AGREEMENT WITH IDCO FOR THE LAND PURCHASED IN BHAGABANPUR INDUSTRIAL ESTATE. SIMILARLY, THE LOAN WAS SANCTIONED FROM THE OSFC WHICH WOULD HAVE REMAINED SECURED BY WAY OF MO RTGAGE OR BY WAY OF THE ASSESSEES CAPACITY TO REPAY THE LOAN. ALL THESE DOCUMENTS WERE MADE AVAILABLE TO THE LEARNED CIT(A) WHICH WE ARE INCLINED TO HOLD THAT THERE WAS NO NEED TO COMPUTE RESIDUAL INCOME IF ANY IN THE CASE OF THE ASSESSEE AGAINST ASSETS U TILISED BY THE ASSESSEE FOR GENERATION OF INCOME WHICH ULTIMATELY WAS BELOW THE TAXABLE LIMIT. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE APPEAL AS WELL AS THE C.O. SUPPORTING THE ORDER OF THE LEARNED CIT(A) FILED BY THE ASSESSEE ARE ALLOWED. ITSSA NO. 3/CTK/2002 AND ITSSA NO. 4/CTK/2002 ( CROSS APPEALS IN CASE OF ASSESSEE SIBA PRASAD DAS) PAGE 20 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) 20. THESE CROSS APPEALS BY THE ASSESSEE AS WELL AS THE REVENUE IN CASE OF THE ASSESSEE SHRI SIBA PRASAD DAS, WHO HAPPENED TO BE AN EMPLOYEE AS SISTING SHRI KARUNAKAR MOHANTY, THE ASSESSEE WHO HAS BEEN SUBJECTED TO SEARCH AND SEIZURE OPERATION U/S.132. THIS ASSESSEE WAS MANAGING TWO SITES WHICH WERE SUBJECTED TO SEARCH OPERATION AND WAS ISSUED NOTICE U/S.158BC. ADDITIONS HAVE BEEN MADE WHICH HAVE BEEN PARTLY DELETED BY THE LEARNED CIT(A) ON THE BASIS OF FACTS AND FIGURES AS PERUSED BY US. 21. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED A BRIEF HISTORY ABOUT THE ASSESSEE WHO WAS ALSO PRESENT DURING THE COURSE OF HEARING. THE ASSESSEE SUFFERED HUGE LOSSES IN HIS OWN BUSINESS OF BRICK KILN WAS LOOKING FOR EMPLOYMENT FROM SHRI KARUNAKAR MOHANTY TO ACCOMMODATE HIM WITH THE PROMISE THAT HE COULD TRUST HIM WITH PROJECTS AT VARIOUS SITES WHEN THE ASSESSEE WAS ENTRUSTED TO DEPEND ON THE VARIOUS TRANSACTIONS TO BE CONDUCTED FOR HIRING OF MACHINERY, EXTRACTION OF DEBRIS AND PROPER IMPLEMENTATION OF THE MATERIAL SUPPLIED BY THE DEPARTMENT TO BE UTILISED IN THE CONSTRUCTION WORK FOR SHRI KARUNAKAR MOHANTY . THE ASSESSEE HAD BEEN FILING RETURN UPTO THE ASSESSMENT YEAR 1993 - 94 WHEN HE HAD SUBSTANTIAL INCOME WAS CONSTRAINED TO WORK AT SIBAPUR S ITE AND SAMALGRADE BANDH SITE AWARDED CONTRACT BY IRRIGATION DEPARTMENT TO THE ASSESSEE NAMELY, SHRI KARUNAKAR MOHANTY ON INCURRING LOSS THEREAFTER . SEARCH TOOK PLACE ALONG WITH SHRI KARUNAKAR MOHANTY IN THE ASSESSEES SMALL RENTED HOUSE IN LIC COLONY, CUTTACK WHEN CERTAIN DOCUMENTS WERE SEIZED AND HAVE BEEN PLACED IN THE PB FILED BY THE DEPARTMENT. DOCUMENTS BELONGING TO ASSESSEES WIFE NAMELY SMT. SA BITA DAS WERE ALSO FOUND AND USED FOR HOLDING THE SAME AS UNDISCLOSED INCOME IN THE HANDS OF THE HUSBAND NAMELY SHRI SIBA PRASAD DAS, THE ASSESSEE BEFORE US. THE ASSESSING OFFICER JOTTED PAGE 21 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) DOWN THE FIGURES FROM THE LEASE SITES RELATING TO THE WORK OF SHRI KA RUNAKAR MOHANTY AND ASSETS AND DOCUMENTS BELONGING TO THE WIFE SMT. SABITA DA S AND DETERMINED THE INCOME AT R S.1,72,04,952 WHICH WAS APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(A) ON THE BASIS OF FACTS AND FIGURES DELETED THE ADD ITION OF RS.1,03,32,375 AND SUSTAINED THE BALANCE OF RS.68,72,577. THIS DELETION AND RETENTION OF THE ADDITION HAVE BEEN APPEALED AGAINST BY THE REVENUE AND THE ASSESSEE RESPECTIVELY. 22. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMIT TED THAT ON THE FACTS AND FIGURES, IT WOULD BE CLEAR THAT THE LEARNED CIT(A)HAS ENHANCED THE INCOME PURPORTED TO HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER AS UNDISCLOSED WITHOUT FOLLOWING THE PROPER PROCEDURE OF LAW. THIS IN TURN INDICATE THE WRONG IN TERPRETATION OF THE FACTS INSOFAR AS THE PURPORTED INCOME BELONGING TO SHRI KARUNAKAR MOHANTY HAS BEEN DELETED BY THE LEARNED CIT(A) AS NOT BELONGING TO THE ASSESSEE WHICH HAD ALREADY BEEN CONSIDERED IN THE CASE OF SHRI KARUNAKAR MOHANTY BY HIM IN A SEPARA TE PROCEEDINGS. THEREFORE, ON THE BASIS OF THE SAME FACTS, THE LEARNED CIT(A) ERRED IN CONSIDERING THAT INCOME WHICH THE ASSESSEE OUGHT TO HAVE EARNED FROM SIBAPUR SITE BELONGING TO SHRI KARUNAKAR MOHANTY COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE. HE FURTHER CONTRADICTED HIS OWN FINDING IN THE CASE OF SHRI KARUNAKAR MOHANTY BY HOLDING THAT THE INCOME FROM THESE TWO UNITS COULD BE IDENTIFIED WITH THE ASSESSEE AND NOT SHRI KARUNAKAR MOHANTY. FURTHER THE LEARNED CIT(A) H AS SUSTAINED THE ADDITIONS COMPU TE D BY THE ASSESSING OFFICER ON ACCOUNT OF SUPERVISORY ACCOUNT AT SIBAPUR SITE, A CONTRIBUTION, IF ANY, MADE BY THE ASSESSEE TO SHRI KARUNAKAR MOHANTY AND THE MACHINERY ACCOUNT BALANCE WHICH HAPPENED ON THE DELEGATION OF AUTHORITY GIVEN TO THE ASSESSEE FOR O BTAINING MACHINERIES ON THE BASIS OF PAGE 22 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) PROFORMA INVOICES WHICH HAD ALREADY STOOD DELETED BY THE LEARNED CIT(A) IN THE CASE OF SHRI KARUNAKAR MOHANTY. THE DIARY ACCOUNT FOR THE CONSTRUCTION WORK OF SHRI KARUNAKAR MOHANTY HAS BEEN SOUGHT TO BE ADDED IN THE HAN DS OF THE ASSESSEE WHEN IT DID NOT BELONG TO IT. IT WAS SUMMARY OF AC COUNT OF EXPENDITURES REQUIRED FOR SHRI KARUNAKAR MOHANTY ON THE BASIS OF SUPPLEMENTING THE WORK CARRIED OUT BY HIM WHEN THE PURPORTED INCOME REPRESENTED BY SHRI KARUNAKAR MOHANTY HAS BEE N SOUGHT TO BE ADDED BY WAY OF ENHANCING THE INCOME AS ASSESSED BY THE ASSESSING OFFICER AS UNDISCLOSED INCOME IN THE;HANDS OF SHRI KARUNAKAR MOHANTY . THE LEARNED COUNSEL ALSO POINTED THAT THE RESIDUAL PAYMENT FOR THE BRICK KILN WORK WHICH HAD CLOSED IN TH E YEAR 1993 - 94 WAS CONSIDERED AS STOCK LYING WITH THE ASSESSEE TO BE TAXED AT RS.2,40,000 INCLUDING THE FURNITURE BELONGING TO SHRI KARUNAKAR MOHANTY AT SITES WORTH RS.61,500 HAS BEEN TAXED IN THE HANDS OF THE ASSESSEE. A SMALL PLOT OF LAND , WHICH THE ASSE SSEE AFTER HAVING PRACTICALLY BECOMEBANKRUPT, MERGED WITH WIFE SMT. SABITA DAS WAS REQUISITIONED TO BE VALUED BY THE DVO TO BE SPLIT FOR HOUSE CONSTRUCTION IN ASSESSMENT YEAR 1998 - 99 AND 1999 - 2000 BY SMT. SABITA DAS HAS BEEN TAXED IN THE HANDS OF THE HUSB AND, THE ASSESSEE. THE LEARNED COUNSEL AGITATED THAT A COMPLETE BIAS EMERGES WHEN THE ASSESSING OFFICER NOTICED THAT THE SMALL HATCHMENT HAS TO BE VALUED BELONGING TO SMT.SABITA DAS AS FROM UNDISCLOSED SOURCES IN THE CASE OF THE ASSESSEE THAT TOO BEYOND TH E DATE OF SEARCH HAD TAKEN PLACE ON 29.6.1999. 23. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE LEARNED CIT(A) WAS APPRISE OF THE FACTS THAT THE ESTIMATION OF INCOME IN THE HANDS OF SHRI KARUNAKAR MOHANTY COULD NOT BE SUBJECTED TO TAX. A PORTION OF THAT INCOME HAS HOWEVER BEEN ERRONEOUSLY CONFIRMED IN THE HANDS OF SIBA PRASAD DAS IS PAGE 23 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) BEYOND ANY BASIS OR JUSTIFICATION. THE SAME CIT(A) WHO ACKNOWLEDGES THAT THE SOURCE OF INCOME TO AN EMPLOYEE, IF ANY, IS BY FINDING T HE INCOME AT A PARTICULAR SITE I S GENERATED BY RAISING BILLS ON THE DEPARTMENT, THE ASSESSEE WHO HAPPENS TO BE THE MANAGER AT SITE WAS TO RENDER TRUE AND CORRECT AMOUNT OF RECEIPT AND EXPENDITURE WHEN THE RECEIPT IN THE FORM OF ADVANCE GIVEN BY SHRI KARUNAKAR MOHANTY TO THE ASSESSE , WHO I N TURN PROMISE D THE ASSESSEE WOULD BE A LUMP SUM AWARD ON SATISFACTORY COMPLETION OF THE PROJECT . THE ASSESSING OFFICER, THEREFORE, WITHOUT ISSUING NOTICE U/S.143(2) PROCEEDED TO BRING ALL THE MATERIAL SEARCHED AND FOUND AT THE SITE TO UNILATERALLY CONSIDE R RECEIPTS AS INCOME OF THE ASSESSEE BUT BY NO CORROBORATIVE EVIDENCE WOULD SUBS TA NTIATE THAT THE ASSESSEE WAS IN POSSESSION TO EARN SEPARATELY FROM THE DEPARTMENT OR HOODWINK THE ASSESSEE TO GENERATE INCOME BY WAY OF SIPHONING ALL THE ADVANCE GIVEN BY PRO DUCING FORGED BILLS FOR MATERIALS UTILIZED AT SITES. IN OTHER WORDS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SE RECORDINGS/NOTINGS, WHICH COULD HAVE BEEN USED BY THE ASSESSEE TO SUPPORT IS ENTITLEMENT OF AWARD AND REDUCING THE COS T INCURRED C IT(A) IN THE PROJECT SITE AND FAITHFULLY RENDERING SERVICES AS A MANAGER HAS BEEN USED AGAINST HIM WHICH THE LEARNED SOUGHT TO ENHANCE BY SUPER IMPOSING THAT TH E INCOME FROM THESE TWO SITES W HICH HAD ALREADY BEEN RENDERED TO TAX AND CONSIDERED BASELESS BY HIM WAS NOT ON THE BASIS OF ESTIMATION OF GROSS RECEIPTS BUT ON THE BASIS OF REGULAR RETURN FILED BY SHRI KARUNAKAR MOHANTY COULD NOT REMAIN SUFFICIENT EVIDENCE FOR TAXATION IN THE HANDS OF SHRI SIBA PRASAD DAS. THE LEARNED CIT(A) THEREFORE, ERRED IN SUSTA INING THE SUM OF RS.68,72,577 IN THE HANDS OF THE ASSESSEE AFTER GIVING RELIEF TO THE ASSESSEE ON THE MAJOR PAGE 24 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) ADDITION BEING ESTIMATION OF INCOME IN THE HANDS OF SHRI SIBA PRASAD DAS, ACTUALLY CONSIDERED NOT TAXABLE IN THE HANDS OF SHRI KARUNAKAR MOHANTY . 24 . THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT A MISTAKE/ERROR IN THE ORDER OF THE LEARNED CIT(A) BY INDICATING THAT THE ROUGH CASH BOOK INDICATED AMOUNT OBTAINED BY WAY OF LOAN FROM THE BANK WHEN THE ASSESSEE STARTED WORK WITHIN A OVERDRAFT LIMIT OF R S.10 LAKHS IN THE NAME OF THE ASSESSEE AND RS.40 LAKHS IN THE NAME OF SHRI KARUNAKAR MOHANTY FROM SBI AT KANIHA WHERE THE WORK SITE IS LOCATED. ALL AMOUNTS WERE SPENT AND THE RECEIPTS WERE NOTED DOWN BY THE ASSESSEE IN HIS ROUGH CASH BOOK. THE AMOUNT OF LO AN ACKNOWLEDGED BY THE ASSESSEE ON BEHALF OF SHRI KARUNAKAR MOHANTY HAS BEEN SOUGHT TO BE TAXED IN THE HANDS OF THE ASSESSEE WHICH IS BEYOND ANY COMPREHENSION . SIMILARLY THE EXPENDITURE OF RS.85 LAKHS WAS ON THE BASIS OF ENTIRE WORK UPTO 31 ST MARCH WAS PRE PARED AND TYPED FROM THE ROUGH CASH BOOK. THIS TYPED STATEMENT INDICATES MACHINERY A CC OUNT WAS WORTH OF RS.85 LAKHS. THIS IS AN ARITHMETICAL CALCULATION OF MACHINE WORK THAT CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE ON PRESUMPTION AND ASSUMPTION WHEN O NCE THE AMOUNT IN THE ROUGH CASH BOOK AS PURSUED IS IN THE PAPER BOOK CLEARLY INDICATES THAT THE ASSESSEE HAD HIRED OUT MACHINERY ON BEHALF OF THE SHRI KARUNAKAR MOHANTY. THE PC ACCOUNT ARE THE PETTY CASH ACCOUNT WHICH ARE INCURRED BY THE ASSESSEE ON OBEHA LF OF SHRI KARUNAKAR MOHANTY WHEN THE VARIOUS EXPENDITURES INCURRED ON BEHALF OF SHRI KARUNAKAR MOHANTY HAS BEEN CONSIDERED AS EXPENSES NOT DEDUCTIBLE AS BUSINESS EXPENDITURE. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT IF THE EXPENSES ARE NOT INCURRE D HOW THE SAME WILL BE REIMBURSED BY SHRI KARUNAKAR MOHANTY, WHEN THE VERY FACT THAT THE LEARNED CIT(A) HAS AGREED TO THE PROPOSITION THAT THE INCOME ESTIMATED ON THE BASIS OF GROSS RECEIPTS PAGE 25 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) CANNOT BE SUBJECTED TO TAX OVER AND ABOVE WHAT HAS BEEN RETURNED BY THE ASSESSEE BY WAY OF REGULAR RETURN. HE POINTED OUT THAT THE TOTAL EXPENDITURE INCURRED THEREFORE INCLUDED THE PAYMENTS MADE ON BEHALF OF SHRI KARUNAKAR MOHANTY TOTALING RS.1,41,08,000 WHICH WAS REPORTED BY THE THEN MANAGER TO ITS EMPLOYER INDICATIN G THAT ALL THESE EXPENSES PERTAIN TO PARTICULAR SITE WAS NOT ON THE BASIS OF SEPARATE BUSINESS CONDUCTED BY THE ASSESSEE BUT WAS ONLY INCURRING EXPENDITURE ON BEHALF OF SHRI KARUNAKAR MOHANTY. THE LEARNED CIT(A) THEREFORE ERRED IN LAW AND FACTS TO HOLD THA T THE ASSESSEE IS TO BE TAXED ON THESE INCOMES WHICH EXPENSES HAVE ALREADY BEEN CONSIDERED NOT TAXABLE IN THE HANDS OF THE ASSESSEE NAMELY SHRI KARUNAKAR MOHANTY ON WHOSE BEHALF THE ASSESSEE HAD NOTED THESE EXPENSES. IN ANY CASE, THE MAJOR PORTION OF INCOM E SOUGHT TO BE TAXED IN THE HANDS OF SHRI SIBA PRASAD DAS ARE ON ACCOUNT OF CAPITAL EXPENDITURE WHO HAS ALREADY EXPLAINED WERE HELD BY SHRI KARUNAKAR MOHANTY ON THE BASIS OF INCOME GENERATED DURING THE BLOCK PERIOD ON THE GROSS RECEIPTS OF MORE THAN RS.12 CRORES WHICH THE LEARNED DR HERSELF AGREED TO THE PROPOSITION THAT THE RATE OF RETURN MAY BE LOWERED TO 10% TO 12%. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION OF A SMALL HATCHMENT ON A PLOT OF LAND BELONG ING TO THE ASSESSEES WIFE IS LESS THAN 500 SFT HAS BEEN VALUED AT MORE THAN RS.5 LAKHS SPLIT FOR TWO YEARS EVEN BEYOND THE DATE OF SEARCH SPEAKS VOLUME OF BIAS AND UNILATERAL CONSIDERATION OF FACTS IN CASE OF THE ASSESSEE. THE ASSESSEE WAS UNFORTUNATE TO HAVE UNDERTAKEN FULL RESPONS IBILITY OF TWO SITES WHERE HE WAS TO INDEPENDENTLY PROCURE MACHINERY AT PARTICULAR RENT AMOUNT AND ALSO BY WAY OF SECURITY GRANTED BY THE EMPLOYER NAMELY SHRI KARUNAKAR MOHANTY WAS TO FUNCTION INDEPENDENTLY BUT TO MAINTAIN A ROUGH ACCOUNT ON BEHALF OF SHRI KARUNAKAR MOHANTY THEREFORE ONLY CULMINATED TO FINDING OF SUCH PAGE 26 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) MATERIAL I.E., LOOSE S H EET S , FORGED BILLS, EXECUTIVE DIARIES, RECEIPTS AND VOUCHERS WHICH IN NO WAY INDICATE THAT THE ASSESSEE WAS CONDUCT ING A SEPARATE BUSINESS TO EARN HUGE INCOME AS OTHERW ISE SUSTAINED BY THE LEARNED CIT(A). HE PERUSED THE ORDER OF THE LEARNED CIT(A) IN THE CASE OF SHRI KARUNAKAR MOHANTY WHEREIN THE LEARNED CIT(A) HAS AGREED TO THE P ROP OSITION THAT SHRI SIBAPUR SITE AND SAMALGRADE BANDH SITE CONTRACTS WERE AWARDED BY THE IR RIGATION DEPARTMENT WERE BELONGING TO SHRI KARUNAKAR MOHANTY. THE LEARNED CIT(A) WITHOUT ISSUING NOTICE U/S.251 PROCEEDED TO ENHANCE THE INCOME WHICH DOES NOT INDICATE THAT THE ASSESSING OFFICER HAD IDENTIFIED THE INCOME THERE FROM ON THE BASIS OF SEARCH D OCUMENTS. GIVING CONTRADICTORY FINDINGS ON THE SAME FACTS THEREFORE BECOME HIGHLY UNJUSTIFIED AND UNREASONABLE WHICH MAY KINDLY BE CONSIDERED FOR APPROPRIATE ACTION. EVEN A SMALL HOUSE WHICH THE ASSESSEE COULD ACCOUNT FOR BY FILING RETURNS HEREAFTER THE DA TE OF SEARCH HAS BEEN TAXED IN THE IMPUGNED BLOCK PERIOD WHICH INDICATES THAT THE FACT S AS BROUGHT ON RECORD REGARDING SMT. SABIT A DAS M, PURCHASING TWO PIECES O F ADJACENT LAND AT CUTTACK BY REGISTERED DEED ON 31.3.1989 AND 3.7.1990 TOTALLING RS.77,500 WHEN CONSTRUCTION OF ABOUT TOTAL 2000 SFT ON THREE FLOORS HAS BEEN VALUED BY THE DVO AT RS.5,75,156. THE LEARNED COUNSEL FOR THE ASSESSEE CONCLUDING HIS ARGUMENT SUBMITTED THAT THE ASSESSING AUTHORITIES HAVE THEMSELVES FAULTED IN COMPUTATION OF UNDISCLOSED INC OME IN THE HANDS OF THE ASSESSEE INSOFAR AS THE PURPORTED SEARCHED DOCUMENTS SOUGHT TO BE RELIED UPON BY THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) INDICATE VOLUME OF CONTRA DICTION OF THEIR OWN FINDINGS BY BRINGING TO TAX ASSETS HELD AGAINST INCO ME RENDERED TO TAX EITHER BY THE ASSESSEE HIMSELF OR BY THE EMPLOYER NAMELY SHRI KARUNAKAR MOHANTY. THE LEARNED COUNSEL FOR THE ASSESSEE PAGE 27 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) SUBMITTED THAT THE ASSESSEE SHRI SIBA PRASAD DAS HAS BEEN MADE A SCAPEGOAT WHEN THE BURDEN OF SHRI KARUNAKAR MOHANTY TO EXPLAIN AFTER APPEARING BEFORE THE ASSESSING OFFICER HAS BEEN PUSHED TO BE EXPLAINED BY SHRI SIBA PRASAD DAS. 25. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A) FOR CONFIRMING THE ADDITION AND THE ENHANCEMENT. SHE SUBMITTED THAT THE SEACH DOCUM ENT GIVEN IN THE PAPER BOOK MAY KINDLY BE PERUSED WHICH ONLY INDICATE S THAT THE ONUS LIES ON THE ASSESSEE TO EXPLAIN AS TO HOW THE SAME COULD NOT BE TAXED IN HIS HAND. SIMILARLY TRYING TO SUGGEST THAT THE ASSESSEE AND HIS WIFE PROCEEDED TO LEAD A FRUGAL LI FE STYLE INDULGING IN SUCH VOLUMINOUS TRANSACTIONS ON BEHALF OF SHRI KARUNAKAR MOHANTY DID NOT APPEAR JUSTIFIED BY THE LEARNED CIT(A) THEREFORE REQUIRES CONSIDERATION IN THE LIGHT OF THE FACTS AS BROUGHT ON RECORD BY THE ASSESSING OFFICER. SHE SUBMITTED TH AT THE ASSESSEE OUGHT TO EXPLAIN OBTAINING AND CONDUCTING BUSINESS IN HIS OWN NAME AND BY CLAIMING REIMBURSEMENT OF HIGH PITCHED EXPENDITURE AGAINST INCOME WHICH HE SUGGESTS BELONG ED TO SHRI KARUNAKAR MOHANTY. HE USE TO PREPARE BILLS FOR REIMBURSEMENT WHIC H WERE TAKEN COGNIZANCE OF BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) TO CLEARLY DERIVE THE INCOME YET TO BE DISCLOSED BY THE ASSESSEE IN THE BLOCK PERIOD. SHE AGREED TO THE PROPOSITION TO THE EXTENT THAT INCOME HAD BEEN DELETED BY THE LEARNED CIT(A) MAY BE IDENTIFIED IN THE HANDS OF SHRI KARUNAKAR MOHANTY MAY BE CONSIDERED IN ACCORDANCE WITH LAW. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO HOLD THAT THE ASSESSEE NAMELY SHRI SIBA PRASAD DAS HAS BEEN SUBJECTED TO PROCEEDINGS U/S.158BC BEING A FAITHFUL EMPLOYEE AWAITING TO PAGE 28 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) CLAIM REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF SHRI KARUNAKAR MOHANTY BY NOT HAVING ANY STA KE IN THE FORM OF INTRODUCTION OF CAPITAL OR BRINGING ANY ASSETS BELONGING TO HIM FOR WHICH INCOME , THE AUTHORITIES BELOW SUGGEST, OUGHT TO HAVE BEEN EARNED BY HIM. THE SIMPLE RECEIPT AND PAYMENT AMOUNT HAS BEEN MISCONSTRUED BY THE ASSESSING AUTHORITIES HAS NEWLY STARTED BUSINESS CONDUCTED BY THE ASSESSEE INDEPENDENTLY. MORE SO THE ASSETS ACQUIRED INCORPORATED IN THE RETURN OF THE LOOSE SHEET WAS RECEIVED FROM SHRI KARUNAKAR MOHANTY HAS BEEN TAXED IN THE ASSESSEES HAND WHICH HA S ALREADY BEEN CONSIDERED BY THE LEARNED CIT(A) IDENTIFYING T HE MACHINERY OBTAINED ON LOAN FROM BANKS WHICH HE PROVIDED SECURITY AS GUARANTEE HAS BEEN HELD TO BE BELONGING TO SHRI KARUNAKAR MOHANTYS BUSINESS. CASH INCOME GENERATED INDEPENDENTLY THEREFORE HAS NO LEGS TO S TAND ON AS JUSTIFIED TO HAVE BEEN COMPUTED B Y THE INSPE CTOR OF INCOME TAX BY MAKING SPOT ENQUIRY. THE LEARNED CIT (A) SOUGHT TO TAKE PART IN THE INFORMATION AVAILABLE TO IT WHEN HE AGREED WITH THE PROPOSITION THAT THE MAJOR UTILIZATION OF ASSETS IS NOT FIT FOR ADDITION IN THE HANDS OF THE ASSESSEE. T HEREFORE, IT LEADS TO THE FINDING THAT HAVING AGREED TO THE PROPOSITION THAT THE MACHINES DO NOT BELONG TO THE ASSESSEE HE PROPOSED TO SUGGEST THE ASSESSEE NAMELY SHRI SIBA PRASAD DAS EARNING INCOME ON THE SLY AT SIBAPUR S ITE AND SMALGRADE BANK SITE. WE AR E UNABLE TO SATISFY OURSELVES TO THIS PROPOSITION OF THE LEARNED CIT (A) WHICH DOES NOT EMERGE FROM THE FACTS AS NOTED BY THE ASSESSING OFFICER NAMELY THE SEARCH MATERIAL WHICH COPIES HAVE BEEN FURNISHED BY THE LEARNED DR AS WELL AS BY THE LEARNED COUNSEL F OR THE ASSESSEE IN THE FORM OF PANCHANAMA IN THE PAPER BOOK . ESTIMATE OF INCOME ON PROPOSED MACHINERY THEREFORE BECOMES AN EXERCISE IN FUTILITY INSOFAR AS THE INDIVIDUAL NOTING OF RECEIPTS AND PAYMENT ACCOUNT ALSO LEAVE PAGE 29 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) NO ROOM FOR AUTHENTICATION TO THE EX TENT THAT THE EXPENDITURE INCURRED O N BEHAL F OF SHRI KARUNAKAR MOHANTY HAS ALSO BEEN CONSIDERED BY THE ASSESSING OFFICER ON THE BASIS OF INCOME LESS EXPENDITURE TO BE ESTIMATED AT 20% NOW ACCEPTABLE TO THE DEPARTMENT AT 10% TO 12%. IN OTHER WORDS IT BECOME S IMMATERIAL AS TO FOR WHAT PURPOSE THE EXPENDITURE HAS BEEN INCURRED INSOFAR AS IT IS NOT THE CASE OF THE ASSESSING OFFICER TO TAX THE SAME UNDER THE PROVISIONS OF SECTION 69C. ESTIMATING PERCENTAGE OF INCOME ABSOLVES THE ASSESSEE FROM BEING HIT BY THE PR OVISIONS OF SECTION 69C INSOFAR AS IT NEVER BELONGED TO THE ASSESSEE BEING THE DIFFERENCE BETWEEN THE EXPENDITURE AND THE INCOME HAS ALREADY BEEN PUT TO USE TO BE TAXED IN THE HANDS OF SHRI KARUNAKAR MOHANTY. SIMILARLY PETTY ASSETS HELD BY THE ASSESSEE ON THE BASIS OF RENDERING SUFFICIENT INCOME WHETHER BELOW TAXABLE LIMIT CANNOT BE TAXED WHICH MAY BE FURTHER SUBJECTED TO SCRUTINY BY WAY OF REGULAR RETURNS. WE ARE OF THE CONSIDERED VIEW THAT AT NO POINT OF TIME THE ASSESSEE IDENTIFIED HOLDING OF THE ASSETS FOR HIS PERSONAL USE WHEN HE HIMSELF SUGGESTED TH AT HE HAD COME AS A BROKEN MAN TO SHRI KARUNAKAR MOHANTY AFTER HAVING SUFFERED TOTAL LOSS I N THE BUSINESS OF BRICK KILN. HAVING BUSINESS PRUDENCY HE WAS ALLOWED BY SHRI KARUNAKAR MOHANTY TO WORK AS MANAGER A T TWO SITES WHICH HE WAS LOOKING FORWARD TO RECEIVE AWARD FROM SHRI KARUNAKAR MOHANTY BY MAINTAINING ROUGH ACCOUNT OF THE EXPENDITURE INCURRED WAS JUSTIFIED IN NOTING THE TOTAL RECEIPTS FROM SHRI KARUNAKAR MOHANTY DURING THE BLOCK PERIOD WHEN THE INCOME GE NERATED FOR SUCH RECEIPTS HAS ALREADY BEEN RENDERED TO TAX BY SHRI KARUNAKAR MOHANTY. WE SEE NO REASON TO SEPARATELY TAX THE ASSESSEE AS COMPUTED BY THE ASSESSING OFFICER AND ENHANCED BY THE LEARNED CIT(A) WITHOUT ADOPTING PROPER PROCEDURE AND THAT TOO IN A MANNER WHICH RATHER CONTRADICTS THEIR OWN FINDINGS IN THE PROCEEDINGS IN THE CASE OF PAGE 30 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) SHRI KARUNAKAR MOHANTY. THE HOUSE HAS ALREADY BEEN SUBJECTED TO TAX IN THE CASE OF SMT. SABITA DAS ON THE BASIS OF REGISTRATION WAY BACK IN 1989 AND 1990 THEREFORE REQUI RE NO FURTHER ADDITION IN THE BLOCK PERIOD ON THE BASIS OF VALUATION OF THE DVO. THE SAME IS DIRECTED TO BE DELETED. ESTIMATED INCOME FROM VARIOUS SOURCES , EVEN P ETTY IS WITHOUT BASIS INSOFAR AS IT WA S DONE ON BEHALF OF THE EMPLOYER NAMELY SHRI KARUNAKAR M OHANTY. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THAT FILED BY THE REVENUE IS DISMISSED. 27. TO SUM UP THE RESULT , PRONOUNCED IN OPEN COURT ON DT. 23 RD JUNE, 2011 SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER (K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 23 RD JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. SL. NO . IT(SS)A & C.O.NOS. RESULT 1. ITSSA NO.33/CTK/2001 ALLOWED 2. ITSSA NO.34/CTK/2001 DISMISSED 3. C.O.NO. 78/CTK/2001 (FILED BY ASSESSEE) ALLOWED 4. ITSSA NO. 5/CTK/2002 DISMISSED 5. C.O.38/CTK/2002 (FILED BY ASSESSEE) ALOWED 6. ITSSA NO. 6/CTK/2002 ALLOWED 7. ITSSA NO. 3/CTK/2002 ALLOWED 8. ITSSA NO. 4/CTK/2002 DISMISSED PAGE 31 OF 31 ITSSA NO.33/CTK/2001 AND OTHERS KARUNAKAR MOHANTY & OTHER S (GROUP CASE) COPY OF THE ORDER FORWARDED TO : 1. THE A SSESSEES : 1. KARUNAKAR MOHANTY 2. BSANTI MOHANTY 3. SIBA PRTASAD DAS 2. THE DEPARTMENT : ACIT, CIRCLE 1(1), BHUBANESWAR 3. THE CIT, 4. THE CIT(A), 5 . THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.