A Sudhakar, Husnabad V. ACIT, Karimnagar

ITSSA 4/HYD/2006

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9467 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-02-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-01-2010
• Assessment Year: misc
• Appeal Filed On: 06-01-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHANDRA SEKHARANDR
• Assessee Lawyers: K VASANT KUMAR
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Block assessment; Documents seized
• Section: 69C; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER IT(SS)A NO:4/HYD/2006 ASSTT. YEAR 1984-90 TO 1990-2000 SHRI A. SUDHAKAR, KARIMNAGAR (AAYPA 4534 F) VS ACIT, CIRCLE, 1, KARIMNAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. VASANT KUMAR RESPONDENT BY : SHRI M.S. CHANDRA SEKHARAN,DR O R D E R PER : CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) III, HYDERABAD DATED 27.10.2005 FOR T HE BLOCK PERIOD COVERING THE ASSESSMENT YEARS 1989 - 1990 AND 1990-2000. 2. THE FIRST EFFECTIVE GROUND IS AS FOLLOWS: 2. THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.92,724 AS UNEXPLAINED INVESTMENT IN NARMADA & NANDI INDUSTRIE S ASSUMING THAT THE INVESTMENT MIGHT HAVE BEEN MADE IN INDIVIDUAL S TATUS ONLY WHEN THE WHEN THE ASSESSEE IS IN NO WAY CONCERNED WITH BOTH THE FIRMS IN THE STATUS OF INDIVIDUAL AND THERE IS NO VARIATION IN THE INVESTMENTS EXPLAINED AND ENTRIES IN THE POCKET DIARY. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS MANAG ING PARTNER OF M/S OMKAR PARBOILED MODERN RICE & OIL MILL , ALGUNUR, KARIMNAGAR DISTRICT. A SEARCH OPERATION WAS CONDUCTED ON 9/3/1999. DURING THE COURSE OF SEARCH OPERATION U/S 132 THE ASSESSEE F ILED RETURN OF INCOME DISCLOSING A TOTAL UNDISCLOSED INCOME AT RS.10,0 4,610. THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S 158BC DETERMINING THE UNDISCLOSED INCOME AT RS.45,34,795. ON APPEAL, THE CIT (A) REDUCED THE UNDISCLOSED INCOME AT RS.34,03,375 TREATING AS ENHANCEMEN T ON 2 2 ACCOUNT OF UNEXPLAINED CREDIT IN THE PARALLEL BOOKS OF ACCOUNT AMOUNTING TO RS.3,12,520. AGAINST THIS THE ASSESSEE IS WENT IN APPEAL BEFORE THE ITAT. THE ITAT, HYDERABAD DELETED THE ADD ITIONS AGGREGATING AT RS.5,04,550 VIDE ORDER DATED 21.9.2003 IN IT(SS)A NO.108/HYD/2002 A BENCH, HYDERABAD AND SET ASIDE THE OTHER ISSUES TO TH E FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER ACCORDING SUFF ICIENT OPPORTUNITY TO THE ASSESSEE. THEREAFTER, THE ASSESSING OFF ICER ASSESSED THE UNDISCLOSED INCOME OF THE ASSESSEE ON GOING THROUGH THE SEIZED DOCUMENTS AND ASSESSEES WRITTEN SUBMISSION AT RS.15,49,539. THE ASSESSING OFFICER SUSTAINED ADDITIONS RELATING TO UNEXPLAIN ED INVESTMENT IN M/S NARMADA AND NANDI INDUSTRIES AMOUNTS TO RS.92,76 8/ AND UNEXPLAINED OPENING CAPITAL IN THE PARALLEL BOOKS AMO UNTING TO RS.3,12,520. THE CIT(A) CONFIRMED THE ORDER OF THE A SSESSING OFFICER. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 4. REGARDING ADDITION OF RS.92,724/- AS UNEXPLAINED INVESTMENT, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNA L IN ITA NOS.12/HYD/2004, 13/HYD/2004 AND 15/HYD/2004 IN THE CASE OF SHRI ELUGURI SATISHKUMAR, ALUGURI VISHNU & THOTA PRASAD V S. ACIT, KARIMNAGAR DATED 28/11/2008 AND THE TRIBUNAL AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE HELD AS FOLLOWS: 6. RIVAL CONTENTIONS OF EITHER SIDE HAVE BEEN CARE FULLY CONSIDERED IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD. PR OVISIONS OF SUB-SECTION (B) OF S.158B OF THE ACT, WHICH DEFINES THE TERM 'UNDISCLO SED INCOME', READ AS FOLLOWS- '158B. DEFINITIONS. IN THIS CHAPTER, UNLESS THE CONTEXT OTHERWISE RE QUIRES,-- (A) .. (B) 'UNDISCLOSED INCOME' INCLUDES ANY MONEY, BULLIO N, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON AN Y ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHERE S UCH MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BO OKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF 3 3 THIS ACT, OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CL AIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE.' FROM THE ABOVE DEFINITION OF THE TERM 'UNDISCLOSED INCOME' ANY INCOME BASED UPON ENTRY FOUND IN THE BOOKS OF ACCOUNT, WHICH WAS NOT DISCLOSED BY THE ASSESSEE FOR THE PURPOSES OF THE INCOME-TAX ACT, CO ULD BE TREATED AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. S.158BB PR ESCRIBED THE PROCEDURE FOR COMPUTING THE UNDISCLOSED INCOME. CLAUSE-2 OF S.158BB CLEARLY PROVIDES THAT THE PROVISIONS OF S.69A, 69B AND 69C SHALL, SO FAR AS MAY BE, APPLY AND REFERENCES TO 'FINANCIAL YEAR' IN THOSE SECTIONS SHALL BE CONSTRUED AS REFERENCE TO THE RELEVANT PREVIOUS YEAR FALLING IN THE BLOCK PERIOD, INCLUDING THE PREVIOUS YEAR ENDING WITH THE DATE OF SEARCH OR THE REQUISITION. 7. FROM THE ABOVE, IT IS VERY CLEAR THAT THE REFE RENCE IN S.69 TO FINANCIAL YEAR HAS TO BE TAKEN AS THE PREVIOUS YEAR WHICH FALLS IN THE BLOCK PERIOD INCLUDING THE PREVIOUS YEAR ENDING WITH THE DATE OF SEARCH. IN THIS CASE, ADMITTEDLY, SEARCH TOOK PLACE ON 9.3.1999. T HE BLOCK PERIOD IS FROM 1989-90 TO 1998-1999 AND THE PERIOD FROM 1.4.1998 T O 9.3.1999 FORMING PART OF ASSESSMENT YEAR 1999-2000. THEREFORE, ONLY SUCH UNEXPLAINED INVESTMENTS MADE BY THE ASSESSEES IN THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEARS 1989-90 TO 1998-1999 OR DURING TH E BROKEN PERIOD OF ASSESSMENT YEAR 1999-2000 TILL THE DATE OF SEARCH, VIZ. FROM 1.4.1998 TO 9.3.1999, WOULD FALL WITHIN THE SCOPE UNDISCLOSED I NCOME OF THE BLOCK PERIOD. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSES SEES IS THAT THE ENTRIES IN THE MATERIAL FOUND AT THE TIME OF SEARCH DOES NOT B EAR ANY INDICATION OR REFERENCE TO THE DATE OR YEAR OF INVESTMENT. THEREF ORE, THE PROVISIONS OF S.69 ARE NOT APPLICABLE, FOR THE PURPOSES OF MAKING ADDI TIONS UNDER S.69, SINCE IN TERMS OF SUB-SECTION (2) OF S.158BB, THE INVESTMEN T HAS TO BE MADE BY THE ASSESSEES IN THE PREVIOUS YEARS WITHIN THE BLOCK P ERIOD UNDER CONSIDERATION, AND SUCH INVESTMENT WAS NOT RECORDED IN THE BOOKS O F ACCOUNT. IN THIS CASE, THE INVESTMENT FOUND TO HAVE BEEN MADE WAS NOT RECO RDED IN THE BOOKS OF ACCOUNT, BUT IT WAS RECORDED IN A POCKET DIARY, REF ERRED AS AS/A/9. ADMITTEDLY, THE POCKET DIARY DOES NOT DISCLOSE DATE OR YEAR IN WHICH THE INVESTMENT IS MADE. FOR THE PURPOSE OF MAKING ADDIT ION ON ACCOUNT OF UNDISCLOSED INVESTMENT IN A BLOCK ASSESSMENT, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO BRING ON RECORD NECESSARY MATE RIAL AND ARRIVE AT A CONCLUSION THAT INVESTMENT IN QUESTION HAS BEEN MAD E IN ANY OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD, IN VIEW OF S .158B(B)(2) OF THE ACT. 8. THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF USHAKANT PATEL (SUPRA) HAS ALSO BEEN CAREFULLY EXAMINED BY T HIS TRIBUNAL. NO DOUBT, THE JUDGMENT OF GUJARAT HIGH COURT, AS POINTED BY T HE LEARNED DEPARTMENTAL REPRESENTATIVE, RELATES TO REGULAR ASSESSMENT MADE UNDER THE NORMAL PROVISIONS OF THE ACT, BUT IT APPLIES WITH EQUAL FO RCE EVEN TO THE BLOCK ASSESSMENT PROCEEDINGS, WHEN AN ADDITION IS SOUGHT TO BE MADE UNDER S.69 OF THE ACT. FOR THE PURPOSE OF CONVENIENCE, THE R ELEVANT OBSERVATIONS OF THE GUJARAT HIGH COURT IN THE CASE OF USHAKANT PATEL (SUPRA) ARE EXTRACTED BELOW- ' THE TRIBUNAL LOST SIGHT OF THE FACT THAT SECTION 69 OF THE ACT OPENS WITH THE WORDS 'WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR, THE ASSESSEE HAS MADE INVESTMENTS' THEREFORE, IN THE FIRST INSTANCE IT WAS INCUMBENT UPON THE AUTHORITY TO ESTABLISH THAT THERE WERE INVESTME NTS MADE BY THE ASSESSEE; THAT SUCH INVESTMENTS WERE NOT RECORDED IN THE BOOKS OF ACCOU NT MAINTAINED BY THE ASSESSEE; AND THAT SUCH INVESTMENTS HAD BEEN MADE IN THE FINANCIA L YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR IN QUESTION. UNFORTUNATELY, DESPIT E THE COMMISSIONER (APPEALS) HAVING RECORDED A CATEGORICAL FINDING, THE TRIBUNAL HAS FA ILED TO APPRECIATE THE SAID FINDING AND 4 4 DEALT WITH THE SAME WITHOUT GIVING COGENT REASONS. IF THE TRIBUNAL FOUND THAT THE SAID FINING WAS NOT CORRECT, IT WAS NECESSARY FOR THE TR IBUNAL TO HAVE RECORDED REASONS FOR REVERSING THE SAME. THE OBSERVATION OF THE TRIBU NAL THAT THE DIFFICULTY AS TO FINANCIAL YEAR HAD TO BE FINALIZED IN ACCORDANCE WITH THE PR OVISIONS AND THE DATE OF SEARCH AND SEIZURE IS TOO GENERAL AND VAGUE. IT DOES NOT INDI CATE ANYTHING. WHEN THE PROVISION REQUIRES FULFILLMENT OF CERTAIN PRE-REQUISITES COND ITIONS BEFORE THE ASSESSEE CAN BE CALLED UPON TO EXPLAIN, THE TRIBUNAL HAS TO RECORD ITS FIN DINGS ON THIS ISSUE IN A SPECIFIC MANNER, BECAUSE THE CASE OF THE ASSESSEE ALL ALONG HAS BEEN THAT IN THE FIRST PLACE THE SEIZED DOCUMENTS DO NOT REFLECT ANY INVESTMENTS, IN THE S ECOND PLACE, EVEN IF THE ENTRIES COULD BE TREATED AS INVESTMENTS MADE BY THE ASSESSEE, IT WAS FURTHER NECESSARY TO SHOW THAT SUCH INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR AND ARE NOT RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE TRIBUNAL'S ORDER DOES NOT RECORD ANY FINDING. IN FACT, THE TRIBUNAL IS HARDLY AWARE, IT APPEARS, AS TO WHAT THE REQUIREMENTS OF S ECTION 69 ARE, AND IF IT IS AWARE, IT HAS CONSCIOUSLY CHOSEN TO IGNORE THE SAME. IT COULD NO T HAVE DONE SO IN THE FACE OF THE FINDING RECORDED BY THE COMMISSIONER (APPEALS ) ON THIS ISSUE.' 9. IN VIEW OF THE ABOVE OBSERVATIONS OF THE GUJAR AT HIGH COURT, THE ASSESSING OFFICER HAS TO ESTABLISH THAT THE ALLEGED INVESTMENT WAS MADE BY THE ASSESSEES DURING THE PREVIOUS YEAR, WHICH FALLS WITHIN THE BLOCK PERIOD OF ASSESSMENT. IN THE ABSENCE OF ANY MATERIAL TO SUGG EST THAT THE ASSESSEES HAVE INVESTED ANY MONEY DURING THE PREVIOUS YEARS F ALLING WITHIN THE BLOCK PERIOD OF INVESTMENTS, THIS TRIBUNAL IS OF THE CONS IDERED OPINION, THAT NO ADDITION COULD BE MADE ON THE GROUND OF UNDISCLOSED INVESTMENTS MADE BY THE ASSESSEES IN M/S. NANDI INDUSTRIES AND M/S.NARM ADA INDUSTRIES. 10. IN VIEW OF THE ABOVE DISCUSSION AND RESPECTFU LLY FOLLOWING THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF U SHAKANT PATEL (SUPRA), WE DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF ALLEGED INVESTMENTS BY THE ASS ESSES IN M/S.NANDI INDUSTRIES AND M/S.NARMADA INDUSTRIES. 4.1. FURTHER, HE SUBMITTED THAT BY APPLYING THE RA TIO LAID DOWN BY THE ABOVE ORDER OF THE TRIBUNAL, THE ISSUE TO BE D ECIDED IN FAVOUR OF THE ASSESSEE SINCE THE ASSESSING OFFICER NOT ESTABLISHED THE FA CT THAT THE INVESTMENTS MADE BY THE ASSESSEE WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE FINANCIAL YEA RS COVERING THE BLOCK PERIOD. 5. THE DEPARTMENTAL REPRESENTATIVE(DR) SUBMITTED T HAT FACTS OF THE CASE BEFORE US ARE ENTIRELY DIFFERENT AS COMPARE D TO THE CASE LAW RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND IN THE PRESENT CASE, THE ASSESSEE HAS HIMSELF CONCEDED IN ITS STATEMENT BEFO RE THE DDIT(INVESTMENT) ON 1.6.1999 THAT THE ASSESSEE HAS NOT RE CORDED THE IMPUGNED AMOUNT OF RS.92,724 IN THE BOOKS OF ACCOUNT AN D NOR HAD 5 5 GIVEN ANY EXPLANATION FOR THE SOURCES OF INVESTMENT AN D THE EXPLANATION GIVEN AFTERWARD IS ONLY AS AN AFTER THOUGHT AND NO CR EDENCE COULD BE GIVEN FOR HIS ARGUMENT AND ALSO SUBMITTED THAT THE ORD ER RELIED BY THE ASSESSEE COUNSEL CITED SUPRA ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AT THE TIME OF ASSESSMENT THE ASSESSING OFFICER REFE RRED THE STATEMENT RECORDED FROM SHRI T. PRASAD, MANAGING PARTN ER OF M/S NARMADA INDUSTRIES BEFORE DDIT(INVESTIGATION) U/S 133 A ON 7.6.1999 SPECIFICALLY ON QUESTION NOS.5 AND 8 WHICH READ AS FOLLOWS: Q.5. I AM SHOWING A POCKET DIARY FOUND AND SEIZED D URING THE COURSE OF SEARCH ON 9-3-99 MARKED AS ANNEXURE AS/A/9. PLEASE GO THROUGH THE POCKET D IARY MARKED AS ANNEXURE AS/A/9 AND EXPLAIN THE CONTENTS? ANS. I HAVE GONE THROUGH THE POCKET DIARY MARKED AS ANNEXURE AS/A/9 FOUND AND SEIZED DURING THE COURSE OF SEARCH ON 9-3-99. THE BOOK CONTAINS THE DETAILS OF INVESTMENTS MADE BY THE PARTNERS OF M/S NANDI INDUSTRIES AND NARMADA INDUST RIES, AS FOLLOWS, AT THE TIME OF CONSTRUCTION/INSTALLATION. 1. A.SHANKARAIAH RS. 5,46,000 2. T.PRASAD RS. 10,41,00 0 3. E.SATISH KUMAR RS. 5,45,000 4. G.LAKSHMINARAYANA RS. 2,60,000 5. A.SUDHAKAR RS. 5,90,000 6. P.NARAENDER RS. 7,15,000 7. A.VISHNU RS. 6,98, 000 8. K.GOURISHAM RS. 6,00,000 THOUGH THE INVESTMENTS ARE WRITTEN IN THE NAMES OF ABOVE PERSONS ACTUAL INVESTMENTS ARE MADE IN THE NAME OF FAMILY MEMBERS OR THEMSELVES IN M/S NARMADA INDUSTRIES AND M/S NANDI INDUSTRIES. Q.8. I AM SHOWING YOU PAGE NO.1 TO 10 OF ANNEXURE AS/A/9 SEIZED DURING THE COURSE OF ON 9.3.1999. PLEASE EXPLAIN THE INVESTME NTS DISCLOSED BY YOU IN THE RETURNS OF INCOME AND ALSO THE UNACCOUNTED PORTION OF THE INVESTMENT. A. AS STATED EARLIER THIS BOOK CONTAINS THE DETAILS OF INVESTMENTS MADE BY THE PARTNERS OF M/S NARMADA INDUSTRIES AND M/S NANDI IN DUSTRIES. I WILL BE IN A POSITION TO EXPLAIN THE ACTUAL INVESTMENT AND THE A CCOUNTED INVESTMENT IN PERSONAL CASE AND ALSO IN THE CASE OF SHRI E. SUDHA KAR. IN THE CASE OF REMAINING PARTNERS I WILL BE IN A POSITION TO GIVE THE CORRECT ADDRESS OF ALL THE PARTNERS, WHO WILL FILE OR EXPLAIN THE SOURCE OF IN VESTMENT. AS FAR AS I AM CONCERNED I INVESTED 5,90,000 IN NARMADA AND NANDI INDUSTRIES AS FOLLOWS: A) M/S NARMADA INDUSTRIES RS.3,75,116/ IN THE NAME OF A. SUDHAKAR, HUF B) M/S NANDI INDUSTRIES RS.1,22,170/ IN THE NAME OF A. VIJAYA BHASKAR MY SON. 6 6 6.1. AS SEEN FROM THE ABOVE, THE ASSESSEE WAS ABLE TO EX PLAIN THE INVESTMENT OF RS.4,97,276 AS DISCLOSED IN THEIR RETUR N OF INCOME AND FOR BALANCE OF RS.92,724 ASSESSEE HAVE NO EXPLANATION AN D THE SAME WAS CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE. NOW, TH E CONTENTION OF THE ASSESSEE THAT INVESTMENT IS NOT MADE IN THE ASSESSMENT YEARS COVERING THE BLOCK PERIOD AS THE POCKET DI ARY DOES NOT CONTAIN THE DATE OF INVESTMENT. THIS ARGUMENT OF THE ASSESSEES COUNSEL HOLDS NO MERIT. THE SEIZED MATERIAL FOUND DURIN G THE COURSE OF SEARCH AT PAGE NOS.1 TO 10 OF ANNEXURE-AS/A/9 SEIZED DU RING THE COURSE OF SEARCH ACTION ON 19-3-1999 REFLECTS THIS INVESTMENT OF RS.5,90,000 IN M/S NANDI INDUSTRIES AND NARMADA INDUSTRIES DURING THE A SSESSMENT YEARS COVERING THE BLOCK PERIOD. THE ASSESSEE IS NOT ABLE TO SHOW ANY MATERIAL TO SUGGEST THAT THESE INVESTMENTS HAVE BEEN M ADE BY THE ASSESSEE NOT IN THE BLOCK PERIOD. THOUGH THERE IS NO DATE OF THE INVESTMENT MENTIONED IN THE POCKET DIARY, IT IS TO BE CONSIDERED THAT THE ENTIRE AMOUNT OF RS.5,90,000 MADE BY THE ASSESSEE AS AN INVESTMENT IN THE ABOVE CONCERNS DURING THE BLOCK PERIOD AS THE INVESTM ENT CORRESPONDINGLY REFLECTED IN THOSE CONCERNS DURING THE FIN ANCIAL YEARS COVERING THE BLOCK PERIOD. SEC.69 REQUIRES THAT WHEN T HESE INVESTMENTS FOUND THAT MADE OUTSIDE THE BOOKS OF ACCOUNT AND ASSESSEE O FFERS NO EXPLANATION REGARDING THE SOURCE OF INVESTMENT, THE ASSE SSING OFFICER IS ENTITLED TO TREAT THIS AMOUNT AS UNEXPLAINED INCOME OF THE ASSESSEE. THE ASSESSEE WAS ABLE TO EXPLAIN PART OF THE INVESTMENT T O THE TUNE OF RS.4,97,276 OUT OF RS.5,90,000 THAT DOES NOT ITSELF MEA N THAT THE ENTIRE INVESTMENT HAS TO BE CONSIDERED AS EXPLAINED. EVEN LAPSE OF TIME OR INABILITY OF THE ASSESSEE COULD NOT MAKE THE UNEXPLAINED INVESTMENT AS AN EXPLAINED ONE. SINCE NO EXPLANATION WAS OFFERED I N RESPECT OF RS.92,276 IN OUR OPINION, THE LOWER AUTHORITIES WERE JUSTIFIED IN COMING TO THE CONCLUSION THAT THE SAID INVESTMENT IS UNEXPLAI NED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A) ON THIS ISSUE AND THE SAME IS CONFIRMED. 7 7 7. IN GROUND NO.3 THE ASSESSEE RAISED THE GROUND THAT CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.3,12,520 AS UN EXPLAINED OPENING CAPITAL IN THE PARALLEL BOOKS BY COMPARING WITH REGULA R BOOKS IS AGAINST THE LAW AND NATURAL JUSTICE. 8. THE BRIEF FACTS OF THE CASE ARE THAT IN THE FIRST R OUND , THE CIT(A) WHILE EXAMINING THE SEIZED MATERIAL MARKED AS AS/A/3 FOUND THAT THERE WAS AN OPENING BALANCE OF RS.15,86,745 IN T HE PARALLEL BOOKS MAINTAINED BY THE ASSESSEE FOR THE PERIOD FROM 19-10-19 97 TO 30-10- 1998 FOR WHICH HE GAVE A FINDING THAT EVEN AFTER PRO VIDING FOR THE AMOUNTS CLAIMED TO BE AVAILABLE WITH THE ASSESSEE VIZ.R S.7,64,000 FROM THE CHIT BID AMOUNT RECEIVED AND RS.5,10,000 AVA ILABLE AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE AS CONTENDED BY HIM , HE STILL FOUND THAT THERE WAS NO PROPER AND CONVINCING EVIDENCE FOR THE BALANCE AMOUNT RS.3,12,520 AND THEREFORE TREATED IT UNDISCLOSE D ASSESSABLE INCOME IN THE HANDS OF THE ASSESSEE THE BLOCK ASSESSMENT PERIO D 1989- 90 TO 1999-2000. AS THIS ISSUE WAS NOT EXAMINED BY THE ASSESSING OFFICER THE HONOURABLE ITAT SET ASIDE THE ISSUE, DIRECTING THE ASSESSING OFFICER TO EXAMINING THE AFRESH AFTER GIVING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN COMPLIANCE WITH THE DIRE CTIONS OF THE DIRECTIONS OF THE HONOURABLE ITAT A SHOW CAUSE LETTER DT. 28.1.2005 WAS ISSUED TO THE ASSESSEE ASKING HIM TO ADDUCE ANY EXPLANATION OR PRODUCE ANY EVIDENCE OR DOCUMENTARY TO PROVE THE SAME OR OTHE RWISE TREATED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. THE ASSESSEE IN HIS REPLY CONTENDED THAT THE PARALLEL BOOKS WERE MAINTAINED ON DIWALI ENDING ACCOUNTING YEAR BASIS AND WITHOUT CONSIDERING THE DEPRECIA TION OR SUCH OTHER ALLOWANCES NORMALLY DEBITED TO PROFIT & LOSS WHICH ARE CAPABLE OR REDUCING THE CAPITAL BALANCE THAN THE BALANCE FOUND IN THE PARALLEL OR PERSONAL BOOKS MAINTAINED. NO STATEMENT OF ACCOUNT OR THE WORKING, TO PROVE THAT THE OPENING CAPITAL BALANCE FOUND IN THE SAID PARALLEL BOOKS 8 8 MARKED AS AS/A/3, WAS FILED TO SHOW THAT THE OPENING C APITAL BALANCE WAS CAPABLE OF BEING EXPLAINED. NO CLOSING CAPITAL BALA NCE OF THE PREVIOUS YEAR OR ANY SUCH OTHER STATEMENT WAS FURNISHED. IT WAS STATED BEFORE THE ASSESSING OFFICER THAT THERE IS BOUND TO BE A LOT OF DIFFERENCE BETWEEN THE CAPITAL BALANCE IN THE REGULAR BOOKS OF ACCOUNTS AND THE CAPITAL BALANCE IN THE PARALLEL BOOKS OF ACCOUNT , MORE SO WHEN THE SOURCES FOR OR THE EXPLANATION AS TO THE OPENING CAP ITAL BALANCE IN THE PARALLEL BOOKS WAS ASKED TO BE FURNISHED WITH EVIDE NCE. AS THE ASSESSEE FAILED TO PROVE THE SOURCES FOR THE OPENING CAPIT AL BALANCE MAINTAINED OUTSIDE THE REGULAR BOOKS OF ACCOUNT, WHICH WOULD NOT HAVE SEEN UNEARTHED OTHERWISE BY SUCH ACTION, THE SAME WAS TREA TED AS UNDISCLOSED INCOME OF THE ASSESSEE. 9. THE AR FILED A COPY OF RECONCILIATION STATEMENT ST ATING THAT THE OPENING BALANCE SHOWN AS AN AMOUNT OF RS.15,86,745 AS ON DIWALI 1997. THE REGULAR BOOKS ARE FROM APRIL TO MARCH. TH E CIT(A) HAS CONSIDERED CREDIT FOR A CHIT AMOUNTING TO RS.7,64,000 AN D RS.5,10,000 ADMITTED BY THE ASSESSEE IN THE RETURNS FILED, AND TAXE D ONLY THE BALANCE AMOUNT OF RS.3,12,520/- AFTER GIVING DUE CREDI T FOR ALL THE EXPLAINED SOURCES THE BALANCE AMOUNT OF RS.3,12,520 REMA INED UNEXPLAINED AND THE SAME WAS ADDED TO THE UNDISCLOSED IN COME OF THE ASSESSEE. HE SUBMITTED THAT THERE WAS ONLY A DIFFERENT OF RS.3,183 AS COMPARED TO THE BALANCE IN REGULAR BOOKS AND PARALLEL BOOKS. HE PRAYED TO DELETE THE ADDITIONS. 10. THE DR SUBMITTED THAT THE ENTIRE FACTS ARE CONSIDE RED BY THE CIT(A) AND WHATEVER CREDIT TO BE GIVEN WHICH WERE ALR EADY GIVEN AND PRAYED THAT THE BALANCE ADDITION AT RS.3,12,520 TO BE SUSTAINED. 9 9 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE RECORDS WHICH ARE REPRODUCED HEREIN BELOW: CREDIT BALANCES DECLARED IN REGULAR RETURNS FOR THE ASSESSMENT YEARS 1998-99 A. SUDHAKAR CAPITAL ACCOUNT 5,00,000 CURRENT ACCOUNT 2,68,831 A. VIDHYASAGAR CAPITAL ACCOUNT (FIRST SON) 2 ,00,000 A. VIJAYA BHASKAR CAPITAL ACCOUNT (SECOND SON) 1,00,000 CURRENT ACCOUNT 88,179 11,57,010 LESS DEBIT BALANCE IN A. VIDHYASAGAR CURRENT ACCOUNT 83,448 10,73,562 LOANS TAKEN FROM : SMT. T. JAMUNA RS.2,60,000 SMT. ARUNA 50,000 SRI N. RAMESHAM 1,00,000 SRI V. RAMA KISHTAIAH 1,00,000 5,10,000 INCOME FOR THE PERIOD DIWALI 97 TO 15,8 3,562 DIWALI 98 CREDITED AMOUNTS CREDITED 2,76,500 30.10.98 OUT OF WITHDRAWALS OF RS.10,23,302 DURING THE YEAR 2,00,000 ----------- 20,60,062 LESS WITHDRAWALS DURING THE YEAR 10,23,302 ----------- CLOSING BALANCE AS PER PARALLEL BOOKS AS ON DIWALI 98 10,36,760 ======= 11.1. AS NOTED BY THE CIT(A), FROM EXPLANATION G IVEN BY THE ASSESSEE, IT MAY BE SEEN THAT THE ASSESSEE TAKES CREDIT OF HIS CAPITAL AND CURRENT ACCOUNT, SONS A CAPITAL AND CURRENT ACCOUNT BAL ANCES WITH M/S OPMRM IN WHICH THE ASSESSEE AND HIS TWO SONS ARE PARTNE RS AS WELL 10 10 AS THE LOANS TAKEN FROM 4 PARTIES WHICH TOTALS TO RS.5,10 ,000 AND INCOME FOR THE PERIOD ENDING DIWALI 97 AND DIWALI 98 , FIRST OF ALL, WHAT HAS BEEN MENTIONED IN THE SEIZED ITEM WAS THE TRANSACTI ON OUTSIDE THE BOOKS OF ACCOUNT AND THEREFORE TO EXPLAIN THE SOURCE FOR A TRANSACTION DONE OUTSIDE THE BOOKS, THE ASSESSEE CANNOT RELY ON THE CRE DIT BALANCE AVAILABLE WITH A FIRM WHOSE TRANSACTIONS WERE DISCLOSED T O THE DEPARTMENT. HOWEVER, LOANS TAKEN FROM 4 PARTIES TOTAL ING RS.5,10,000 WAS ADMITTED BY THE ASSESSEE IN THE RETURN FILED AND THE REFORE CREDITS TO BE GIVEN FOR THIS SUM. ALSO THE ASSESSEE HAS CREDITED RS.2, 76,500 ON 7.10.98 AND RS.2 LAKHS ON 30.10.98 AND SINCE THE ASSESSEE H AS WITHDRAWN A SUM OF RS.10,22,467 DURING THE PERIOD 19 .12.97 TO 18.10.98, THERE EXISTS SOURCES FOR CREDIT OF RS.2,76,500 ON 7.10.98 AND RS.2 LAKHS ON 30.10.98. THEREFORE THE ONLY AMOUNT FO R WHICH SOURCE WAS NOT AVAILABLE WAS THE OPENING BALANCE OF RS.15,86,7 45. THE ASSESSEE HAD ALREADY EXPLAINED THAT HE HAS TAKEN A CHIT OF RS.7,64,000 AND IF IT IS TAKEN INTO ACCOUNT STILL THE ASSESSEE HAS TO EX PLAIN THE BALANCE AMOUNT OF RS.8,22,520. AFTER GIVING CREDIT FO R RS.5,10,000 ADMITTED BY THE ASSESSEE IN THE RETURN FILED STILL THE ASSESSEE HAS NOT EXPLAINED THE BALANCE AMOUNT OF RS.3,12,520. SINCE TH E EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE ADDITIONS TO BE SUSTAINED. AS SEEN FROM THE ABOVE STATEMENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE ASSESSEE UNABLE TO RECONCILE THE DIFFERENCE BETWEEN THE REGULAR BOOK AND PARALLEL BOOK. IN T HE ABSENCE OF SATISFACTORY EXPLANATION GIVEN BY THE ASSESSEE, THE DIFFE RENCE BETWEEN THE REGULAR BOOK AND PARALLEL BOOK SHOULD BE CONSIDERE D AS THE UNDISCLOSED INCOME OF THE ASSESSEE. ACCORDING TO THE LEARNE D COUNSEL OF THE ASSESSEE ON RECONCILIATION THE BALANCE IN REGULAR BOO KS IS WORKS OUT AS 15,83,562 AND THE BALANCE AT PARALLEL BOOKS AS PER SE IZED MATERIAL AS/A3/6 AT RS.15,86,745 AND THE DIFFERENCE IS ONLY RS.3 ,183/-. WE HAVE CAREFULLY GONE THROUGH THE RECONCILIATION STATEMEN T FURNISHED BY THE ASSESSEE. WE ARE NOT ABLE TO SATISFIED WITH THE EXPL ANATION GIVEN BY 11 11 THE ASSESSEE. IT IS SELF SERVING DOCUMENTS. NOT SUPPORTED BY ANY EVIDENCE. IN OUR OPINION, CIT(A) HAS TAKEN CORRECT VI EW AND THE SAME HAS TO BE CONFIRMED. THIS GROUND OF THE ASSESSEE DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.4/HYD/2005 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 11.2.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED 11 TH FEBRUARY,2010 COPY FORWARDED TO: 1. SHRI N. NAGARAJU, N.S.R. ANJANMEYULU & CO., ADVO CATE & TAX CONSULTANTS, FLAT NO.12, MANOHAR APARTMENTS, VIDHYANAG AR, HYDERABAD-44. 2. 1. ITO, WARD 10(3), HYDERABAD 2. THE ACIT, CIRCLE 1, KARIMNAGAR 3. CIT(A)-III, VI, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP