M/s. Chandrahas & Co., Mangalore V. ACIT, Mangalore

ITSSA 60/BANG/2006

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2621 (ITAT-BANGALORE)
• Duration Of Justice: 15 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-09-2021
• Assessment Year: misc
• Appeal Filed On: 21-06-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DILIP REDDY S T AN D ING
• Keywords: Business income; Opportunity of being heard; Bad and doubtful debts; Block assessment; Revised return; Set aside
• Section: 80C; 143(3); 264; 139(4); 158BC; 158B(a); 113; 13; 158BFA; 22; 132; 28; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER IT (SS) A NO . 60/ BANG / 2006 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1190 TO 6.9.2000 CHANDRAHAS & CO., ROOM NO.3, SOUTH WHARF BUNDER, MANGALORE. P AN: AADFC 41 80C VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE. APPELLANT RESPONDENT IT (SS) A NO . 6 3 / BANG / 2006 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1190 TO 6.9.2000 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE. VS. CHANDRAHAS & CO., ROOM NO.3, SOUTH WHARF BUNDER, MANGALORE. PAN: AADFC 4180C APPELLANT RESPONDENT APPELLANT BY : SHRI SRINIVAS KAMATH, CA RESPO NDENT BY : SHRI DILIP REDDY, S T AN D ING COUNSEL. DATE OF HEARING : 30 . 0 9 .2021 DATE OF PRONOUNCEMENT : 27 . 1 0 .202 1 IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 2 OF 29 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS BY THE REVENUE AND ASSESSE E DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-VI, BANGALORE DATED 11.4.2006 FOR THE ASSESSMENT FOR THE BLOCK PERIOD 1.4.1190 TO 6.9 .2000. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE AUTHORITIES BELOW IS OPPOSED T O LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) SHOULD HAVE QUASHED THE ASSES SMENT ORDER ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING SEARCH AS INVALID. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) MUST HAVE CONSIDERED UNRECOVERED ADVANCES FO R THE PURCHASE OF FISH AS EXPENDITURE AND MUST HAVE ALLOW ED THE SAME IN FULL. 4. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) MUST HAVE ALLOWED THE CLAIM OF 60% OUT OF THE TOTAL ADVANCES AS 'BUSINESS LOSS' SINCE IT IS IRRECOVERABLE. 5. THE LEARNED CIT(A) ERRED IN NOT GIVING FULL EFFE CT TO THE SWORN STATEMENT AFTER HOLDING THAT ' IF THE DEPARTMENT BELIEVES ONE PART, IT SHOULD BELIEVE THE SECOND PART ALSO '. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT DELETING THE ENTIRE BALANCES AT BANK AMOUNTING TO RS.26,34,333. 7. THE LEARNED CIT(A) ERRED IN HOLDING THAT ONCE A RETURN HAS BEEN FILED DISCLOSING CERTAIN INCOME AND PAID TAXES THEREON, CANNOT BE ALLOWED TO BE RETRACTED FROM THE SAME. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 3 OF 29 8. THE LEARNED CIT(A) ERRED IN NOT CONDONING THE EN TIRE DELAY IN FILING BLOCK RETURN FOR THE PURPOSE OF INT EREST U/S 158BFA. 9. THE APPELLANT CRAVES FOR LEAVE TO ADD, TO DELETE FROM, OR TO AMEND THE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDIT IONAL GROUNDS:- 1. THE ORDER OF ASSESSMENT MADE ON THE APPELLANT I N THE STATUS OF 'INDIVIDUAL' U/S.158BC OF THE ACT, IS BAD IN LAW AS THE WARRANT OF SEARCH WAS NOT IN INDIVIDUAL NAME TO ASSUME THAT SEARCH WAS INITIATED INDIVIDUALLY TO MAKE AN A SSESSMENT U/S.158BC BUT IN THE JOINT NAMES AND THEREFORE, THE ASSESSMENT OUGHT TO HAVE BEEN MADE IN THE STATUS OF 'AOP' HAVING REGARD TO THE RATIO OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE P.J.KUMAR [SUPRA] AND THE DECISION OF THE HON'BLE ITAT, BANGALORE 'B' BENCH IN THE CASE OF SRI CHANDRA REDDY AND DR. K.PRAVEEN KUMAR & OTHERS [SUPRA] . 2. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED . 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND F ACTS OF THE CASE. 2. EXCLUSION OF INCOME OF AY 2000-01: RS. 96,105: 2.1 THE LEARNED CIT(A) HAS ERRED IN EXCLUDING THE INCOME OF RS. 96,105/- FOR THE ASST. YEAR 2000-01 O N THE BASIS OF DECISION THE DECISION OF ITAT, BANGALORE, IN THE CASE OF SMT. SUBHA PRASAD HOLDING THAT THE RETURN W AS FILED WITHIN THE TIME ALLOWED UNDER SEC. 139 (4). 2.2 THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE PROVISIONS OF SEC. 158 BB (CA) WHEREIN IT IS STIPUL ATED THAT IN A CASE WHERE THE DUE DATE FOR FILING OF RET URN OF INCOME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEE N IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 4 OF 29 FILED, THE INCOME TO BE REDUCED FROM BLOCK ASSESSME NT IS NIL. 3. DELETION OF SURCHARGE: 3.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT EVEN THOUGH THE PROVISO WAS INTRODUCED WITH EFFECT FROM 1.6.2002, THE SURCHARGE LIABLE TO BE PAID BY A N ASSESSEE WOULD BE APPLICABLE FROM THE INCEPTION OF THE PROVISIONS FOR BLOCK ASSESSMENTS. 3.2 THE CIT(A) ERRED IN NOT FOLLOWING THE DECISION OF SUPREME COURT IN THE CASE OF K. SRINIVASN (83 ITR 351) WHEREIN IT HAS BEEN HELD THA T THE INCOME-TAX INCLUDES SURCHARGE AS WELL. THE PROVISIONS OF SECTION 113 AS CLARIFIED BY THE CBDT IN CIRCULAR NO.717 DATED 14.08.1995 HAS NOT BEEN CONSIDERED. 3.3. THE LEARNED CIT(A) FAILED TO TAKE INTO CONSIDERATION SUBSECTION(2) OF SECTION 158BFA OF THE ACT WHICH CLEARLY CONTEMPLATED THAT SECTION_113 OF THE ACT WOULD BE APPLICABLE TO THE BLOCK PERIOD IRRESPECTIVE OF THE PREVIOUS YEAR OR YEARS TO WHICH SUCH INCOME RELATES AND IRRESPECTIVE OF THE FACT WHETHER REGULAR ASSESSMENT FOR ANY ONE OR MORE OF THE RELEVANT ASSESSMENT YEARS IS PENDING OR NOT. 3.4. THE LEARNED CIT(A) ERRED IN TAKING THE DATE OF SEARCH I.E. 06.09.2000 AS THE BENCHMARK FOR THE PURPOSE OF LEVYING SURCHARGE IN THE CASE OF THE ASSESSEE. THE LEVY OF TAX AND SURCHARGE WAS GOVERNE D BY THE PROVISIONS OF THE INCOME-TAX ACT AND THAT OF THE FINANCE ACT WHICH WAS NOT EXAMINED IN THE PROPER PERSPECTIVE. 3.5. THE LEARNED CIT(A) FAILED TO SEE THAT THE PROVISO INSERTED BY THE FINANCE ACT OF 2002 WITH EFFECT FROM 01.06.2002 TO SECTION 113 ONLY CLARIFIE D THE LEGISLATIVE INTENT REGARDING THE ADOPTION OF TH E APPROPRIATE YEARS RATE OF SURCHARGE FALLING WITHIN THE BLOCK PERIOD. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 5 OF 29 4. DELETION OF AMOUNT RECEIVABLE ON ACCOUNT OF FISH SALES: RS 21,24,326: 4.1 THE CIT(A) HAS ERRED IN DELETING THE AMOUNT REC EIVABLE BY THE ASSESSEE ON ACCOUNT OF FISH SALES EVEN THOUG H THE SAME WAS CLEARLY MENTIONED IN SEIZED BOOKS AS UNDER : EX.NO. CHCS 2 RS. 10,85,225 CHCS 42 RS. 10,39,101 TOTAL: RS.21,24,326 4.2 THE CIT(A) HAS ERRED IN NOT COMPUTING THE PROFI T ON SALE OF FISH, IN SPITE OF HOLDING THAT ONLY PROFIT PORTION ON ACCOUNT OF SALE OF FISH SHOULD HAVE BEEN ASSESSE D. 5. AMOUNTS DUE TO PURSE-SEIN BOATS OWNERS RS. 11,57,000/-. 5.1 THE LEARNED CIT(A) ERRED IN ALLOWED THE ASSESS EE'S CLAIM FOR LIABILITIES AMOUNTING TO RS. 11.57 LAKHS ACCEPTING THE ASSESSEE'S CLAIM THAT THE AMOUNTS ARE SHOWN IN SEIZED MATERIAL CH/CS/1. THE LEARNED CIT(A) FAILED TO TAKE NOTE OF THE FACT THAT THE ASSESSEE IS NOT FULLY DISCLOSING THE INCOME EARNED ON AUCTION SALES AND ALSO INCOME EARNED BY PURCHASE AND SALE OF RAW FISH. 5.2 THE LEARNED CIT(A) ERRED IN ALLOWING THIS CLAI M WITHOUT COMPUTING INCOME FROM PURCHASE AND SALE OF FISH. 6. PRIOR PERIOD ADVANCES: A. CANOE BOAT ADVANCES: RS. 7,53,092 B. PURSE-SEIN BOAT ADVANCES: RS. 4,16,461 6.1 THE CIT(A) HAS ERRED IN DELETING A PORTION OF THE ADVANCES MADE TO THE CANOE BOAT OWNERS AMOUNTING TO RS. 7.5 LAKHS AND TO PURSE-SEIN BOAT OWNERS AMOUNTING TO RS. 4.16 LAKHS ON THE GROUND THAT THES E IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 6 OF 29 ADVANCES WERE MADE PRIOR TO THE COMMENCEMENT OF THE BLOCK PERIOD I.E., 1-4-1990 TO 06-09-2000. 6.2 THE LEARNED CIT(A) ERRED IN NOT MENTIONING THE SEIZED MATERIAL, BASED ON WHICH THE AMOUNT OF PRIOR PERIOD ADVANCES HAVE BEEN ARRIVED AT. 6.3 THE CIT (A) FAILED TO TAKE NOTE OF THE ADVANCES AS PER SEIZED BOOK A/BB-1, WHICH IS AS UNDER: CANOE BOAT ADVANCES - RS. 7,53,092: 1. SAGAR KIRAN RS. 1,50,000 2. SRIRAMA, KODIKAL RS. 1,00,000 3. MEGHADOOT (KAMAT) ULLAL RS. 1,10,000 4. MAHALAKSHMI BENGERE RS. 20,004 5. MAHALAKSHMI FUND BOLOOR RS. 42,000 6. CHAITANYA FUND, ULLAL RS. 1,31,048 7. SRI ANJENEYA BENGERE RS. 2,00,000 6.4 THE CIT(A) HAS ERRED IN NOT TAKING NOTE OF THE FACT THAT SEIZED BOOK A/BB-1, WHICH SHOWS THE AMOUNT DUE UNDER CANOE BOAT ADVANCES, MENTIONS THE ADVANCES AS 'OLD' OR 'STARTING OLD' AND IN NONE OF THE ENTRIES, PERIOD PRIOR TO THE COMMENCEMENT OF BLOCK PERIOD, I .E. 1.4.90, IS MENTIONED. 6.5 THE CIT(A) ALSO ERRED IN NOT CONSIDERING THE EN TRIES IN SEIZED BOOK CHCS-137 REGARDING PRIOR PERIOD ADVANCES IN RESPECT OF PURSE-SEIN BOAT ADVANCES. TH E ENTRIES SHOW THE STARTING DATE AS 1.9.90 OR 2.9.90, WHICH FALLS WITHIN THE BLOCK PERIOD COMMENCING ON 1.4.90, AND THEREFORE CANNOT BE CONSIDERED AS PRIOR PERIOD ADVANCES. 6.6 THE CIT(A) ERRED IN NOT TAKING NOTE OF THE FACT THAT THERE IS VARIATION IN THE AMOUNT SHOWN AS ADVANCED AS ON 1.9.90, AND THE AMOUNT CLAIMED AS PRIOR PERIOD ADVANCES AS SHOWN BELOW: IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 7 OF 29 CHCS - 137 ANJANEYA 10,000 1.9.90 43,945 JALA JYOTHI 49,305 1.9.90 7,320 JALA SOWGANDHI 35,000 1.9.90 30,925 JALA MANIKYA 50,000 1.9.90 22,560 JALA RAJ 10,155 1.9.90 14,525 HITHARAJ 34,712 2.9.90 24,450 LAXMINARAYANA 15,928 1.9.90 49,350 RAMANJENYA 10,000 1.9.90 18,590 SAGAR DEEP 37,121 1.9.90 24,675 SUVARNAKIRAN 10,000 1.9.90 7,990 S K FISHERIES 5,000 2.9.90 1,380 UDAYA RASHMI 25,000 1.9.90 20,680 UPKAR 20,000 2.9.90 3,645 CHANDRAKIRAN 10,000 1.9.90 25,100 VISHVA INDRA 49,000 1.9.90 12,180 SUNDER ENTERPRISES 21,240 1.9.90 7,560 GANGAJENYA 8,000 1.9.90 2,000 HRF 16.000 1.9.90 15,040 TOTAL 4,16,461 3,31,915 7 LIABILITIES FOR PURCHASES NOT PAID 7.1 THE CIT (A) ERRED IN--ALLOWING ASSESSEE'S CLAIM OF LIABILITY FOR PURCHASES NOT PAID AMOUNTING TO RS.3. 87 LAKHS. 7.2 THE LEARNED CIT (A) ERRED IN ALLOWING THIS NE W CLAIM WHICH WAS NOT MADE BEFORE THE ASSESSING OFFICER. 8. BAD DEBTS: A. CANOE BOAT ADVANCES : RS. 24,74,076 IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 8 OF 29 B. PURSE-SEIN BOAT ADVANCES: RS.7,44,017 8.1 THE CIT(A) HAS ERRED IN ALLOWING THE BAD DEBT S CLAIMED BY THE ASSESSEE IN RESPECT OF CANOE BOAT ADVANCES A T 40% OF THE AMOUNT RECEIVABLE, AND AT RS.7,44,017 IN RES PECT OF PURSE-SEIN BOAT ADVANCES, WITHOUT DISCUSSING THE ADMISSIBILITY OF THE CLAIM UNDER SEC. 361)(VII) AND 36 (2) OF THE I T ACT. 8.2. THE LEARNED CIT (A) FAILED TO CONSIDER THE F OLLOWING: A. THE BAD DEBTS CLAIMED HAS NOT BEEN WRITTEN OFF I N THE BOOKS OF THE ASSESSEE; B. THE DEBT HAS NOT BEEN TAKEN INTO ACCOUNT IN COMP UTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT IS WRITTEN OFF OR IN ANY EA RLIER PREVIOUS YEAR OR REPRESENTS MONEY LENT IN THE ORDIN ARY COURSE OF BUSINESS OF BANKING OR MONEY-LENDING CARR IED ON BY THE ASSESSEE; C. THE ADVANCES MADE BY THE ASSESSEE IS TOWARDS PUR CHASE OF FISH, TO ENSURE THAT THE RECIPIENT SELLS FISH ON LY TO THE ASSESSEE, AND THIS CANNOT BE CONSIDERED AS ENGAGING IN MONEY LENDING OR BANKING ACTIVITY. 9. THE APPELLANT CRAVES FOR PERMISSION TO ADD OR DECLARE THE GROUNDS OF APPEAL AT THE TIME OF HEARING OF THE CAS E. 10. THE APPELLANT PRAYS THAT THE ORDERS OF LEARNED CIT (A) ON THE ABOVE POINTS MAY PLEASE BE SET ASIDE AND THE OR DERS OF ASSESSING OFFICER BE RESTORED. ASSESSEES APPEAL [IT(SS)A NO.60/B/2006] 5. THE ASSESSEE FIRM IS CARRYING ON BUSINESS IN RAW FISH AND ALSO DOING COMMISSION BUSINESS. THERE WAS A SEARCH ACTION IN THE BUSINESS PREMISES AS WELL AS RESIDENTIAL PREMISES OF ASSESSEE, PREMIS ES OF PARTNERS OF ASSESSEE SHRI CHANDRAHAS AND SHRI BHARAT BHUSHAN ON 6.9.2000. DURING THE COURSE OF SEARCH, INCRIMINATING MATERIAL WAS FO UND REGARDING IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 9 OF 29 UNACCOUNTED COMMISSION EARNED THROUGH BOAT OWNERS A ND ALSO COMMISSION EARNED IN RESPECT OF AUCTION MADE FOR OU TSIDE PARTIES. THE DETAILS OF ADVANCE GIVEN TO VARIOUS BOAT OWNERS WER E ALSO FOUND AND SEIZED. IN THE RESIDENTIAL PREMISES OF BHARAT BHUS HAN, ONE DIARY MARKED AS EX A/BB/1 CONTAINING DETAILS OF ADVANCES GIVEN T O VARIOUS CANOE BOAT OWNERS FOR PURCHASE OF FISH RELATING TO THE FIRM WA S FOUND AND SEIZED. IN THE BUSINESS PREMISES OF ASSESSEE, ONE LEDGER MARKE D CHCS-I CONTAINING DETAILS OF ADVANCES GIVEN TO PORCEINE BOAT OWNERS O N LEFT HAND SIDE AND AMOUNT PAYABLE TO THEM AT THE RIGHT HAND SIDE WAS F OUND AND SEIZED. CASH DEPOSIT OF RS.26,07,363 IN SB A/C NO.2565 OF MAHALAXMI CO-OP. BANK STANDING IN THE NAME OF SMT. DAYA C. MENDON WA S FOUND AND SEIZED AND THERE WAS PHYSICAL CASH OF RS.26,979 AT THE BU SINESS PREMISES OF ASSESSEE FOUND AND SEIZED. CONSEQUENTLY, ASSESSMEN T U/S. 158BC R.W.S. 143(3) OF THE ACT WAS FRAMED ON 27.9.2002 FOR THE B LOCK PERIOD 1.4.1990 TO 6.9.2000 DETERMINING TOTAL INCOME OF RS.1,53,40,340 AS FOLLOWS:- CASH FOUND : RS.26,34,333 ADVANCE MADE TO CANOE BOATS : RS.69,38,192 ADVANCE MADE TO PORCEINE BOAT : RS.35,47,380 AMOUNT RECEIVABLE ON ACCOUNT OF FISH SALES AS ON THE DATE OF SEARCH : RS.21,24,326 UNDISCLOSED INCOME FOR AY 2000-01: RS. 96,105 ------------------ RS.1,53,40,336 R/OFF RS.1,53,40,340 ------------------ 6. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) HAS GIVEN PARTIAL RELIEF. NOW THE ASSESSEE IS IN APPEAL BEFORE US WITH REGARD TO SUSTENANCE OF CERTAIN ADDI TIONS AND THE DEPARTMENT IS ALSO IN APPEAL BEFORE US FOR DELETING THE ADDITIONS. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 10 OF 29 IT(SS)A NO.60/BANG/2006 7. GROUND NOS.1 & 2 IN THE MAIN GROUNDS ARE NOT PRE SSED, ACCORDINGLY THE SAME ARE DISMISSED AS NOT PRESSED. 8. GROUND NOS.3 TO 5 ARE WITH REGARD TO NON-GRANTIN G OF DEDUCTION OF 60% OUT OF TOTAL ADVANCES AS BUSINESS LOSS SINCE IT IS IRRECOVERABLE. THE ASSESSEE ADVANCED A SUM OF RS.1,04,85,572 AS FOLLOW S:- ADVANCE AMOUNT ON CANOE BOATS : 69,38,192 ADVANCE MADE TO PURSE-SEIN BOATS : 35,47,380 -------------- 104,85,572 -------------- 9. THE ASSESSEE CLAIMED BUSINESS LOSS @ 60% OF THE ABOVE AMOUNT VIDE STATEMENT RECORDED U/S. 132(4) OF THE ACT ON 1 3.10.2000 IN ANSWER TO Q. 11 & 17. HOWEVER, THE AO HAS NOT ALLOWED DEDUCT ION ON THIS COUNT. ON APPEAL, THE CIT(APPEALS) HAS GIVEN DEDUCTION AS FOL LOWS:- ADDITION BY AO RELIEF BY CIT(A) ADDITION SUSTAINED BY CIT(A) ADVANCE TO CANOE BOAT S 69,38,192 24,74,076 (SIC) 37,11,116 ADVANCE TO PURSE- SEIN BOATS 35,47,380 31,64,122 7,99,258 1 04,85,572 5 6,38,198 4 5,10,374 10. AGAINST SUSTAINING ADDITION, THE ASSESSEE IS IN APPEAL AND AGAINST DELETION THE REVENUE IS IN APPEAL BEFORE US. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 11 OF 29 11. NOW THE CLAIM OF THE LD. AR IS THAT THE ASSESSE E HAS DISCLOSED ONLY 40% OF ADVANCE OUTSTANDING AS UNDISCLOSED INCOME AN D CLAIMED BALANCE 60% OF THE ADVANCES AS BAD DEBT. THE CLAIM OF ASSE SSEE WAS NOT ALLOWED U/S. 36(1)(VII) R.W.S. 36(2) OF THE ACT. HOWEVER, IT WAS ALLOWED BUSINESS LOSS U/S. 28 AS THE ASSESSEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT AND TO BE ALLOWED AS BUSINESS DEBT. ACCORDING TO THE L D. AR, THE LOWER AUTHORITIES ACCEPTED THE STATEMENT RECORDED U/S. 13 2(4) OF THE ACT AND IT IS NOTHING BUT CHERRY PICKING AND THE AO CONSIDERED ON LY THE FACTS WHICH IS FAVOURABLE TO THE DEPARTMENT WHICH IS IMPROPER. H E FURTHER SUBMITTED THAT THE TOTAL ADVANCE IS RS.104,85,472 OUT OF WHICH PRI OR PERIOD EXPENSES OF RS.11,69,000 IS NOT COVERED UNDER THE BLOCK PERIOD AND THE NET ADVANCE IS RS.93,16,572 ONLY. THE ASSESSEE OFFERED 40% OF RS.9 3,16,572 @ RS.37,26,628 AS INCOME OF THE ASSESSEE. AS AGAINST THIS, THE CIT(APPEALS) SUSTAINED RS. 45,10,374 WHICH IS TO BE CORRECTED. THE LD. AR RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF BHARAT BHUSHAN IN IT(SS)A NO.12/BANG/2010 DATED 30.4.2020 WHEREIN IT WAS HELD AS UNDER:- 5. THE NEXT ISSUE ON MERIT IS RAISED BY THE ASSES SEE AS PER GROUND NO. 7 IN WHICH THIS IS A GRIEVANCE OF THE AS SESSEE THAT ASSESSING OF RS. 27,64,604/- BEING BUSINESS ADVANCE MADE BY THE ASSESSEE IN ANUBHAV PLANTATIONS AND VGP PLANTATIONS AS UNDISCLOSED INCOME OF BLOCK PERIOD IS NOT JUSTIFIED . AWE FIND THAT IN PARAS 7 TO 11 OF HIS ORDER, LEARNED CIT (A) HAS NOTED ABOUT VARIOUS ARGUMENTS OF THE ASSESSEE AGAINST THIS ADDI TION OF RS. 27,64,604/- BEING BUSINESS ADVANCE MADE BY THE ASSE SSEE IN ANUBHAV PLANTATIONS AND VGP PLANTATIONS. THE MAIN A RGUMENT IS THIS THAT THESE ARE BUSINESS ADVANCES AND SINCE THE SE ARE NOT RECOVERABLE, IT IS ALLOWABLE AS BUSINESS LOSS AGAIN ST THIS VERY ADDITION MADE BY THE AO. THEREAFTER IN PARAS 13 AND 14 OF HIS ORDER, LEARNED CIT (A) HAS REJECTED THIS ARGUMENT B Y HOLDING THAT ADDITION HAS TO BE MADE BECAUSE SOURCE OF SUCH ADVA NCES COULD NOT BE EXPLAINED BY THE ASSESSEE AND REGARDING CLAI M OF IT AS BUSINESS LOSS, NO SPECIFIC FINDING IS GIVEN AND THI S CLAIM WAS REJECTED BY SAYING THAT BAD DEBTS ARE ALLOWABLE U/S 36 (1) (VII) ON ACTUAL WRITE OFF AND IT CAN BE CLAIMED BY THE FIRM M/S * CO. AND IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 12 OF 29 NOT BY INDIVIDUAL PARTNER. WE FEEL THAT THESE FINDI NGS OF CHANDRAHAS LEARNED CIT (A) ARE ALSO NOT SUSTAINABLE BECAUSE IF THE ADVANCES ARE GIVEN BY THE PRESENT ASSESSEE, ITS NON RECOVERY CAN BE CLAIMED AS BUSINESS LOSS BY THE PRESENT ASSE SSEE ONLY AND IT SHOULD BE ALLOWED IF OTHER PRE REQUIREMENTS FOR CLAIMING SUCH LOSS IS SATISFIED BY THE ASSESSEE. ACTUAL WRITE OFF IN BOOKS IS REQUIRED TO CLAIM BAD DEBTS BUT THE ASSESSEE IS CLA IMING IT AS BUSINESS LOSS AND NOT AS BAD DEBT U/S 36 (1) (VII). SUCH CLAIM AS BAD DEBT IS NEITHER CLAIMABLE NOR ALLOWABLE FOR THI S REASON ALONE THAT THE REQUIREMENTS OF SECTION 36 (2) CANNOT BE S ATISFIED FOR NONRECOVERY OF TRADE ADVANCES. HENCE, WE WILL IT PR OPER TO REMAND THIS MATTER ALSO TO THE AO FOR A FRESH DECIS ION ABOUT THE CLAIM OF THE ASSESSEE AS BUSINESS LOSS. WE ORDER AC CORDINGLY AND DIRECT THE AO TO DECIDE THIS ISSUE BY A SPEAKING AN D REASONED ORDER AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 7 IS ALSO ALLOWED FOR STATISTI CAL PURPOSES. 12. THE LD. DR RELIED ON THE ORDER OF THE AO AND SU BMITTED THAT NO CLAIM OF BAD DEBT CAN BE GRANTED. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE STATEMENT RECORDED U/S. 13 2(4) ON 13.10.2000 AND ALSO ASSESSEES LETTER DATED 13.10.2000 WHEREIN THE ASSESSEE COMPUTED UNDISCLOSED INCOME AT RS.67,51,362 AS FOLL OWS:- CASH : RS.26,34,333 ADVANCE TO CANOE BOAT OWNERS : RS.26,98,077 ADVANCE TO PORCEINE BOAT OWNERS : RS.14,98,952 RS.41,17,029 RS.67,51,362 HOWEVER, CONSEQUENT TO NOTICE U/S. 158BC DATED 11.1 1.2000, THE ASSESSEE FILED RETURN OF INCOME FOR THE BLOCK PERIO D ON 8.3.2001DISCLOSING UNDISCLOSED INCOME AT RS.58,41,163 AS FOLLOWS:- ADVANCE TO CANOE BOAT OWNERS : RS.26,35,000 ADVANCE TO PORCEINE OWNERS : RS.14,18,952 CASH AT BANK AND AT THE PREMISES : RS.26,34,333 RS.66,88,285 IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 13 OF 29 LESS: LIABILITIES OUTSTANDING 1. NELLAKANTH PLASTICS RS.7,27,442 2. M/S. SUPREME BOXES RS. 85,000 3. M/S. KARWAR FISHERS RS. 34,680 RS. 8,47,122 RS.58,41,163 14. THE ASSESSEE SUBMITTED THAT 40% ADVANCES MADE T O CANOE BOAT OWNERS AND PURSE-SEIN BOAT OWNERS WAS OFFERED AS UN DISCLOSED INCOME AND CLAIMED 60% OF THESE ADVANCES HAVE BECOME BAD D EBT. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS NOT WRITTEN OF F THESE IN THE BOOKS OF ACCOUNT AND CLAIM OF ASSESSEE CANNOT BE ALLOWED U/S . 36(1)(VII) R.W.S. 36(2) OF THE ACT. AS PER AO, ADVANCES COULD BE ALLOWED A S BAD DEBT ONLY IF WRITTEN OFF IN THE BOOKS OF ACCOUNT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS AND NOT CLAIME D THESE ADVANCES AS BAD DEBTS U/S. 36(1)(VII) R.W.S. 36(2) OF THE ACT. THESE ADVANCES CLAIMED BY THE ASSESSEE IS BUSINESS LOSS U/S. 28 OF THE ACT . U/S. 28, ANY LOSS INCURRED IN RELATION TO BUSINESS COULD BE ALLOWED A S A DEDUCTION. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ADVANCES ARE MADE IN THE COURSE OF BUSINESS AND IT IS INCURRED FOR THE PURPOSE OF B USINESS OF ASSESSEE. THE ONLY DISPUTE WITH REGARD TO CLAIM OF QUANTUM OF AMO UNT TO BE ALLOWED IN THE ASSESSEES APPEAL. THE LD. DR HAS CHALLENGED THAT NO DEDUCTION COULD BE GIVEN U/S. 36(1)(VII) R.W.S. 36(2) OF THE ACT. AS WE HAVE ALREADY OBSERVED, SINCE THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT, THERE IS NO QUESTION OF WRITING OFF ANY DEBTS AS BAD IN THE BOO KS OF ACCOUNT AND SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT CANNOT BE APPLIE D. ON THE OTHER HAND, WHEN THE ASSESSEE MADE ADVANCES ON BUSINESS NECESSI TY, NON-RECOVERY OF THE SAME HAS TO BE ALLOWED AS A BUSINESS LOSS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THESE ADVANCES ARE MADE FOR NON-BUS INESS PURPOSES. BEING SO, SUCH ADVANCES ARE INCIDENTAL TO THE BUSIN ESS OF THE ASSESSEE AND LOSS THEREOF CANNOT CONSTITUTE A DEDUCTION U/S. 28 OF THE ACT. IN THE IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 14 OF 29 PRESENT CASE, THE IRRECOVERABLE AMOUNT HAS BEEN IDE NTIFIED BY THE ASSESSEE AND IN THE COURSE OF STATEMENT U/S. 132(4) THE ASSESSEE OFFERED 40% OF SUCH ADVANCES AS UNDISCLOSED INCOME OF SUCH ADVANCES. HOWEVER, THE AO HAS NOT GIVEN ANY DEDUCTION TOWARDS THIS. ON THE OTHER HAND, THE CIT(APPEALS) HAS GIVEN DEDUCTION TO THE E XTENT OF 60%. IT IS NOT POSSIBLE TO ACCEPT THIS FINDING OF THE CIT(APPEALS) AS THE ASSESSEE HAS IDENTIFIED THE AMOUNT OF BAD DEBTS OUT OF TOTAL ADV ANCES MADE BY THE ASSESSEE AND IT WAS DULY REFLECTED BY THE ASSESSEE IN ITS STATEMENT RECORDED U/S. 132(4) OF THE ACT. THE DEPARTMENT HA VING NO MATERIAL IN ITS HANDS, BOTH THE LOWER AUTHORITIES REJECTED THE CLAI M OF ASSESSEE IN ONE WAY OR THE OTHER WHICH IS NOT CORRECT. 15. IN THE PRESENT CASE, THE ASSESSEE ADVANCED MONE Y TO VARIOUS FISHERMEN WITHOUT KEEPING ANY LEGAL AND PROPER DOCU MENTS AND IF THE RESULT OF SEARCH WAS ANY LOSS TO THE ASSESSEE, THEN IT HAS TO BE CONSIDERED AS BUSINESS LOSS. THEREFORE, THE ASSESSEES CLAIM HAS TO BE ALLOWED IN THE ABSENCE OF SUCH ENFORCEABLE BOOKS OF ACCOUNT OR LEG AL DOCUMENTS. IN THE PRESENT SCENARIO, EVEN ADVANCES GIVEN WITH LEGAL DO CUMENTS AND SECURITIES WERE UNABLE TO BE RECOVERED AND THE ASSESSEE WHO HA S ADVANCED MONEY TO VARIOUS FISHERMEN IN THE COURSE OF BUSINESS ACTI VITY WHICH IS UNDISCLOSED TO THE DEPARTMENT, THE CLAIM OF ASSESSEE HAS TO BE ALLOWED AS PER STATEMENT RECORDED U/S. 132(4) OF THE ACT. THE AUTH ORITIES CANNOT REJECT THE STATEMENT RECORDED U/S. 132(4) WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW THAT THESE DEBTS ARE GOOD SO AS TO RECOVERY FR OM THOSE PERSONS. MORE SO, THERE WAS NO PROPER ADDRESSES AVAILABLE ON RECORD OF THESE DEBTORS SO AS TO CONTACT THEM FOR RECOVERY. IN THI S SITUATION, WE ARE OF THE OPINION THAT THESE AMOUNTS ARE IRRECOVERABLE AND TH E ADVANCES MADE DURING THE COURSE OF BUSINESS ACTIVITY OF THE ASSES SEE HAS TO BE ALLOWED AS BAD DEBTS (BUSINESS LOSS) AND ON RECOVERY THE SAME HAS TO BE TAXED. THE ASSESSEE HAS CONFIRMED IN HIS SWORN STATEMENT RECOR DED U/S. 132(4) ON IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 15 OF 29 13.10.2000 THAT 60% OF ADVANCES MADE TO CANOE AND P ORCEINE BOAT OWNERS ARE BAD DEBTS. WITH THESE OBSERVATIONS, WE ALLOW THE GROUNDS RAISED IN APPEAL BY THE ASSESSEE AND DISMISS THE RE LEVANT GROUNDS IN THE REVENUES APPEAL ON THIS ISSUE. 16. GROUNDS NO.6 & 7 ARE WITH REGARD TO DELETION OF ENTIRE BALANCES AT BANK AMOUNTING TO RS.26,34,333. DURING THE COURSE O F SEARCH IT WAS FOUND THAT IN SB A/C NO.2565 OF MAHALAXMI CO-OPERATIVE BA NK LTD. THERE WAS A BALANCE OF RS.26,07,363 IN THE NAME OF SMT. DAYA C. MENDON AND CASH OF RS.26,970 WAS FOUND IN THE BUSINESS PREMISES, THE T OTAL ADDITION OF RS.26,34,333 WAS MADE BY THE AO. ON APPEAL, THE C IT(APPEALS) OBSERVED AS FOLLOWS:- IT IS THE CONTENTION OF THE AR THAT THERE IS NO OB LIGATION ON APPELLANT TO FILE RETURN IN RESPONSE TO NOTICE U/S. 158BC AS IT IS ONLY A REQUEST, NOT ACCOMPANIED BY ANY NOTICE U/S.1 42 ETC, AND SO THERE IS NO DIRECTION SO THE INCOME RETURNED CAN BE RETRACTED. ASSESSEE IS ONLY FISHERMAN. AO HAS NOT ISSUED ANY G UIDANCE WITH NOTICE HOW INCOME IS TO BE COMPUTED AND FILED. ASSE SSEE CANNOT EARN SO MUCH IN THREE MONTHS ONLY, RS.26.3 LATHS AN D THERE ARE SALE PROCEEDS WHICH CON NOT BE TAXED. IF A DECLARAT ION IS MADE WITHOUT KNOWING LEGAL PROVISIONS, IT IS ILLEGAL DIS CLOSURE, WHICH SHOULD BE ALLOWED TO BE RETRACTED. THE LOGIC OF THE APPELLANT IS APPEALING, HOWEVER THIS AMOUNT HAS BEEN DISCLOSED B Y THE APPELLANT THEMSELVES IN THE BLOCK RETURN FILED AND THEREFORE IT IS DIFFICULT FOR ME TO CONSIDER THE REVERSAL OF THIS TRANSACTION. THE CONTENTION OF THE APPELLANT THAT THE ADVANCES WAS I N THE NATURE OF EXPENSES, AND HE SHOULD BE ALLOWED TO RETRACT FROM THE DISCLOSURE MADE, CANNOT BE CONSIDERED OR PERMITTED. ONCE A RET URN HAVE BEEN FILED DISCLOSING CERTAIN INCOMES AND PAID TAXE S THEREON, CANNOT BE ALLOWED TO RETRACT FROM THE SAME. 17. THE LD. AR RELIED ON THE JUDGMENTS IN THE CASE OF GUJARAT HIGH COURT IN THE CASE OF CIT V. MILTON LAMINATES LTD. IN ITA NO.1022/2010 DATED 24.1.2012 WHEREIN IT WAS HELD AS UNDER:- IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 16 OF 29 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE TRIBUNAL'S ULTIMATE CONCLUSION IN ALLOWING THE ASSESSEE'S APPEAL. THOUGH SOME OF THE OBSERVATIONS MAY NOT APP EAL TO US, NEVERTHELESS, FOR THE REASONS SOMEWHAT DIFFERENT FR OM THOSE RECORDED BY THE TRIBUNAL WE COME TO THE SAME CONCLU SION. THE DECISION OF THE APEX COURT IN CASE OF SHELLY PRODUCTS ( SUPRA ), WAS RENDERED IN VERY DIFFERENT BACKGROUND. IT WAS A CAS E WHERE THE ASSESSEE HAD FILED THE RETURN. THE ASSESSEE HAD PAI D SELF- ASSESSMENT TAX ON THE INCOME DISCLOSED IN THE RETUR N. THE TRIBUNAL ON APPEAL BY THE ASSESSEE HELD THAT THE OR DER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER WAS AB I NITIO VOID SINCE HE HAD NO JURISDICTION TO DEAL WITH SUCH PROC EEDINGS. THE REVENUE SOUGHT REFERENCE BEFORE THE HIGH COURT. WHE N SUCH REFERENCE WAS PENDING, THE ASSESSEE APPLIED TO THE DEPARTMENT FOR REFUND OF THE TAX PAID. IT WAS IN THIS BACKGROUND T HE APEX COURT EXPRESSED THE OPINION THAT LIABILITY TO PAY INCOME- TAX DOES NOT DEPEND ON ASSESSMENT BEING MADE AND FAILURE OR INAB ILITY TO FRAME FRESH ASSESSMENT AFTER EARLIER ASSESSMENT IS SET ASIDE OR NULLIFIED IN APPROPRIATE PROCEEDINGS, DOES NOT ENTI TLE THE ASSESSEE TO CLAIM REFUND OF THE ADVANCE TAX AND TAX PAID ON SELF- ASSESSMENT BECAUSE TO THAT EXTENT THE ASSESSEE HAS ADMITTED HIS LIABILITY TO PAY TAX IN ACCORDANCE WITH LAW. THE FA CTS OF THE PRESENT CASE ARE, THEREFORE, DIFFERENT. IN THE CASE ON HAND, THE ASSESSMENT WAS NOT RENDERED NULL. IN FACT SUCH ASSE SSMENT, WHICH ACCORDING TO THE ORDER OF THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAD BECOME FINAL TAX LIABILITY OF THE ASS ESSEE, CAME LOWER THAN THAT DECLARED BY HIM IN THE RETURN FILED . 18. FURTHER HE RELIED ON THE JUDGMENT OF SUPREME CO URT IN S.R. KOSHTI V. CIT, 276 ITR 165 (GUJ) WHEREIN IT WAS HELD AS FOLLOWS:- 18. THE POSITION IS, THEREFORE, THAT, REGARDLESS O F WHETHER THE REVISED RETURN WAS FILED OR NOT, ONCE AN ASSESSEE I S IN A POSITION TO SHOW THAT THE ASSESSEE HAS BEEN OVER-ASSESSED UNDER THE PROVISIONS OF THE ACT, REGARDLESS OF WHETHER THE OV ER-ASSESSMENT IS AS A RESULT OF ASSESSEES OWN MISTAKE OR OTHERWI SE, THE CIT HAS THE POWER TO CORRECT SUCH AN ASSESSMENT UNDER SECTI ON 264(1) OF THE ACT. IF THE CIT REFUSES TO GIVE RELIEF TO THE A SSESSEE, IN SUCH CIRCUMSTANCES, HE WOULD BE ACTING DE HORS THE POWER S UNDER THE IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 17 OF 29 ACT AND THE PROVISIONS OF THE ACT AND, THEREFORE IS DUTY-BOUND TO GIVE RELIEF TO AN ASSESSEE, WHERE DUE, IN ACCORDANC E WITH THE PROVISIONS OF THE ACT. 19. IN THE PRESENT CASE, THE RESPONDENT-CIT HAS NOW HERE STATED THAT THE PETITIONER IS NOT ENTITLED TO THE RELIEF U NDER SECTION 10(10C) OF THE ACT. IN FACT, THE SAID POSITION IS U NDISPUTED. THE ASSESSING OFFICER HIMSELF HAD PASSED AN ORDER UNDER SECTION 154 OF THE ACT, GRANTING SUCH RELIEF. IN THE CIRCUMSTAN CES, EVEN THE ORDER UNDER SECTION 264 OF THE ACT MADE ON 29-3-200 4, CANNOT BE SUSTAINED. 19. FURTHER, HE DREW OUR ATTENTION TO THE SUPREME C OURT JUDGMENT IN CIT V SHELLY PRODUCTS & ANR., 261 ITR 367 (SC) WHEREIN IT WAS HELD THAT WHERE AN ORDER OF ASSESSMENT IS SET ASIDE OR ANNULL ED AND NO FURTHER ASSESSMENT CAN BE MADE, THE ASSESSEE WOULD BE ENTIT LED ONLY TO THE AMOUNT OF TAX PAID IN EXCESS OF LIABILITY INCURRED BY HIM ON THE BASIS OF INCOME DISCLOSED, NOT THE TAX PAID BY HIM BY WAY OF ADVANCE TAX OR SELF- ASSESSMENT TAX PAID. AMENDMENT OF SECTION 240 W.E. F. 1.4.1999 BY INSERTION OF PROVISO (B) IS DECLARATORY OF THE LAW AND THEREFORE RETROSPECTIVE. 20. ACCORDING TO THE LD. AR, IN THE PRESENT CASE, T HE ABOVE JUDGMENT CANNOT BE APPLIED AS THERE WAS NO ANNULMENT OF ASSE SSMENT MADE BY THE AO AND THERE WAS ONLY DISCLOSURE OF ADDITIONAL INCO ME ON MISTAKE OF FACT BY THE ASSESSEE. BEING SO, THIS BEING THE BLOCK RE TURN, THE ASSESSEE IS NOT AT ALL FAMILIAR IN INCOME TAX MATTERS AND IT IS NOT FAIR TO CONCLUDE THAT THE RETURN OF INCOME CANNOT BE RETRACTED IF IT IS DECLA RED WITHOUT UNDERSTANDING THE NATURE OF TRANSACTIONS BY THE ASSESSEE. ACCORD ING TO HIM, THE ASSESSEE DECLARED INCOME BY MISTAKE AND THE JUDGMEN T OF SUPREME COURT IN SHELLY PRODUCTS (SUPRA) IS NOT COMING IN THE WAY OF ASSESSEE TO RETRACT THE EARLIER INCOME DECLARED BY THE ASSESSEE. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 18 OF 29 21. THE LD. AR RELIED ON THE DECISION OF THE PUNE T RIBUNAL IN THE CASE OF ACIT V. BAJAJ FINANCE LTD. ITA NOS.288 TO 291/PN/20 14 DATED 29.1.2015, WHEREIN IT WAS HELD AS UNDER:- 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IN OUR CONSIDERED OPINION, THE DISCUSSION MADE BY THE CIT( A) IN PARA 10 OF THE IMPUGNED ORDER, WHICH WE HAVE EXTRACTED ABOV E, SETTLES THE CONTROVERSY IN FAVOUR OF THE ASSESSEE. THE RELI ANCE PLACED BY THE REVENUE ON THE CBDTS CIRCULAR DATED 31.10.1989 (SUPRA) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF LML LTD. VS. ACIT (SUPRA) IS QUITE MIS-PLACED HA VING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. OSTENSIBLY, THE CBDTS CIRCULAR DATED 31.10.1989 (SUPRA) AND ALSO T HE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF LML LTD. VS. ACIT (SUPRA) ARE IN THE CONTEXT OF ASSESSMENT YEAR 1989-90 WHICH WERE PRIOR TO THE AMENDMENTS MADE TO SECTION 143(3) OF THE ACT BY THE FINANCE ACT (NO.2) 1998 W.E.F. 01.10 .1998. AS SECTION 143(3) OF THE ACT STOOD FOR THE ASSESSMENT YEAR 1989-90, THERE WAS NO PROVISION FOR REFUND AFTER THE REGULAR ASSESSMENT. IN THE PRESENT CASE, THE ASSESSMENT YEARS INVOLVED ARE 2006-07 ONWARDS, WHICH PERTAIN TO PERIOD AFTER SECTION 143( 3) OF THE ACT WAS AMENDED BY THE FINANCE ACT (NO.2) 1998 W.E.F. 0 1.10.1998. AS PER THE AMENDMENT, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, INTER-ALIA, ENVISAGES THE ASSESSING OFFICE R TO GRANT REFUND OF ANY AMOUNT DUE TO THE ASSESSEE CONSEQUENT TO THE ASSESSMENT AND THEREFORE, THE ASSESSING OFFICER IS STATUTORILY EMPOWERED TO DETERMINE THE REVISED INCOME WHICH CAN BE LOWER THAN THE RETURNED INCOME. THEREFORE, IN OUR VIEW, T HE OBJECTION RAISED BY THE REVENUE TO THE IMPUGNED ORDER OF CIT( A) IS UNTENABLE IN THE EYES OF THE LAW, AS IT STOOD FOR T HE PERIOD UNDER CONSIDERATION. 22. FURTHER IT WAS SUBMITTED THAT THE ASSESSEE IS A LAY FISHERMAN AND FILING OF RETURN U/S. 158BC IS VERY COMPLEX AND IT HAS TO BE FILED WITHIN SMALL TIME. IN THIS CONNECTION, THERE WAS ERROR IN THE R ETURN OF INCOME WHICH MAY BE CONDONED BY THIS TRIBUNAL. , 23. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E ASSESSEE HIMSELF DISCLOSED CASH BALANCE IN ITS RETURN FILED CONSEQUE NT TO NOTICE U/S. 158BC. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 19 OF 29 THIS AMOUNT IS FROM THE SALE PROCEEDS OF FISH WHICH IS THE BUSINESS OF THE ASSESSEE AND MISTAKEN ADMISSION OF THIS AMOUNT BY A SSESSEE HOLDS NO MERIT. THE LD. DR SUBMITTED THAT THE ENTIRE AMOUNT HAS TO BE CONSIDERED AS INCOME OF THE ASSESSEE. NO PROFIT PERCENTAGE IS TO BE ESTIMATED TO SUSTAIN PART OF THE ADDITION. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THERE IS A BANK BALANCE OF RS.26,07,3 63 AND PHYSICAL CASH OF RS.26,970 TOTALLING TO RS.26,34,333. IT IS AN ADMI TTED FACT THAT IT IS GENERATED FROM SALE TRANSACTION OF FISH. IN OUR OP INION, IT IS FAIR TO ESTIMATE ONLY NET INCOME AT 5% OF THE DEPOSIT BY PLACING REL IANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M.A. SIDDIQUE V. DCIT IN ITA NOS. 62 TO 66/BANG/2020 DATED 14.8.2020 WHEREIN IT WAS HELD AS UNDER:- 42. AS PER GROUND NO. 3, THE DISPUTE IS ABOUT ADDI TION OF RS. 103.68 LACS MADE BY THE AO AS PER PARA 8 ON PAGE 23 OF THE ASSESSMENT ORDER BY ALLEGING THAT THIS AMOUNT IS DE POSITED BY THE ASSESSEE IN BHATKAL URBAN COOPERATIVE BANK BUT THE TURNOVER DECLARED BY THE ASSESSEE IS OF ONLY RS. 95.25 LACS FROM SALE OF APARTMENTS AND IT WAS RECEIVED BY THE ASSESSEE BY W AY OF CHEQUES. THE AO HELD THAT THE ASSESSEE COULD NOT EX PLAIN THE SOURCE OF THIS CASH DEPOSIT AND HE ADDED THE FULL A MOUNT OF CASH DEPOSIT AS ASSESSEES UNEXPLAINED INCOME. BEFORE CI T (A), THIS WAS THE SUBMISSION OF THE LEARNED AR OF THE ASSESSE E AS NOTED BY CIT (A) IN PARA 5.5.2 OF HIS ORDER THAT THIS IS SUR PRISING THAT THIS ADDITION IS MADE BY THE AO WITHOUT REJECTING THE BO OKS OF ACCOUNT AND THE AO ARRIVED AT THIS FIGURE OF CASH D EPOSIT WITHOUT DETAILED DISCUSSION AND BY IGNORING THIS ASPECT THA T THE CASH DEPOSIT IN BANK MAY NOT BE TURNOVER OF THE SAME YEA R AND IT MAY BE OUT OF CASH RECEIPTS FROM THE CREDIT SALES OF TH E EARLIER YEARS AND THE AO HAS TOTALLY IGNORED THE CONTRA ENTRIES A BOUT CASH DEPOSIT AND CASH WITHDRAWAL. THIS WAS AN ALTERNATIV E CONTENTION RAISED BEFORE CIT (A) AS NOTED BY HIM IN PARA 5.5.3 OF HIS ORDER THAT EVEN IF SOURCE OF CASH DEPOSIT IS NOT ACCEPTED AS EXPLAINED, IT SHOULD BE ACCEPTED THAT THIS IS UNACCOUNTED TURNOVE R OF THE ASSESSEE AND ONLY PROFIT ELEMENT SHOULD BE TAXED BU T IN PARA 5.5.4 OF HIS ORDER, LEARNED CIT (A) UPHELD THIS ADDITION WITHOUT ANY IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 20 OF 29 DISCUSSION ABOUT VARIOUS ARGUMENTS RAISED BEFORE HI M. BEFORE US, LEARNED AR OF THE ASSESSEE REITERATED THE SAME ARGU MENTS AND IN SUPPORT OF THE ALTERNATIVE CONTENTION RAISED BEFORE CIT (A) AS NOTED BY HIM IN PARA 5.5.3 OF HIS ORDER THAT EVEN I F SOURCE OF CASH DEPOSIT IS NOT ACCEPTED AS EXPLAINED, IT SHOULD BE ACCEPTED THAT THIS IS UNACCOUNTED TURNOVER OF THE ASSESSEE AND ON LY PROFIT ELEMENT SHOULD BE TAXED, RELIANCE IS PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF V. R. TEXTILES VS. JCIT, 20 TAXMAN 154 (AHMEDABAD) AND COPY OF THIS TRIBUNAL ORDER IS FILE D. RELIANCE IS ALSO PLACED ON A JUDGMENT OF HONBLE GUJARAT HIGH C OURT RENDERED IN THE CASE OF CIT VS. PRESIDENT INDUSTRIE S AS REPORTED IN 124 TAXMAN 654 AND ON A JUDGMENT OF HONBLE MADHYA PRADESH HIGH COURT RENDERED IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR AS REPORTED IN 135 TAXMAN 180. LEARNED DR OF THE RE VENUE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 43. WE H AVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER PARA 8 O F THE ASSESSMENT ORDER, THE AO STATES THAT THIS CASH DEPO SIT BY THE ASSESSEE IN BANK ACCOUNT IS IN EXCESS OF THE DECLAR ED TURNOVER NOT DEPOSITED BY WAY OF CHEQUES. HENCE, AS PER THE AO A LSO, THE ALLEGATION IS THIS THAT THIS IS UNACCOUNTED TURNOVE R. THEREFORE, IN OUR CONSIDERED OPINION, THE TRIBUNAL ORDER RENDERED IN THE CASE OF V. R. TEXTILES VS. JCIT (SUPRA) IS APPLICABLE. IN T HIS CASE, THE TRIBUNAL HELD THAT ENTIRE UNDISCLOSED SALES CANNOT BE TREATED AS PROFIT OF THE ASSESSEE AND ONLY THE PROFIT ELEMENT BY APPLYING PROFIT RATE OF 6.09% SHOULD BE ADDED. WE FIND THAT IT IS NOTED BY THE AO THAT THE INCOME FROM BUSINESS IS DECLARED BY THE ASSESSEE AT RS. 619,750/- AND IT IS ACCEPTED BY THE AO AND O NLY ADDITION MADE IN BUSINESS INCOME IS OF RS. 58,58,136/- WHICH IS REGARDING INCOME OF A FOREIGN COMPANY AND THEREFORE, DECLARED PROFIT ON DOMESTIC TURNOVER IS ACCEPTED BY THE AO AND THE DOM ESTIC TURNOVER AS NOTED BY THE AO IN PARA 8 OF THE ASSESS MENT ORDER IS RS. 95.25 LACS FROM SALE OF APARTMENTS. THIS RESULT S INTO PROFIT RATE OF 6.50%. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, WE HOLD THAT ONLY PROFIT ELEMENT @ 6.50% OF UNDISCLOSED TUR NOVER OF RS. 103.68 LACS SHOULD BE ADDED INSTEAD OF ADDITION OF RS. 103.68 LACS BEING TOTAL CASH DEPOSIT IN BANK. THIS GROUND IS PARTLY ALLOWED. 44. IN THE RESULT, THE APPEAL OF THE ASSES SEE IN THE CASE OF MR. MOHAMMED SAFWAN FOR A. YS. 2015 16 IN ITA NOS . 67/BANG/2020 IS PARTLY ALLOWED IN THE TERMS INDICAT ED IN THE ORDER. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 21 OF 29 25. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS PAR TLY ALLOWED. 26. GROUND NO.8 IS REGARDING CONDONING THE DELAY IN FILING BLOCK RETURN FOR THE PURPOSE OF INTEREST U/S. 158BFA WHICH IS MA NDATORY AND CONSEQUENTIAL IN NATURE AND TO BE COMPUTED ACCORDIN GLY IN THE LIGHT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN CIT & ANR. V. SMT. SIRE KANWAR BAI (2010) CTR (KAR) 198 WHEREIN IT WAS HELD THAT THE INTEREST U/S. 158BFA(1) IS LEVIED TO COMPENSATE THE GOVERNMENT FO R WITHHOLDING THE TAXES BY THE ASSESSEE AND THEREFORE, INTEREST IS PA YABLE ONLY ON THE SUM FOUND PAYABLE BY THE ASSESSEE AS PER THE ASSESSMENT ORDER AS REDUCED BY THE TAX PAID PRIOR TO THE ISSUE OF NOTICE OR PRIOR TO THE LAST DATE OF FILING OF THE RETURN AND IT IS ALSO SUPPORTED BY THE SUPREME COUR T JUDGMENT IN THE CASE OF R.C. JEWELLERS V. CIT 87 CCH 4 (SC). THUS INTEREST U/S. 158BFA(1) BEING CONSEQUENTIAL AND MANDATORY IN NATURE TO BE C OMPUTED ACCORDINGLY BY THE AO WHILE PASSING GIVING EFFECT ORDER TO OUR FINDINGS IN THIS ORDER. ACCORDINGLY THIS GROUND OF APPEAL IS DISPOSED OF. 27. AT THE TIME OF HEARING, THERE WAS NO ARGUMENT O N THIS ADDITIONAL GROUND AND THEREFORE IT IS DISMISSED AS NOT PRESSED . 28. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. REVENUES APPEAL [IT(SS)A NO.63/B/2006] 29. IN GROUNDS NO.2 TO 2.2, THE GRIEVANCE OF THE D EPARTMENT IS WITH REGARD TO DELETION OF AN AMOUNT OF RS.96,105 RELATI NG TO AY 2000-01 FOR WHICH YEAR DUE DATE FOR FILING THE RETURN OF INCOME U/S. 139(4) HAD NOT EXPIRED AND ASSESSEE FILED THE RETURN ON 9.5.2001. 30. IN THE PRESENT CASE, SEARCH HAS TAKEN PLACE ON 6.9.2000 AND DUE DATE FOR FILING THE RETURN FOR AY 2000-01 U/S. 139( 4) HAD NOT EXPIRED AND THE ASSESSEE ACTUALLY FILED THE RETURN ON 9.5.2001 WHIC H IS WITHIN THE DUE DATE TO FILE RETURN U/S. 139(4) OF THE ACT. FURTHER, TH E PROVISIONS OF SECTION 158B(A) WHICH WAS AMENDED W.E.F. 1.4.1996 READS AS FOLLOWS:- IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 22 OF 29 ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SE ARCH. 158BA. (1) NOTWITHSTANDING ANYTHING CONTAINED IN AN Y OTHER PROVI-SIONS OF THIS ACT, WHERE AFTER THE 30TH DAY O F JUNE, 1995 A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF A CCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SEC TION 132A IN THE CASE OF ANY PERSON, THEN, THE ASSESSING OFFICER SHA LL PROCEED TO ASSESS THE UNDISCLOSED INCOME IN ACCORDANCE WITH THE PROVI -SIONS OF THIS CHAPTER. (2) THE TOTAL UNDISCLOSED INCOME RELATING TO THE BL OCK PERIOD SHALL BE CHARGED TO TAX, AT THE RATE SPECIFIED IN SECTION 11 3, AS INCOME OF THE BLOCK PERIOD IRRESPECTIVE OF THE PREVIOUS YEAR OR Y EARS TO WHICH SUCH INCOME RELATES AND IRRESPECTIVE OF THE FACT WHETHER REGULAR ASSESSMENT FOR ANY ONE OR MORE OF THE RELEVANT ASSESSMENT YEAR S IS PENDING OR NOT. [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT (A) THE ASSESSMENT MADE UNDER THIS CHAPTER SHAL L BE IN ADDITION TO THE REGULAR ASSESSMENT IN RESPECT OF EACH PREVIOUS YEAR INCLUDED IN THE BLOCK PERIOD; (B) THE TOTAL UNDISCLOSED INCOME RELATING TO TH E BLOCK PERIOD SHALL NOT INCLUDE THE INCOME ASSESSED IN ANY REGULAR ASSE SSMENT AS INCOME OF SUCH BLOCK PERIOD; (C) THE INCOME ASSESSED IN THIS CHAPTER SHALL N OT BE INCLUDED IN THE REGULAR ASSESSMENT OF ANY PREVIOUS YEAR INCLUDED IN THE BLOCK PERIOD.] (3) WHERE THE ASSESSEE PROVES TO THE SATISFACTION O F THE ASSESS-ING OFFICER THAT ANY PART OF INCOME REFERRED TO IN SUB- SECTION (1) RELATES TO AN ASSESSMENT YEAR FOR WHICH THE PREVIOUS YEAR HAS NOT ENDED OR THE DATE OF FILING THE RETURN OF INCOME UNDER SUB-SECTI ON (1) OF SECTION 139 FOR ANY PREVIOUS YEAR HAS NOT EXPIRED, AND SUCH INCOME OR THE TRANSACTIONS RELATING TO SUCH INCOME ARE RECORDED O N OR BEFORE THE DATE OF THE SEARCH OR REQUISITION IN THE BOOKS OF A CCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEARS, THE SAID INCOME SHALL NOT BE INCLUDED IN THE BLOCK PERIOD. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 23 OF 29 31. BEING SO, THE INCOME FOR AY 2000-01 WHICH IS IN CLUDED IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND NOT UNEARTHED B Y THE DEPARTMENT BY WAY OF ANY INCRIMINATING MATERIAL CANNOT BE CONSIDE RED AS UNDISCLOSED INCOME OF THE ASSESSEE. THEREFORE, THE DELETION O F ADDITION IS JUSTIFIED. THESE GROUNDS OF THE REVENUE ARE DISMISSED. 32. GROUNDS NO.3 TO 3.5 OF THE REVENUE RELATE TO DE LETION OF SURCHARGE. IN THIS CASE, THE CIT(APPEALS) DELETED THE SURCHARG E LEVIED BY THE AO ON THE REASON THAT SEARCH TOOK PLACE IN THIS CASE ON 6 .9.2000 AND SECTION 113 OF THE ACT WAS INSERTED W.E.F. 1.6.2002 AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THERE WAS NO PROVISION SO AS TO LEVY SURCHARGE. IN OUR OPINION, THE FINDING OF THE CIT(APPEALS) IS JUSTIFI ED AS SECTION 113 OF THE ACT CAME INTO EFFECT FROM 1.6.2002 AND SEARCH TOOK PLAC E IN THIS CASE ON 6.9.2000 AND THE FINDINGS OF THE CIT(APPEALS) ARE I N LINE WITH THE PROVISIONS OF THE ABOVE SECTION. HENCE, THESE GROUNDS ARE DIS MISSED. 33. GROUND NOS. 4 TO 4.2 ARE REGARDING DELETION OF AMOUNT RECEIVABLE ON ACCOUNT OF FISH SALES OF RS.21,24,326. THE FACTS ARE THAT THE SEIZED MATERIAL SHOW THE SALES OF FISH AS UNDER:- EX. CHCS-2 : RS.10,85,225 EX. CHCS-42 : RS.10,39,101 ------------------- TOTAL : RS.21,24,326 ------------------- 34. ACCORDING TO THE AO, THE ABOVE AMOUNT WHICH IS RECEIVABLE ON ACCOUNT OF SALE OF FISH IS ON THE DATE OF SEARCH AN D THE SAME WAS BROUGHT TO TAX. THE CIT(APPEALS) OBSERVED THAT A SUM OF RS .21.24 LAKHS BEING SALES RECEIVABLES HAS BEEN INCLUDED AS AN ASSET, WH EREAS ONLY PROFIT OF THIS TRANSACTION CAN BE TAXED AS IT WOULD NOT BE AN ASSE T. ALSO AS PER ASSET METHOD, PROFIT HAS TO BE TELESCOPED AND NOT INCLUDE D IN THE COMPUTATION. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 24 OF 29 ACCORDINGLY, HE UPHELD THE ARGUMENT OF THE LD. AR T HAT THE AO ERRED IN INCLUDING THIS FIGURE IN THE COMPUTATION. 35. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE AMOUNT OF RS.21,24,326 RECEIVABLE FROM THE DEBT ORS REPRESENTED THE AMOUNT RELATING TO SALE OF FISH WHICH WAS SUPPLIED BY THE BOAT OWNERS AND COST OF SUCH FISH SUPPLY WAS ADJUSTED OUT OF THE AD VANCES GIVEN TO THE BOAT OWNERS. THE AO MADE AN ADDITION OF RS.104,85,570 T OWARDS ADVANCES TO VARIOUS BOAT OWNERS. THE SAID AMOUNT OF RS.21,24, 326 RECEIVABLE FROM THE DEBTORS WAS ALREADY SUBSUMED IN THE ADVANCES MA DE TO BOAT OWNERS, THEREFORE ONCE AGAIN THAT CANNOT BE ADDITION. OTHE RWISE, IT AMOUNTS TO DOUBLE ADDITION, ONE AS ADVANCES TO BOAT OWNERS AND ANOTHER AS SALE OF FISH. BEING SO, THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE THAT ONLY PROFIT ELEMENT OF THIS TRANSACTION CAN BE TAXE D AS IT WOULD BE AN ASSET, SINCE THE TOTAL COST OF FISH SALES WAS ADJUSTED OUT OF THE ADVANCES GIVEN TO THE BOAT OWNERS. THIS VIEW OF OURS IS SUPPORTED BY THE JUDGMENT OF MADHYA PRADESH HIGH COURT IN THE CASE OF SMT. DAYA BAI V. CIT, 154 ITR 248 (MP) WHEREIN IT WAS HELD THAT UNDER THE INCOME-TAX ACT, LEVY OF TAX TWICE ON THE SAME INCOME IS NOT PERMISSIBLE. IN TH E PRESENT CASE, SINCE THE ADVANCES MADE TO BOAT OWNERS WAS SUBJECT TO TAX OUT OF WHICH FISH WAS SUPPLIED AND SAME WAS SOLD AND THE SALE PROCEEDS WA S SHOWN AS RECEIVABLES FROM DEBTORS. ALLOWING RELIEF TO THE A SSESSEE AS BAD DEBTS / BUSINESS LOSS OUT OF ADVANCES GIVEN TO THE BOAT OWN ERS IS A SEPARATE ISSUE. IT IS BECAUSE OF CERTAIN ADVANCES GIVEN TO THE BOAT OWNERS WAS ALLOWED AS BUSINESS LOSS, THAT CANNOT LEAD TO THE CONCLUSION T HAT THE ENTIRE AMOUNT OF UNACCOUNTED SALES IS TO BE TAXED. ACCORDINGLY, THE SE GROUNDS OF THE REVENUE ARE DISMISSED. IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 25 OF 29 36. GROUNDS NO.5 TO 5.2 RELATE TO AMOUNTS DUE TO PU RSE-SEIN BOAT OWNERS. BEFORE THE CIT(APPEALS), THE ASSESSEE EXPL AINED THAT SEIZED MATERIAL CS/CS/1 REGARDING TRANSACTION OF RS.35.47 LAKHS IS ADVANCES MADE TO PURSE-SEIN BOAT OWNERS AND ALSO EXPLAINED F ROM THE CHARTWISE DETAILS OF ADVANCES, THERE WAS LIABILITY OF RS.11.5 7 LAKHS WHICH IS SUM DUE TO THE BOAT OWNERS AND CREDIT HAS BEEN GIVEN TOWARD S THIS AMOUNT. IN OUR OPINION, THE OUTSTANDING LIABILITY DUE TO BOAT OWNE RS AND ASSESSEES CLAIM IS SUPPORTED BY SEIZED MATERIAL. THE SAME HAS TO BE ALLOWED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) . THESE GROUNDS OF THE REVENUE ARE DISMISSED. 37. GROUNDS NO.6 TO 6.6 RELATE TO PRIOR PERIOD ADVA NCES. THE FACTS ARE THAT CANOE BOAT ADVANCES OF RS.7,53,092 AND PURSE-S EIN BOAT ADVANCES OF RS.4,16,461 WERE OUTSIDE THE BLOCK PERIOD WHICH WAS BROUGHT TO TAX BY THE AO AS UNDISCLOSED INCOME. THE AO ADMITTED THIS FA CT, BUT HOWEVER HE HAS NOT GIVEN ANY DEDUCTION. ON THIS ISSUE, THE CI T(APPEALS) AFTER CONSIDERING THE SEIZED MATERIAL OBSERVED THAT AN AM OUNT OF RS.7.53 LAKHS ADVANCED TO CANOE BOAT OWNERS AND RS.4,16,461 ADVAN CED TO PURSE-SEIN BOAT OWNERS CANNOT BE INCLUDED IN THE BLOCK PERIOD AS THESE ARE OUTSIDE THE BLOCK PERIOD. 38. THE LD. DR SUBMITTED THAT ON VERIFICATION OF SE IZED BOOK A/BB-1 IT IS SEEN THAT IN THIS BOOK THE STARTING ENTRY IN THESE CASES IS MENTIONED AS EITHER 'OLD' OR 'STARTING OLD'. THE BLOCK PERIOD CO MMENCED ON 1.4.1990 AND IN NONE OF THE LEDGER ACCOUNT ENTRIES THERE IS SPEC IFIC MENTION OF PERIOD PRIOR TO 1.4.1990. 39. THE LD. DR SUBMITTED THAT THE CIT(APPEALS) IS N OT JUSTIFIED IN OBSERVING THAT TRANSACTION WHICH IS OUTSIDE THE BLO CK PERIOD IS TO BE EXCLUDED AND HE WRONGLY OBSERVED THAT THE DDI HAD M ENTIONED ABOUT THE NAMES OF SOME ADVANCES OF BEING PRIOR PERIOD AND AO HAS NOT CONSIDERED IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 26 OF 29 THE SAME. IT IS CO-RELATED TO ASSESSEES RECORDS A ND DETAILED CHARTS HAVE BEEN PROVIDED BY THE ASSESSEE IN THE ASSESSMENT AND APPELLATE PROCEEDINGS. HOWEVER, THE CIT(APPEALS) HAS NOT REF ERRED TO THE CONCERNED SEIZED MATERIAL BASED ON WHICH THE AMOUNT OF PRIOR PERIOD ADVANCES HAVE BEEN ARRIVED AT. ACCORDING TO THE LD. DR, THE ASSE SSEE HAS NOT MADE THIS CLAIM ON PRIOR PERIOD TRANSACTIONS BEFORE THE AO AN D NO DECISION ON THIS ISSUE IS FOUND IN THE ASSESSMENT ORDER. THE ASSESS EE CLAIMED PRIOR PERIOD ADVANCES AS PER LETTER DATED 02.8.2005 FILED BEFORE THE CIT(A) A SUM OF RS.4,16,461 AS ADVANCE GIVEN TO VARIOUS PARTIES PRI OR TO THE BLOCK PERIOD AND RS.7,53,052 AS ADVANCE GIVEN TO CANOE BOAT OWNE RS PRIOR TO BLOCK PERIOD WHICH IS AS FOLLOWS:- A. UNDER CANOE BOAT ADVANCES 1. SAGAR KIRAN RS.1,50,000 2. SRIRAMA, KODIKIAL RS.1,00,000 3. MEGHADOOT (KA MAT) ULLAL RS.1,10,000 4. MAHALAKSHMI BENGERE RS.20,004 5. MAHALAKSHMI FUND BOLOOR RS.42,000 6. CHAITANYA FUND, ULLAL RS.1,31,048 7. SRI ANJENEYA BENGERE RS.2,00,000 RS.7,53,052 ADVANCE TO PARTIES PRIOR TO BLOCK PERIOD RS.4,16,461 TOTAL RS.11,69,553 40. PURSE-SEIN BOAT ADVANCE RS.4,16,461 : AS P ER LETTER DATED 2.8.2005 FILED BEFORE THE CIT(A), THE ASSESSEE HAS CLAIMED THE FOLLOWING AS PRIOR PERIOD ITEMS WHICH IS SHOWN BELOW IN COLUMNS 1,2 & 3: IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 27 OF 29 41. THE ASSESSEE HAS REFERRED TO THE SEIZED BOOK CH CS 137. ON VERIFICATION OF THE SEIZED BOOK IT IS SEEN THAT ALL THE ENTRIES HAVE COMMENCED ON 1.9.1990 AND AFTERWARDS, AND IN NONE O F THE LEDGER ACCOUNT PERIOD PRIOR TO 1.4.1990 HAS BEEN MENTIONED. THESE ARE SHOWN IN COLUMNS 4 & 5 ABOVE. THEREFORE, THE ASSESSEE'S CLAIM REGARD ING PRIOR PERIOD ITEMS IS NOT SUPPORTED BY ANY SEIZED MATERIALS. THEREFOR E, ACCORDING TO THE LD. DR, THE ORDERS OF THE CIT(A) ON THIS ISSUE ARE NOT ACCEPTABLE. 42. WE DO NOT FIND ANY INFIRMITY IN THIS FINDING OF THE CIT(APPEALS) WHICH IS BASED ON MATERIAL FACTS EMANATING FROM THE SEIZE D MATERIAL. THESE GROUNDS OF THE REVENUE ARE DISMISSED. 43. GROUNDS NO.7 TO 7.2 ARE REGARDING LIABILITIES F OR PURCHASES NOT PAID. DURING THE COURSE OF HEARING BEFORE THE CIT(APPEALS ), THE LD. AR POINTED OUT THAT IN QUESTION NO.17 OF STATEMENT RECORDED DU RING THE COURSE OF SEARCH, SHRI BHARAT BHUSHAN, PARTNER, HAS STATED TH AT PURCHASES SINCE 1 ST IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 28 OF 29 SEPTEMBER UPTO DATE OF SEARCH HAVE NOT BEEN PAID. THESE PAYMENTS WOULD HAVE BEEN FROM THE CASH AT BANK, WHICH IS ONL Y SALE PROCEEDS. FROM 31.8.2000 RS.3.87 LAKHS WERE DEPOSITED WHICH CREDIT HAS TO BE GIVEN AS LIABILITIES DUE FOR PURCHASES. IT WAS CLAIMED THAT THIS IS DIRECTLY RELATABLE AND REFERABLE TO THE STATEMENT DURING THE SEARCH AN D PARTICULAR DEPOSITS MADE IN THE BANK ACCOUNT WHERE WERE TO BE USED TO P AY FOR PURCHASES. THIS BEING A SPECIFIC CLAIM BACKED BY EVIDENCE WAS ACCEPTED BY THE CIT(APPEALS). AGAINST THIS, REVENUE IS IN APPEAL B EFORE US. 44. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED LIABILITY ON THE PART OF THE ASSE SSEE AND RELATED RECEIPT HAS BEEN TAXED IN THE HANDS OF THE ASSESSEE. FOLLOWING THE MATCHING PRINCIPLE CREDIT SHOULD BE GIVEN ON THIS ACCOUNT. THE DEPART MENT CANNOT HAVE ANY GRIEVANCE ON ADMISSION OF THIS GROUND BY THE CIT(AP PEALS) AS HIS POWER IS COTERMINOUS. ACCORDINGLY, THESE GROUNDS OF THE REV ENUE ARE DISMISSED. 45. GROUNDS NO.8 TO 8.2 ARE REGARDING BAD DEBTS OU T OF ADVANCES MADE TO BOAT OWNERS. THESE GROUNDS ARE INFRUCTUOUS SINC E WE HAVE ALREADY ALLOWED THE CLAIM OF ASSESSEE AS BUSINESS LOSS TO T HE EXTENT OF 60%. ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 46. THE APPEAL OF THE REVENUE IS DISMISSED. 47. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF OCTOBER, 2021. SD/- SD/- ( N V VASUDEV AN ) ( CHANDRA POOJARI ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH OCTOBER, 2021. / DESAI S MURTHY / IT(SS)A NOS. 60 & 63/BANG/2006 PAGE 29 OF 29 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.