Shri P.Damodharasamy, Coimbatore V. ACIT, Coimbatore

ITSSA 71/CHNY/2007

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9446 (ITAT-CHENNAI)
• Duration Of Justice: 15 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 08-09-2022
• Assessment Year: misc
• Appeal Filed On: 01-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Block assessment
• Section: 263; 132; 143(3); 158BC; 43; 13; 158BD; 22

Judgement Text

आयकर अपीलȣय अͬधकरण, ‘डी’ Ûयायपीठ, चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मनोज कुमार अᮕवाल, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER I.T(SS)A. No.:71/CHNY/2007 Assessment Year : Block Period 01.04.1985 – 31.03.1995 & 01.04.1995 – 13.02.1996 Mr.P. Damodharasamy, No.36/98, Rajaji Road, Ramnagar, Coimbatore – 641 009 PAN : AEUPD 9131Q Vs. The Assistant Commissioner of Income Tax, Circle – I, Coimbatore (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) & I.T(SS)A. No.:68/CHNY/2007 Assessment Year : Block Period 01.04.1985 –13.02.1996 Mr.P. Balasubramaniam No.7, II Street, Poochakadu, Mangalam Road, Tirupur – 641 604. PAN : AFMPB 0678L Vs. The Assistant Commissioner of Income Tax, Circle – I, Tirupur (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) & I.T(SS)A. No.:92/CHNY/1998 Assessment Year : Block Period 01.04.1985 –13.02.1996 Mr. L. Arumugham No.102E, Angammal Layout, Lawley Road, Coimbatore – 641 003. PAN : AHQPA 6683A Vs. The Assistant Commissioner of Income Tax, Central Circle – I, Coimbatore (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) & :: 2 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 I.T(SS)A. No.:93/CHNY/1998 Assessment Year : Block Period 01.04.1985 –13.02.1996 Mr. C. Shanmugasundaram, No.4/39, Mariamman Koil Street, Keeranatham, Coimbatore – 641 001. PAN : BDEPS 6126D Vs. The Assistant Commissioner of Income Tax, Central Circle – I, Coimbatore (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellants by : Shri. G. Baskar & Shri I. Dinesh, Advocates ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. M. Swaminathan, Sr. Standing Counsel स ु नवाई कȧ तारȣख/Date of Hearing : 09.09.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 31.10.2022 आदेश /O R D E R PER MAHAVIR SINGH, VP: All these four appeals are filed by different Assessee’s against block assessment orders. Hence, we dispose off all these four appeals by this consolidated order. I.T(SS)A. No.:71/CHNY/2007: 2. This appeal by the Assessee is directed against the block assessment order framed by the Assistant Commissioner of Income Tax, Company Circle – 1(3), Coimbatore for the block period 01.04.1985 to 13.02.1996 vide order dated 14.12.2006 u/s 158BC r.w.s. 143(3) of the Income Tax Act, 1961(herein after ‘the Act’). :: 3 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 3. At the outset, it is noticed that this appeal is barred by limitation by 77 days and the Assessee has filed an affidavit stating the reasons. The Assessee in his affidavit stated that the block assessment order dated 14.12.2006 passed by the Assistant Commissioner of Income Tax, Company Circle – 1(3), Coimbatore was received by the Assessee on 16.12.2006 along with a demand notice. The Assessee under the wrong impression filed an appeal before the Commissioner of Income Tax (Appeals) on 22.01.2007 after remitting the requisite filing fee. But later on, when the demand was perused by the Income Tax Department, the Assessee was told by the Revenue Authorities that he had wrongly filed an appeal before the CIT(A) and that it should have been filed before the Tribunal. Finally, with a delay of 77 days, an appeal was filed before the Tribunal on 02.04.2007. It was stated by the Assessee that the appeal was filed with a delay of 77 days due to the aforesaid reason and there was no purpose in filing a delayed appeal. When these facts were confronted to the CIT-DR, he could not controvert on the above facts. The facts stated by the Assessee in his affidavit for condonation of delay seems reasonable and hence we condone the delay of 77 days and admit the appeal for adjudication. :: 4 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 4. The brief facts are that the original block assessment was completed by the Assessing Officer vide order dated 30.03.1999 and the Assessee had filed appeal against the block assessment before the Tribunal. The Tribunal vide order dated 18.11.2005 in I.T.(SS).A. No.74/Mad/1997 set aside the assessment back to the file of the Assessing Officer. Accordingly, the assessment was taken up for finalization and the present block assessment order is subject matter before us.The impugned block assessment order framed by the Assistant Commissioner of Income Tax, Company Circle – 1(3), Coimbatore for the block period 01.04.1985 to 13.02.1996 vide order dated 14.12.2006 u/s 158BC r.w.s. 143(3) of the Act. 5. The brief facts relating to the Assessee are that the he is the Managing Director of Talent Alloys Private Limited and Talent Steel Industries Private Limited. The Income Tax Department gathered information, [i.e. Investigation Wing of the Income Tax Department] from the TamilNadu Textile Corporation Limited [TNTC] that the Assessee was purchasing Sarees, Dhothies and Uniform material for the free distribution scheme of the TamilNadu Government and that some of the concerns which supplied such clothing materials were benami of the assessee and that assessee was behind certain persons, who were doing the business behind the veil of such benami concerns. :: 5 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Accordingly, a search u/s.132 of the Act was conducted at the business premises of the TNTC as well as the business and residential premises of the Assessee, Shri P. Damodharasamy and his business concerns were also covered in the search conducted u/s 132 of the Act on 13.02.1996. During the course of search, certain incriminating materials and search materials were gathered and seized by the Department which indicated that the assessee is the benamidar of all these concerns supplying such clothing materials and that assessee was doing the business behind the veil of such bogus concerns. Accordingly, a notice u/s.158BC of the Act was issued and served on the Assessee and the alleged proprietors of these concerns on 14.08.1996. A detailed letter was issued to the Assessee asking him to furnish details of the investment in various companies and concerns and copies of the bank accounts. The Income Tax Department issued letter stating that the Revenue had collected evidences that these are the benami concerns of the assessee, which are as under: (i) M/s. Prasanna Textiles and Chemicals (ii) M/s. Talent Cotton and Yarn Corporation (iii) M/s. Akashri Yarn and Fabrics Company (iv) M/s. M.P. Textiles Sl.No. Company’s Name Benami’s Name (i) M/s. Prasanna Textiles and Chemicals Shri L. Arumugham (ii) M/s. Talent Cotton and Yarn Corporation Shri C. Shanmugasundaram :: 6 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 (iii) M/s. Akashri Yarn and Fabrics Company Shri P. Balasubramaniam (iv) M/s. M.P. Textiles Shri. A. Murugaswamy The Assessee was also asked to explain the source of investment in Talent Alloys Private Limited and Talent Steel Industries Private Limited and Talent Paper and Boards Limited. The Assessing Officer while framing block assessment treated the above four concerns held in four different names (above mentioned) as Binamis of present assessee Shri. P. Damodharaswamy. The assessee’s counsel has not objected to the same and stated that he has no objection in case, all these binami concerns are assessed in the hands of the assessee. Hence, we considered the assessment in the hands of present assessee Shri. P. Damodharaswamy in IT(SS)A No. 71/Chny/2007. 6. First we will take up ground no.2, relating to assessment year 1994-95. The additions made by the AO of Rs.34,56,636/- as undisclosed investment made by the assessee. For this assessee has raised following ground No.2.1 2.1 The Assessing Officer grossly erred in making an addition of Rs.34,56,636/- as undisclosed investments made by the Appellant. 7. The assessee while filing block return from assessment years 1986-87 to 1996-97 on 17.02.1997, declared undisclosed income of Rs.14,59,730/-. The Assessing Officer while completing block :: 7 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 assessment noticed that the assessee has assets as per balance sheet as on 31.03.1994 at Rs.21,46,736/- and the source for this investment are capital gains of Rs.12,96,636/- and loan from Shri Palanisamy Gounder (HUF) at Rs.8,50,000/-. The Assessing Officer has reiterated the capital account in the assessment order at page 24, para 28 which reads as under: Debit Credit Rs. Rs. Opening Balance 7,07,500 Agricultural income 2,00,000 Commission income 4,00,000 Income tax paid 91-92) 10,864 92-93 93-94 Drawings 36,000 Balance carried down 12,96,636 The Assessing Officer first of all taken total assets as per balance sheet at Rs.21,46,636/- and after giving rebate on agricultural produce at Rs.50,000/- and agricultural income of Rs.30,000/- considered the balance at Rs.20,66,636/- as unexplained. We noted from the block assessment order that the opening cash balance of Rs.7,07,500/- and agricultural income of Rs.2,00,000/- during the year and commission income earned at Rs.4,00,000/-, but for this income the Assessing Officer has not given any weightage. The Assessing Officer has denied the opening balance of Rs.7,07,500/- by stating that it is an exaggerated figure, but without making any enquiry or investigation, :: 8 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 he considered this opening cash balance of Rs.1,00,000/-, but has not given any credit even for this 1 lakh even. 8. After hearing both the sides and going through the facts of the case, we noted that the assessee has available funds with him to the extent of Rs.13,07,500/- in the shape of opening balance, agricultural income and commission income and accordingly aggregate balance available is Rs.12,96,636/-. The Assessing Officer should have allowed credit for this amount from the total assets as per balance sheet i.e., Rs.21,46,636/-. Accordingly, we are of the view that the assessee’s unexplained investment in this year can be considered at Rs.8,50,000/- after giving credit for balance carried down at Rs.12,96,636/-. This amount can be treated as unexplained i.e., Rs.8,50,000/-. We direct the AO on this issue accordingly. 9. As regards to assessment of assets held as shares in the name of assessee’s father Sri Palanisamy Gounder in Talent Alloys (P) Ltd at Rs.3.9 Lakhs, assets held in the name of Smt. Suppathal, mother of the assessee at Rs.2,65,000/-, shares held in the name of Shri. A. Murugaswamy, in Talent Alloys P Ltd at Rs.1.60 lakhs, and shares held in the name of assessee’s father Sri Palanisamy Gounder in Talent Steel Industries Ltd at Rs.3.50 lakhs and shares held in the name of :: 9 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Smt. Suppathal in Talent Steel Industries Ltd at Rs.2.25 lakhs as unexplained investment in assessment year 1994-95. We noted that this total investment comes to Rs.13.9 lakhs, and assessee even before us, could not explain how this investment is accounted for, although there is a doubt that this investment in the name of assessee’s father Sri Palanisami Gounder, assessee’s mother Smt. Suppathal, and one Shri. A. Murugaswamy i.e., a third party. But since the assessee is unable to prove, we consider this as unexplained investment in the hands of the assessee. Therefore, this amount of Rs.13.9 lakhs is rightly treated by AO as unexplained investment in the hands of the assessee. 9.1. Accordingly, we direct the AO to treat the above two i.e, unexplained investment in assets at Rs.8.50 lakhs and this amount of Rs.13.9 lakhs being shares held in the above mentioned names as unexplained for the assessment year 1994-95. We direct the AO accordingly and block assessment be modified accordingly. 10. The next ground of appeal is ground no. 3, relating to assessment year 1995-96, wherein estimated business income from sale of sarees/dhothis by the AO at Rs.3,23,99,997/-. For this assessee raised following ground No.3.2:- :: 10 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 3.2 In any event the Assessing Officer went wrong in estimating the net income from the business of Shri. L. Arumugam at Rs.3,23,99,997/- when no estimate of income is permitted in a block assessment. 11. Brief facts are that a search u/s. 132 of the Act was conducted on the business premises of the TNTC as well as the business and residential premises of the assessee Shri. P. Damodharasamy, on 13.02.1996. During the course of search, it came to notice that the assessee was purchasing sarees, dhothies and uniform materials from TNTC for the free distribution scheme of the TamilNadu Government and one of the concern Shri. L. Arumugam, proprietary concern of M/s. Prasanna Textiles and Chemicals has entered into the supply of sarees and dhothies i.e., sale and distribution i.e., free distribution of sarees under Government scheme. The Assessing Officer during the course of block assessment proceedings, noted from the account of M/s. Prasanna Textiles and Chemicals maintained with Bank of Madura Main branch, Coimbatore that assessee transferred Rs.2 crores to the current account of the same concern at Madras. The AO noted that the cheque of Rs.2 crores was issued from this account to one Shri V. Ramaswamy, who admitted that this amount was paid for payments made for purchase of cloth and chemical. But AO disbelieved the statement for the reason that when he is conducting business at Coimbatore or at Erode for purchasing clothes or :: 11 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 chemicals, why he has withdrawn amount at Madras. The AO noted that M/s. Prasanna Textiles and Chemicals had purchased 40 lakhs meter of cloth and amount was received from TNTC @ 19.5 per meter which costs to Rs.7,79,99,997/-. According to the AO the cost of 40 lakh meters of cloth @ 9.7 per meter costs to Rs.3.88 lakhs and hence, the assessee has earned gross profit of Rs.3,91,99,997/-. According to AO, there are additional costs in the shape of packing, transportation, overhead expenditure @ 1.70 per meter and therefore, he estimated the expenditure at Rs.68,00,000/- and computed undisclosed income at Rs.3,23,99,997/-. The AO computed and recorded in his assessment order as under: No. Name of parties from whom Metres Amount (Rs.) Purchases were made 1. M/s. Golden Mills, Somanur 8,52,011.15 86,12,499 2. M/s.Selvanayaki Textiles 5,31,915.00 49,99,990 3. Sri Meghana Industries 5,805.00 45,865 4. Sri P.M.Shah 8,499.50 58,646 5, Mangalam Textiles 26,015,50 2,05,522 6. Parasakthi Textiles 2,82,713.95 26,57,512 Total 17,06,960.80 1,65,80,034 The average cost per metre works out: 1,65,80,034 17,06,960.80 = Rs.9.7 per mtr Total quantity supplied to TNTC = 40,00,000 metres Amount received = Rs.7,79,99,997 Rate = Rs.19.5 Cost of 40 lakhs metres of cloth at 9.7 = Rs. 3,88,00,000 Amount received from TNTC = Rs.....7,79,99,997 GROSS PROFTT(Rs.7,79,99,997-Rs.3,88,00,000) = Rs.3,91,99,997 :: 12 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 He thus computed undisclosed income by allowing expenditure as under: Profit as calculated Rs.3,91,99,997 Less: Packing, Transportation etc Rs.28,00,000 2. Overhead expenditure Rs.40,00,000 Rs.68,00,000 Net income from this business Rs.3,23,99,997 Thereby he computed the net income and from undisclosed income from undisclosed sources at Rs.3,23,99,997/-. Aggrieved, assessee preferred appeal before theTribunal. 12. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the only argument of assessee is that how in a business of textile, the net profit rate comes to almost 50%. Ld. Counsel for the assessee only requested a reasonable rate in the trade which ranges from 5% to 10% can be estimated. He stated that in the retail trade, the profit rate is 5% to 10%, in case of wholesale supply of materials, the profit rate will be 1% to 4%. When this proposition was put to ld. Sr. Standing Counsel, Shri. M. Swaminathan, he only argued that the Assessing Officer can estimated profit on the basis of average cost of clothes purchased for which the assessee has not provided any details. We have gone though the arguments of both the sides as well as recording of fact by :: 13 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 the AO in the block assessment order and noticed that the profit rate adopted by AO on the amount of Rs.7,79,99,997/- computed by him at Rs.3,23,99,997/- is much higher. Hence, we direct him to re-compute the profit by applying profit @ 8% on the amount received from TNTC i.e., Rs.7,79,99,997/-. Hence, the Assessing Officer will re-compute the undisclosed income from supply of uniform cloth to TNTC by M/s. Prasanna Textiles and Chemicals. We direct the AO accordingly. 13. Coming to the next addition made by the AO for the block assessment for assessment year 1995-96 and challenged by the assessee vide ground no. 3.3, the addition of Rs.26,04,642/- as undisclosed investment made by the assessee. For this assessee has raised following ground No.3.3:- 3.3 The Assessing Officer grossly erred in making an addition of Rs.26,04,642/- as undisclosed investments made by the Appellant. 14. We have gone through the assessment order and noticed that the Assessing Officer has computed the undisclosed investment of Rs.26,04,642/- by observing as under: 33. The investment during the accounting period ending on 31 st March, 1995 and the sources thereof are computed as under Total assets as per Balance sheet as on 31/3/1995 Rs, 44,44,278 Less: Assets acquired during the year 1993-94 Rs.20,96,636 Assets acquired during 1993-94 Rs.23,47,642 :: 14 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Less: Sources available: Agricultural income Rs.2,08,000 Rs.21,39,642 Add: Share in the name of Sri Palanisamy Gounder In Talent Steel Industries Ltd. Rs.3,40,000 Add: Shares in the name of Suppathal in the Above company Rs.1,25,000 Total undisclosed investment for Asst, year 1995-96 Rs.26,04,642 From the above, it is noted that the Assessing Officer has taken the balance sheet figure of total assets as on 31.03.1995 at Rs.44,44,278/- and after reducing the assets acquired during the year end as on 31.03.1994 at Rs.20,96,636/-, which are already disclosed in earlier year and assessed in this block assessment and also the sources available on account of agricultural income at Rs.2,08,000/- assessed the balance assets as undisclosed income amounting to Rs.21,39,642/-. We noted that the assessee for this year has disclosed agricultural income of Rs.5 lakhs and commission income of Rs.10 lakhs and assessee has also filed return of income for the relevant assessment year 1995-96, in which he has included this amount of Rs.15 lakhs for which no credit was given by the Assessing Officer. We are of the view that this amount should be allowed as credit and balance amount of Rs.6,39,642/- can be treated as unexplained investment in the assets acquired during the year and the same can be treated as unexplained and undisclosed income of the :: 15 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 assessee for the assessment year 1995-96. We direct the AO accordingly. 15. The next issue in assessment year 1995-96, is as regards to investment in shares in the name of assessee’s father Sri Palanisamy Gounder in Talent Steel Industries Ltd of Rs.3,40,000/- and investment in shares in the name of assessee’s mother Smt. Suppathal of Rs.1.25 lakhs, neither ld. Counsel for the assessee made any arguments nor tried to prove, but only stated that these are old shares carried forward from earlier years and no new investment is made and even revenue has not brought out any material that these are new investment. Even now before us, ld. Sr. Standing Counsel Shri. N. Swaminathan, could not produce any evidence in support of the block assessment framed and addition made and hence, we presume that these are same shares which are added in earlier year i.e., assessment year 1994-95 and no new shares are purchased by assessee in this year in the name of his father Sri Palanisamy Gounder and his mother Smt. Suppathal. Hence, in this year two addition sustained i.e. in regard to application of profit rate on receipts from TNTC as decided above in para 14 and sum of Rs.6,39,642/-, which will be treated as undisclosed income of the assessee for the assessment year 1995-96. We direct the AO accordingly. :: 16 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 16. The next issue of addition of undisclosed income in the hands of the assessee being Binami of M/s. M.P Textiles, M/s. Talent Cotton & Yarn Corporation and M/s. Akashri Yarn & Fabrics Co., and arrived at profit from the above concerns at Rs.36,05,425/-. For this, assessee has raised following ground nos. 4.1 & 4.2 for assessment year 1996- 97:- 4.1 The Assessing Officer went wrong in treating M/s. M.P. Textiles, M/s. Talent Cotton & Yarn Corporation and M/s. Akashri Yarn & Fabrics Company as Benami concerns of the Appellant. 4.2 In any event, there is no basis or material to arrive at a profit of Rs.36,06,425/- 17. We noted that the Assessing Officer during the course of block assessment proceedings has noted the payment received from TNTC by M/s. M.P Textiles, M/s. Talent Cotton & Yarn Corporation and M/s. Akashri Yarn & Fabrics Co., amounting to Rs.1.65 crores and also received from TNTC for conversion and printing charges i.e., Sri Lakshmi Textiles at Rs.14,63,654/-, Sri Selvanayaki Textiles at Rs.14,85,991/- and Prasanna Textiles & Chemicals at Rs.16,39,034/-, aggregating to Rs.45,88,379/-. The assessee received total sum of Rs.2,10,88,379/-. The AO computed the gross profit at Rs.60,49,584/- vide his block assessment order in page 17 & 18 as under: :: 17 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 AMOUNT RECEIVED FROM TNTC: A)For supply of yarn:- 1. MP Textiles 2. Talent Cotton & Yarn Co. Rs, 1,65,00,000 3. Prasanna Textiles &Chemicals Conversion & Printing charges;- 1.Sri Lakshmi Textiles Rs.14,63,354 2.Sri Selvanayaki Textiles Rs.14,85,991 3.Prasanna Textiles &Chemicals Rs.16,39,034 ----------------- Rs.45,88,379 Total Rs.2,10,88,379 Profit: Amount received from TNTC Rs.2,10,88,379 Less; Cost: 1.Total length of cloth supplied in metres 14,37,740 Cost at Rs.9.17 per m Rs.1,31,84,075 Add: Printing charges for sarees 230400@ Rs.8.05/m Rs.18,54,720 Rs, 1,50,33,795 (This is included in the payments to TNTC by way of conversion and printing charges) Profit Rs.60,49,584 The Assessing Officer thereafter computed expenses and computed net profit and added to the returned income as undisclosed income at Rs.36,05,425/- as under: Profit as computed Rs.60,49,584 Less: Transportation At Rs.0.70 on 14,37,740 = 10,06,418 Other expenses At Rs.1 on 14,37,740 = 14,37,740 Rs.24,44,158 Profit from the supply of sarees and dhothies for Pongal 95 Rs.36,05,425 :: 18 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Aggrieved, assessee came in appeal before Tribunal. 17.1 Before us, Ld. Counsel for the assessee made similar arguments as was made in the case of Prasanna Textiles & Chemicals, where it has treated that the profit rate should be applied, as is applied in that case. In this perspective, Ld. Sr. Standing Counsel also adopted the same arguments. As this issue is covered, we direct the AO to apply 8% on the gross receipt of Rs.2,10,88,379/- and assess accordingly. 18. The next issue in this appeal of assessee is as regards to the Assessing Officer estimating undisclosed income from supply of Sarees/dhothies to Peelamedu Society at Rs.27,50,392/-. For this assessee raised the following Ground No.4.3:- 4.3 Equally erroneous is the action of the Assessing Officer in estimating the undisclosed income from supply of sarees and Dhotis to Peelamedu Society at Rs.27,50,392/-. 19. Brief facts are that the AO while estimating block assessment noted that the proprietor of M/s Talent Cotton & Yarn Corporation Shri. C. Shanmugasundaram supplied 4,92,700 sarees and 5,29,100/- dhothies to Peelamedu Weaver’s Cooperation Production and Sales Society for free distribution scheme of Government of TamilNadu for Pongal, 1995. The assessee received total amount for supply of these :: 19 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 material at Rs.4,89,23,875/-. The Assessing Officer noted that the assessee has made payment of Rs.4,87,04,981/- to the following parties: S.No. Name of the party 1. M/s. Srivans Enterprises Rs.3,55,54,125 2. Drawn by self-cheque Rs. 88,25,856 3. Prasanna Textiies & Chemicals Rs. 13,97,000 4. Talent Cotton &Yarn Corpn. Rs. 19,25,000 5. Golden Mills Rs. 10,00,000 Total Rs, 4,87,04,981 The Assessing Officer computed the profit earned i.e., gross profit at Rs.94,01,275/- which reads as under: THE PROFIT EARNED IS WORKED OUT AS UNDER: A. PROFIT EARNED FROM THE TRANSPORTATION IN THE NAME OF.Sri.C. Shanmughasundaram : Amount received from Peelamedu Society .. Rs.4,89,23,875 No.of sarees supplied : 492,700 Cost of sarees at Rs.48 Rs.2,36,49,600 No.of dhotis supplied : 529,100 Cost of dhotis at Rs.30/- Rs.1,58,73,000 Total Rs.3,95,22,600 PROFIT Rs.94,01,275 And accordingly after allowing expenses of packing and transportation cost, computed net profit of Rs.25,73,922/- by observing as under: On the basis of the above data, the packing and transportation cost and other Expenses on the lines discussed in para 10,2 above are worked out as under; No.of sarees 492,700 Length in metres 492700x4.5 22,17,150 No.,of dhotis 529100 Length in metres 529100x3,4 17,98,940 :: 20 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Total length in metres 40,16,090 Profit worked out at para 17 94,01,275 Less: transportation charges- Re,0-70x 40,16,090 = 28,11,263 2.Other expenses at Rs.1x 40,16,090 = 40,16,090 ------------------ Total expenses 68,27,353 Net income relating to Sri C. Shanmughasundaram's Transactions 25,73,922 Similarly the Assessing Officer also estimated the profit earned from the Proprietor concern of M/s. Akashri Yarn & Fabrics Company Shri. P. Balasubramaniam and computed net income of Rs.1,76,470/- as under: PROFIT EARNED IN THE NAME OP SRI P. BALASUBRAMANIAM: Amount received from Peelamedu Society Rs.77,52,250 No,of sarees supplied = 107,200 Cost at Rs.48 per saree for 107,200 Rs.51,45,600 No.of dhothies supplied = 45,000 Cost at Rs.30 per dhothi Rs.13,50,000 Total expense's Rs.64,95,600 PROFIT Rs.12,56,650 Less: The cost on transportation and other expenses Are estimated as in the case of Sri Shanmughasundaram: Length of sarees suppllied is 107200. Total length =107200x4.5 4,82,400 Length of dhotis 45000 x 3.4 1,53,000 Total length 6,35,400 Transportation cost: @Re.0-70 on 6,35,400 = Rs.4,44,780 Other expenses :@ Re, 1x535400 = Rs.6,35,400 Total expenses allowed Rs.10,80,180 Net income from transactions of P. Balasubramaniam Rs.1,76,470 :: 21 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Total profit from transactions with Peelamedu Society: Rs.27,50,392 19.1. Simply, the Assessing Officer computed the income from supply of uniform cloth, sarees and dhothies to TNTC and Peelamedu Society in the name of different persons and total profit earned from the transactions with Peelamedu Society was at Rs.27,50,392/-. Aggrieved, assessee preferred appeal before the Tribunal against this addition. 20. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the Assessing Officer has computed the profit at very reasonable amount from these two transactions of Rs.27,50,392/- and for this neither ld. Counsel for the assessee nor Ld. Sr. Standing Counsel made any further arguments. Even, assessee could not produce any contradicting evidence to delete this addition. Hence, we have no hesitation in confirming the addition. This issue of this assessee appeal is dismissed. 21. The next issue in this appeal of assessee is as regards to addition made by AO while completing block assessment and computing :: 22 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 undisclosed income at Rs.2,08,19,000/-. For this issue, assessee has raised following ground No.4.4:- 4.4 The Assessing Officer grossly erred in making an addition of Rs.2,08,19,000/- as undisclosed investments made by the Appellant. 22. Brief facts are that, as the AO while completing block assessment and going through the balance sheet as on 31.03.1996, noted that the assessee has total assets of Rs.2,40,61,847/- and as against the assessee’s capital account of Rs.30,20,011/- and two loans one from Palanisamy Gounder, assessee’s father at Rs.5 lakhs and one Sha Sunnilal Veesaji & Co amounting to Rs.5,41,836/- and there are liabilities from different persons of Rs.2 crores. The Assessing Officer has not accepted the balance sheet of the assessee and assessed the total asset as unexplained income for the assessment year 1996-97 at Rs.2,08,19,000/- by computing as under: 41. In conclusion, I may state that the assessee's claim that he received Rs.2,00,00,000/-from the individuals and from the two societies mentioned above is not acceptable as the assessee has failed to prove the genuineness and creditworthiness of the creditors.The unaccounted investments of the assessee during the accounting year 1995-96 relevant to the assessment year 1996-97 is computed as under': Total assets as per balance sheet Rs.2,40,61,847 Less: Sundry debtors: Sri C. Shanmughasundaram Rs. 11,15,569 Rs.2,29,46,278 Less: Assets acquired during :: 23 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 the accounting Years; 1993-94. = 20,96,636 1994-95 = 23,47,042 Rs. 44,44,278 Rs.1,85,02,000 Less: Source for investment: Agricultural income as discussed above Rs. 2,08,000 Rs.1,82,94,000 Add: Shares in the name of Sri Palanisamy Gounder in Talent Paper & Boards Ltd, Rs. 3,00,000 3. Shares In the name of Smt. Suppathal In the above company Rs. 3,00,000 Rs. 1,88,94,000 4.Shares in the name of Sri C, Shanmughasundaram in the above company Rs. 19,25,000 Total unexplained investments for assessment Year 1996-97 representing the assessee's Undisclosed income of the relevant year Rs.2,08,19,000 Aggrieved, assessee preferred appeal before Tribunal. 23. Before us, Ld. Counsel for the assessee explained that Tribunal has computed the income on account of income earned from sale of sarees and dhothies for assessment year 1995-96 and 1996-97 and estimated the income of 8%, the AO should be given direction to give credit of the same after re-computing income of the respective assessment years, out of the total unexplained income added by AO of Rs.2,08,19,000/- for this assessment year. Ld. Sr. Standing Counsel :: 24 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 however opposed giving credit and stated that the issue can be remitted back to the file of the AO for re-deciding and income to be assessed accordingly. 24. After hearing rival contentions and going through the facts of the case, we direct the AO to re-compute the income on account of supply of sarees/dhothies in the case of Binami earned from M/s. Prasanna Textiles & Chemicals for assessment year 1995-96 in the name of Shri L. Arumugham and the income earned in the case of M/s. M.P. Textiles, M/s. Talent Cotton & Yarn Corporation and M/s. Akashri Yarn & Fabrics Company, on account of supply of sarees/dhothies to Peelamedu Society and M/s. Akashri Yarn & Fabrics Company, M/s. Talent Cotton & Yarn Corporation and M/s. M.P. Textiles etc for assessment year 1995-96 and the profit estimated from those concerns can be given credit against the addition of unexplained investment for assessment year 1996-97 to the extent of Rs.2,08,19,000/-. If this amount exceeds the income of those concerns, to that extent this amount will be sustained as an addition of unexplained income. The AO is directed accordingly. This issue of assessee’s appeal is directed to decide in terms of the above and allowed for statistical purposes. :: 25 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 25. The next issue in this appeal of assessee is as regards to addition made by AO being difference in income of Rs.79,93,134/- for assessment year 1996-97, as per the directions of the Commissioner of Income tax, Central-II, while passing and giving directions u/s. 263 of the Act, while revising the assessment. For this, assessee has raised following Ground No.4.5:- 4.5 The Assessing Officer went wrong in adding the difference in income of Rs.79,93,134/- as income of the Appellant for the Assessment Year 1996-1997 as per the directions of the Commissioner of Income Tax (Central) for the Assessment Year 1996-1997. 26. Brief facts are that the Assessing Officer made this addition of Rs.79,93,134/- on the simple direction of Commissioner of Income Tax, Central-II, while passing order u/s. 263 of the Act, by observing in para 43 as under: “43. The Commissioner of Income tax (Central)-II in his order under section 263 as held that the Sri L. Arumugham, prop: Prasanna Textiles & Chemicals and Sri C. Shanmughasundaram, Prop: 'Talent Colton & Yarn Company were carrying on the business and the businesses actually belonged to the assessee. The details of total income assessed in their hands as a protective measure in Central Circle are as under: L. Arumugham Rs.4,06,60,580 C. Shanmughasundaram Rs.47,10,090 Rs, 4,53,70,670 Since it has been held that these two businesses in the name of these two persons actually belong to the assessee, and as protective assessments are made in their Individual hands, the difference of Rs,79,93,134, have been directed-to De assessed in the hands of the assessee vide his order u/s 263 in C.N0.1744/1Q/98-99/C.II dated 23/3/1999. Hence this will be assessed in the hands of the assesses. As could be seen from the records, the assessee do not appear to have filed any appeal against the order under section 263.” :: 26 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Aggrieved, assessee came in appeal before Tribunal. 27. We have heard rival contentions and gone through facts and circumstance of the case. Ld. Counsel for the assessee before us made submissions that while framing block assessment u/s. 158 r.w.s. 158BC r.w.s. 158BD of the Act, no effect to the order of 263 can be given to the order of CIT and the effect of this order of 263 cannot be given in this order while framing block assessment, consequent to search conducted u/s. 132(1) of the Act. We are of the view that this addition is not as per provisions of the Act and no effect can be given to the revision order passed u/s. 263 of the Act, while framing block assessment u/s. 158 r.w.s. 158BC r.w.s. 158BD of the Act. Hence, we direct the AO to delete this addition. This issue of the assessee’s appeal is allowed. 28. In the result, the appeal of the assessee is partly allowed and partly allowed for statistical purposes as indicated against each of the grounds. 29. Coming to other three appeals in IT(SS)A Nos. 68/Chny/2007, 92 & 93/Chny/1998. Since, all the additions made in these three appeals in the hands of Shri. P. Balasubramaniam in M/s. Akashri yarn & :: 27 :: I.T.(SS)A Nos.71 & 68/Chny/2007 & I.T.(SS)A Nos.92 & 93/Chny/1998 Fabrics Company in IT(SS)A No. 68/Chny/2007, In Shri. C. Shanmugasundaram in M/s. Talent Cotton & Yarn Corporation in IT(SS)A No. 93/Chny/1998 and Shri. L. Arumugham in M/s. Prasanna Textiles & Chemicals in IT(SS)A No. 92/Chny/1998 are already considered in the hands of P. Damodharasamy in IT(SS)A No. 71/Chny/2007 as benami and accordingly all the additions in these appeals are deleted and substantive additions are confirmed in the case of Shri P. Damodharasamy. Hence, these appeals have become infructuous and dismissed. 30. In the result, the appeal filed by the assessee in IT(SS)A No.71/CHNY/2007 is partly allowed for statistical purposes and in IT(SSA) Nos.92 & 93/CHNY/1998 and 68/CHNY/2007 are dismissed as infructuous. Order pronounced in the open court on 31 st October, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 31 st October, 2022 JPV आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.