ACIT, Hyderabad V. Sri S.Venkateswarulu(Huf), Secunderabad

ITSSA 91/HYD/2003

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9137 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 10 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2010
• Assessment Year: misc
• Appeal Filed On: 20-06-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Search and seizure; Opportunity of cross examination; Peak credit; Corroborative evidences; Block assessment
• Section: 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER 1)IT(SS)A.88/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11,(1), HYDERABAD VS SHRI S. RAVI KUMAR, (INDIVIDUAL), SECUNDERABAD (APPELLANT) (RESPONDENT) 2) IT(SS)A. 89/HYD/2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI S. RAVI KUMAR, (HUF), SECUNDERABAD (APPELLANT) (RESPONDENT) 3)IT(SS)A.90/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI S. VENKATESWARULU, (INDIVIDUAL) (APPELLANT) (RESPONDENT) 4)IT(SS)A.91/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI S. VENKATESWARULU, (HUF), SECUNDERABAD (APPELLANT) 5)IT(SS)A.92/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI S. SRINIVASULU, (INDIVIDUAL), SECUNDERABAD (APPELLANT) (RESPONDENT) 6)IT(SS)A.93/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI S. SRINIVASULU, (HUF), SECUNDERABAD (APPELLANT) (RESPONDENT) IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 2 2 7)IT(SS)A.94/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI NAVEEN KUMAR, SECUNDERABAD (APPELLANT) (RESPONDENT) 8)IT(SS)A.95/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SHRI S. SUDHAKAR, , HUF, SECUNDERABAD (APPELLANT) (RESPONDENT) 9)IT(SS)A.96/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SMT. S. VIJAYALAKSHMI, SECUNDERABAD (APPELLANT) (RESPONDENT) 10)IT(SS)A.97/HYD./2003 1998 -89 TO 1997-98 & 1.4.98 TO 30.6.1998 ACIT, CIRCLE 11, (1), HYDERABAD VS SMT. S. SHOBA RANI, SECUNDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. VASUNDHARA SINHA, DR RESPONDENT BY: SHRI S. RAMA RAO O R D E R PER BENCH THESE 10 APPEALS PREFERRED BY THE REVENUE ARE DIRECT ED AGAINST THE COMMON ORDER PASSED BY THE CIT(A) GUNTUR (CAMP AT HYDERABAD) DATED 31.3.2003 AND PERTAINS TO BLOCK ASSESSME NT YEARS COVERING THE PERIOD FROM 1988 -89 TO 1997-98 & 1.4.9 8 TO 30.6.1998. OUT OF THESE 10 APPEALS, FOUR APPEALS ARE RELATING TO HUF AND OTHER SIX APPEALS ARE RELATING TO DIFFERENT INDIVIDUALS OF THE SAME FAMILY. SINCE IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 3 3 CERTAIN COMMON ISSUES ARE INVOLVED, THESE ARE CLUBBED TOG ETHER, HEARD TOGETHER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR TH E SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE ARE THAT THERE WAS SEARCH ACT ION IN THESE CASE OF THE ASSESSEES U/S 132 OF THE IT ACT ON 30.6.199 8 AND CONCLUDED ON 21.8.1998. DURING THE COURSE OF SEARCH SHRI S. RAVI KUMAR ADMITTED ON BEHALF OF ALL THE ASSESSEES, UNDISCLOSE D INCOME OF RS.1 CRORE BUT IMMEDIATELY RETRACTED FROM THE DISCLOSUR E AND FILED AFFIDAVITS ON 13.10.98 SCALING IT DOWN TO RS.24.40 LAK HS. FINALLY, THE RETURNS WERE FILED FOR THE BLOCK PERIOD 1988-89 TO 19 97-98 AND UPTO 30.6.1998 ADMITTING UNDISCLOSED INCOME OF RS.23,97 LAKH S IN THE AGGREGATE FOR ALL THE MEMBERS. THE ASSESSING OFFICER CAST A CONSOLIDATED DAY BOOK OF SEVERAL CATEGORIES OF UNACCOUNTE D AND BOGUS TRANSACTIONS AND I) ARRIVED AT THE PEAK UNDISCLOSED INCOME OF RS.64.09 LAKH S WHICH WAS SCALED DOWN TO RS.55.53 LAKHS IN THE FINAL COMPUTATIO N. II) ESTIMATED INTEREST INCOME AT RS.8.52 LAKHS ON UNDISCLOSED INCOME INTRODUCED AS CREDITS BY THE ASSESSEE AND III) DISALLOWED INTEREST TO THE TUNE OF RS.6.18 LAKHS ON CRED ITS/CHITS ENTERED IN THE REGULAR BOOKS, WHICH WERE VERIFIED AND FOUND NOT TO BE GENUINE. 2.1. THE TOTAL UNDISCLOSED INCOME THUS AMOUNTING TO R S.70.24 LAKHS WAS APPORTIONED BETWEEN THE 10 ASSESSEES IN THE SAME RATIO IN WHICH ADMITTED 2.2. THE PARTICULARS OF INCOME DISCLOSED/ASSESSED ARE AS F OLLOWS: IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 4 4 NAME OF THE ASSESSEE INCOME RETURNED (RS. IN LAKHS) INCOME ASSESSED (RS. IN LAKHS) SHRI S. RAVI KUMAR, INDIVIDUAL 2.30 6.74 S. RAVIKUMAR HUF 1.93 5.65 S. SRINIVASULU, INDIVIDUAL 0.48 1.40 SRINIVASULU, HUF 3.21 9.42 S. VENKATESWARULU, IND 2.25 6.59 S. VENKATESWARULU, HUF 5.53 16.21 S. NAVEEN KUMAR 2.12 6.21 S. SUDHAKAR HUF 4.33 12.69 S. VIJAYALAKSHMI 1.24 3.63 SMT. S. SHOBA RANI 0.56 1.66 2.3. THE BASIC DOCUMENT PREPARED BY THE ASSESSING OFFICER WAS THE CONSOLIDATED CASH FLOW STATEMENT GROUPING TOGETHER T HE FOLLOWING CATEGORIES OF TRANSACTIONS, EACH CATEGORY BEING LISTED IN THE OTHER ANNEXURE. THE ANNEXURE 2 & 3 RELATE TO ENTRIES IN SEI ZED MATERIAL, NOT FOUND IN THE REGULAR BOOKS: A) ENTRIES IN SLIPS MADE ON THE 11 TH AND 12 TH OF EVERY MONTH AT THE TIME OF AUCTIONS OF CHITS. SUCH SLIPS HAVING BEEN FOUND F OR THE PERIOD 11.4.96 TO 5.2.1998 (ANNEXURE 2) B) UNACCOUNTED RECEIPTS AND PAYMENTS (ANNEXURE 3) C) CHITS IN THE REGULAR BOOKS IN THE NAMES OF BENAMIS OWNE D UP BY THE ASSESSEES(ANNEXURE 4) D) CERTAIN TRANSACTIONS OF CHIT SUBSCRIBERS (ANNEXURE 5) AND CR EDITS (ANNEXURE 6) RECORDED IN THE REGULAR BOOKS WHICH WERE EXAMINED BY THE ASSESSING OFFICER AND NOT FOUND TO BE GENUINE. 2.4. ALL THESE IMPUGNED TRANSACTIONS WERE ARRANGED I N DATE WISE AND THE PEAK OF THE TRANSACTIONS QUANTIFIED AT RS.55.53 LAKHS. THOUGH ALL THE ASSESSEES WERE NOT INVOLVED WITH THE MAKING OF T HIS STATEMENT AT IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 5 5 THE TIME OF ASSESSMENT, THEY ACCEPTED THAT A CONSOLIDATED CASH FLOW, TREATING ALL ENTRIES AS ONE, AND APPORTIONING THE PE AK UNDISCLOSED SOURCES AMONG THEM IS APPROPRIATE, CONSIDERING THE COMPLE XITY OF TRANSACTIONS DONE BY THE GROUP ENTRIES WITH OUTSIDERS AND BETWEEN THEMSELVES. SUBJECT TO THIS CONDITION THAT CERTAIN ENTR IES FROM THE REGULAR BOOKS (BOTH SEIZED AND NOT SEIZED) HAVE TO BE EXCLUDED. 3. AGGRIEVED AGAINST THIS THE ASSESSEE WENT IN APPEAL B EFORE CIT(A) AND CIT(A) DELETED THE ENTIRE ADDITIONS. AG AINST THIS DELETION OF ADDITION BY THE CIT(A), THE REVENUE RAISED THE FOLL OWING GROUNDS : 2. THE CIT(A) ERRED IN HOLDING THAT THE ENQUIRIES WERE PREMATURELY CONCLUDED. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT SUMMONS WERE ISSUED TO THE CONCERNED PERSONS AND TH E ASSESSEE WAS ALSO REQUESTED TO SUBSTANTIATE THE CREDITS/CHIT CONTRIBUTIONS IN RESPECT OF THE CASES WHERE THE SUMMONS WERE RETURNE D UN SERVED/NO REPLIES ARE RECEIVED. 3. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACTS THAT VARIOUS OPPORTUNITIES HAVE BEEN GIVEN TO THE ASSESSEE TO PR OVE THE GENUINENESS OF THE TRANSACTION, AS DETAILED IN THE ASSESSMENT ORDER FOR WHICH THE ASSESSEE FAILED TO PRODUCE ANY EVIDEN CE. 4. THE CIT(A) OUGHT TO HAVE SUSTAINED THE ADDITION CON SIDERING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE ANY SUPPORTING EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTION. 4. THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) GONE BEYOND THE SEIZED RECORDS FOR GIVING RELIEF TO THE ASSESSEE. HE CONSIDERED THE REGULAR BOOKS WHICH WAS NOT SEIZED BUT IN THE CUSTODY OF THE ASSESSEE AND HE ARRIVED THE PEAK CREDIT AS 6.5.1998 O N THE BASIS OF RECORD NOT SEIZED AT RS.36.13 LAKHS. SHE SUBMITTED THAT THE CIT(A) OBSERVED THAT THE FOLLOWING CREDITS NOT TAKEN INTO ACCOU NT WHILE ARRIVING AT THE PEAK: IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 6 6 1. UMA RANI 11.7.96 RS.60,000 2. YSR 11.11.96 RS.60,000 3. D. VIJAYA 11.6.96 RS.50,000 4. P.J. NAIDU 11.8.97 RS.2 LAKHS 5. UDAY RAJU 11.8.97 RS.1.5 LAKHS 6. S. YADHAGIRI RS.1 LAKHS 5. SHE SUBMITTED THAT THE CIT(A) WRONGLY ACCEPTED TH E VERSION OF THE ASSESSEE AND THE CIT(A) HAS WRONGLY OBSERVED THAT THE PEAK CREDIT HAS TO BE WORKED OUT AFTER DULY INCLUDING ALL T HE RECEIPTS AND PAYMENTS RECORDED IN THE SEIZED MATERIAL AT ANNEXURE II. ACCORDING TO THE DR FINDINGS IN PARA 7(B) OF THE ORDER OF THE CI T(A) IS INCORRECT. ACCORDING TO THE DR THE ASSESSING OFFICER CONSIDERED ALL ENT RIES FOR ARRIVING PEAK CREDIT, THERE IS NO NECESSITY TO DEDUCT PAY MENT FROM THE RECEIPTS AND ACCORDING TO THE DR, ALL SIX ENTRIES RELATIN G TO PAYMENTS ARE CONSIDERED BY ASSESSING OFFICER WHILE CONSIDERING THE PEAK CR EDIT. THE DR SUBMITTED THAT SIX SUBSCRIBERS OF CHIT WERE NOT PROPER LY EXPLAINED BY THE ASSESSEE HENCE IT WAS UNEXPLAINED SOURCE OF INCOME. SHE SUBMITTED THAT THE ASSESSING OFFICER ISSUED SUMMONS TO THE CREDITORS U /S131 OF THE IT ACT TO FURNISH PARTICULARS ABOUT THE GENUINENE SS ABOUT THE CREDIT. IN RESPONSE TO THIS SOME OF THE CREDITORS HAVE CONFIRMED THEIR INVESTMENT, SOME OF THEM HAVE NOT RESPONDED AND SOME OF THEM HAVE DENIED ANY CREDIT IN THEIR NAME IN THE BOOKS OF THESE ASSESSEES. IN FEW CASES, SUMMONS U/S 131 WERE RETURNED UN-SERVED WITH THE RE MARK PERSON IS NOT EXISTING/ADDRESS IS NOT CORRECT. THESE DISCRE PANCIES WERE PUT TO THE ASSESSEES VIDE ASSESSING OFFICER NOTICE U/S 143 (2) DATED 26/5/2000 DIRECTING THE ASSESSEES TO FURNISH ITS REPLY BY 5 /5/2000. THE ASSESSEES DID NOT RESPOND FOR THE SAME. ONCE AGAIN, ENQUIR IES RESULTS WERE PUT TO ASSESSEE VIDE A SWORN STATEMENT RECORDED ON 6/6/2000. IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 7 7 THE ASSESSEE WAS ALSO PROVIDED WITH THE REPLIES RECEIVED FROM THE CREDITORS WHO STATED CONTRARY TO THE ASSESSEES VERSIONS. TH E ASSESSEES GROUP IN ITS REPLY DATED 29/6/2000 HAS SIMPLY SUBMITTED THE ACCOUNT COPIES OF SUCH CREDITORS AS APPEARING IN THEIR BOOKS OF ACCOU NTS INSTEAD OF PRODUCING CREDITORS OR CONFIRMATION FROM THEM. THE ASSESSEES GROUP HAS BEEN OFFERED CROSS EXAMINATION OF THESE CREDITORS SEV ERAL TIMES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FINAL SHOW CAUSE NOTICE DATED 11/8/2000 WAS GIVEN TO PROVE THE GENUINENESS OF THE CREDIT. THE ASSESSEES GROUP NOT AVAILED THE SAME. ON THE OTHER HAND, THE ASSESSEE FILED A LETTER DATED 23/8/2000 STATING THAT MOST OF THE AMOUNTS ARE RECEIVED IN CHEQUES AND ARE RECORDED IN THE BOOKS OF ACCO UNTS AND FEW OF THE CREDITS WERE IN CASH. FEW OF CREDITORS WERE NOT A CCEPTED THE TRANSACTIONS FOR VARIOUS REASONS. HOWEVER, THE FACTS ARE TH AT THE TRANSACTIONS ARE THROUGH BANK AND THE ASSESSEE GROUP PROPO SES TO CONTINUE IN THE FINANCE BUSINESS, THEY NEED THE COOPERATI ON OF THE CREDITORS AND THE ASSESSEES GROUP DOES NOT PROPOSES TO SUBJECT THE CREDITORS TO HARASSMENT. THEREBY SHE SUBMITTED THAT THE ASSESSEE THEMSELVES AVOIDED THE CROSS EXAMINATION OF THE CREDITORS AND NOT SOUGHT FOR CROSS EXAMINATION. HOWEVER, BEFORE THE CIT(A ) TAKEN A PLEA THAT THE ASSESSING OFFICER HAS NOT GIVEN THE OPPORTUNITY OF CROSS EXAMINATION WHICH IS ACTUALLY INCORRECT. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT WHATEVER CREDITS OBTAINED IN THE NAME OF SUCH CHIT GROUPS SUBSCRIBERS AS UNDISCLOSED INVESTMENT OF THE ASSESSEES G ROUP. BEING SO, THE FINDINGS OF THE CIT(A) IN PARA 8.(III) AND 8.(IV) ARE FACTUALLY INCORRECT AND THE CIT(A) IS NOT CORRECT IN HOL DING THAT THE ASSESSEE HAS GIVEN A DUE REPLY WHICH IS NOT RECORDED IN THE ASSESSMENT ORDER AND THE INQUIRY CAUSED WAS NOT PUT TO ASSESSEE FOR CO MMENTS AND REPLY GIVEN BY THE ASSESSEE IS NOT RECORDED IN THE ORDER NOR WAS THE IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 8 8 REPLY GIVEN PARTY WISE ARE VERIFIED AND FURTHER OPPO RTUNITY OF CROSS EXAMINATION WAS NOT GIVEN. 6. SHE SUBMITTED THAT THE CIT(A) IN PARA 8.(IV) RE CORDED THAT INQUIRIES ARE PREMATURELY CONCLUDED AND THE DISCUSSION T HAT TOOK PLACE WITH THE ASSESSEE HAS NOT BEEN MADE PART OF THE ASSESSMENT ORDER. SUCH FINDINGS OF THE CIT(A) ARE NOT BACKED BY REASONS AN D THERE IS NO BASIS FOR THIS CONCLUSION. SHE DREW ATTENTION TO THE P AGE 25 AND 27 OF THE ASSESSMENT ORDER AND SUBMITTED THAT CIT HAS NOT GIVEN ANY BASIS TO HOLD THE ASSESSEE AS DISCHARGED THE BURDEN CAST UPON THEM AND THE CIT(A) CANNOT PRESUME THAT ENTRIES ARE CORRECT WITHOUT ANY BASIS SHE SUBMITTED THAT THERE IS A CLEAR CUT FINDING RECORDED BY THE ASSESSING OFFICER IN PAGE 25-30 WHICH WAS NOT PROPERLY APPRAISED BY THE CIT(A). SHE SUBMITTED THAT IF THE ASSESSING OFFICER REQUIRED TO G IVE AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE, THE BEST , THING THE CIT(A) IS TO DO IS TO SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO GIVE AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE . THE BURDEN CAST UPON THE ASSESSEE HAS NOT BEEN DISCHARGED. IT IS THE DU TY OF THE ASSESSEE TO RECONCILE THE FIGURES AND IT IS NOT OF THE ASSESSI NG OFFICER. IF ANY FURTHER ENQUIRY IS REQUIRED TO BE DONE, THE CIT( A) SHOULD HAVE DONE IT OR HE COULD HAVE ASKED THE ASSESSING OFFICER TO CARRY OU T FURTHER ENQUIRY. IN THIS CASE, THE ASSESSEE HAS NOT GIVEN THE COR RECT ADDRESS OF THE PARTIES. SHE SUBMITTED THAT WITHOUT HAVING THE PROPER ADDRESS OF THE PARTIES, HOW THE ASSESSING OFFICER CAN PROVIDE AN OPPO RTUNITY OF CROSS EXAMINATION OF CHIT SUBSCRIBERS. ACCORDING TO DR THE LEARNED CIT(A) SETTING AN IMPOSSIBLE TASK TO THE ASSESSING OFFICER T O GIVEN AN OPPORTUNITY TO CROSS EXAMINATION OF THE PARTIES TO THE ASSESSEES WHEN THE PARTIES ARE NOT GIVEN THEIR CORRECT ADDRESS. ACCORDIN G TO DR IT IS AN IMPOSSIBLE EXPECTATION FROM THE CIT(A). SHE RELIED ON THE JUDGEMENT OF IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 9 9 RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ELEGANT HOME (P) LTD. (259 ITR 232) WHEREIN HELD THAT : (I) THAT WHEN THE ASSESSEE WAS ASKED TO PROVE THE G ENUINENESS OF THE CASH CREDITS, IT HAD FAILED TO DISCHARGE THE BURDEN. WH EN THE ASSESSEE HAD FILED THE RETURN TO RESPONSE TO THE NOTICE AFTER SEARCH, THE INCOME WHICH NOT BEEN TAXED OR SHOWN COULD BE ASSESSED AS UNDISCLOS ED INCOME OF THE ASSESSEE . 7. FURTHER SHE RELIED ON THE JUDGEMENT OF THE SAME HIGH COURT IN THE CASE OF CIT VS. AJAY KUMAR SHARMA WHEREIN IT W AS HELD THAT : MERELY BECAUSE SOME ENTRIES ARE SHOWN IN THE BOOKS OF ACCOUNT THAT DOES NOT PROHIBIT THE ASSESSING OFFICER FROM TAXING THAT AMOUNT IN THE BLOCK PERIOD, IF THAT AMOUNT HAD NOT BEEN TAXED IN THE REGULAR ASSESSMENT. WHEN THE CASH CREDITS ARE NOT TAXED IN THE RELEVANT ASSESSMENT YEARS, THEY CAN BE TREATED AS UNDISCLOSE D INCOME AND CAN BE TAXED AFTER SEARCH IN THE BLOCK PERIOD . 8. ACCORDING TO HER FALSE ENTRIES MADE BY THE ASSESSES AL SO FALLS UNDER THE PURVIEW OF UNDISCLOSED INCOME. FURTHER, SHE SUBMITTED THAT THE ASSESSEES HAVE USED THEIR OWN FUND IN THE BUSINE SS AS CREDITORS THERE IS NO QUESTION OF PAYMENT OF INTEREST THERE OR R EPAYMENT OF THAT AMOUNT. FURTHER, INTEREST PAYMENT TO CREDITORS RECORD IN REGULAR BOOKS WAS FOUND BY ASSESSING OFFICER AS NOT GENUINE AND TREATED THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE. SHE SUBMITTED THAT THE RE ARE FOUR WORDS APPEAR IN THE SEIZED MATERIALS MARKED AS NILVA, SR FNC ETC. WHICH IS RELATING TO THE INTEREST EARNED BY ASSESSEES AM OUNTING TO RS. RS.8,52,451 TREATED AS UNDISCLOSED INCOME OF THE ASSESSEES. T HIS INTERESTS WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT AND ARISING FROM THE SEIZED MATERIAL AND THE CREDIT APPEARING IN THESE SEIZE D MATERIAL ARE NOT INDEPENDENT OR DIFFERENT FROM THAT OF THE CREDIT APP EARED FROM THE OTHER SEIZED MATERIAL OR IN THE REGULAR BOOKS OF THE ASSESSEE G ROUP. ACCORDING TO DR, INTERESTS IN THE SEIZED MATERIAL REPRESENT THE R ECEIPT OF INTEREST OF THE ASSESSEES OWN FUNDS AND ACCORDING TO THE DR, AMOUNT O F IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 10 10 RS.8,52,451 AND IT IS TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 9. REGARDING INTEREST ON CREDIT IN THE NAME OF THE OTHERS, IT WAS SUBMITTED THAT SOME OF THE CREDITS APPEARED IN THE R EGULAR BOOKS OF THE ASSESSEE WERE NOT GENUINE AND TREATED AS SAME AS ASSESSE ES GROUP UNDISCLOSED INCOME. THE INTEREST WAS CALCULATED FROM THE DATE OF CREDIT TO THE DATE OF DEBIT AT RS.6,18,803/- AND TO BE TREA TED AS UNDISCLOSED INCOME OF ASSESSEES GROUP. 10. SHE SUBMITTED THAT THE ASSESSING OFFICER CONSIDERED A LL THE WITHDRAWALS WHILE WORKING OUT THE PEAK CREDIT. SHE DREW OUR ATTENTION TO THE PAGE 8 OF THE ASSESSMENT ORDER. SHE SUBMITTED TH AT THERE ARE CHIT FUNDS IN THE REGULAR BOOKS IN THE NAMES OF BENAMI TO BE CONSIDERED AS UNDISCLOSED INCOME BECAUSE THE NATURE OF BENAMI CAME IN THE LIGHT OF SEARCH ACTION. 11. ON THE OTHER HAND THE LEARNED AUTHORISED REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE GROUP WAS CARRYING ON BUSIN ESS OF ADVANCING AMOUNTS AND CARRYING ON THE CHIT ACTIVITIES IN VARIOUS NAMES. SEPARATE REGULAR BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR ALL THE CONCERNS. THE REGULAR RETURNS OF INCOME WERE ALSO FILED UPTO THE ASSESSMENT 1998-99 BY THE TIME THE SEARCH AND SEIZURE OPER ATIONS WERE CONDUCTED. THE AUTHORITIES ISSUED NOTICE U/S 158BC/BD TO THE ASSESSEE. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION S, THE ITO AUTHORITIES RECORDED A STATEMENT FROM THE ASSESSEE. IN T HE INITIAL STATEMENT, DECLARATION WAS MADE MENTIONING THAT THE TO TAL UNDISCLOSED INCOME WOULD BE RS.1 CRORE INCLUDING THE ALLEGED INVEST MENT MADE IN THE CONSTRUCTION OF BUILDING. A LETTER DATED 13.10.19 98 WAS FILED IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 11 11 IMMEDIATELY RETRACTING THE SAID STATEMENT. EACH OF THE ITEMS WERE EXPLAINED AND THE GROUP OFFERED AN UNDISCLOSED INCOME O F RS.24.40 LAKHS. STATEMENTS WERE ANNEXED TO THE SAID LETTER FO R ARRIVING AT THE UNDISCLOSED INCOME OF RS.24.40 LAKHS. THE ITEMS INCLUDE THE PEAK BALANCES OF THE RECEIPTS AND PAYMENTS NOT RECORDED IN VA RIOUS BOOKS OF ACCOUNT, UNDISCLOSED FINANCES RECEIVED FROM VARIOUS OTHERS A ND THE CHITS HELD BY THE GROUP IN THE NAMES OF VARIOUS PERSONS. THE INCOME OF RS.23,97,207/- WAS ARRIVED AT THE ENTIRE GROUP. A COP Y OF THE LETTER ALONG WITH THE ANNEXURES IS SUBMITTED FOR PERUSAL. AT THE TIME WHEN THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S 158BC IN THE GR OUP, THE FAMILY MEMBERS FILED RETURNS OF INCOME IN FORM 2B FOR THE BLOCK PERIOD OFFERING THE UNDISCLOSED INCOME AT RS.21,67,211. THE D ETAILS ARE MENTIONED AT PAGE NO.2 OF THE ASSESSMENT ORDER. THE A SSESSING OFFICER ISSUED NOTICES AND SOUGHT FOR EXPLANATION. THE ASSESSEE FIL ED A LETTER DATED 29.6.2000. COPIES OF THE LETTERS DATED 29.6.20 00 AND 21.8.2000 ARE ENCLOSED WHEREIN THE ASSESSEE SUBMITTED DETAILED EXPLA NATIONS. THE ASSESSING OFFICER AFTER SCRUTINY OF THE INFORMATION IS OF THE VIEW THAT: A) THE OPENING BALANCE OF RS.10,87,000 HAS NO RELEVANCE A ND THEREFORE HE IS NOT INCLINED TO ADD THE UNDISCLOSED IN COME OFFERED TO THE EXTENT OF RS. RS.10,87,000 B) OUT OF THE SEIZED MATERIAL, THE PAPERS MARKED AS SR/A2 AN AMOUNT OF RS.5,87,000 REPRESENTS DEPOSITS AND DO NOT REPRESENT WITHDRAWALS. SR/A2 IS ANNEXED TO THE ASSESSMENT ORDER AS ANNEXURE-2 C) THE ASSESSING OFFICER ARRIVED AT THE DEPOSITS AND WITHDRAWALS AS PER THE SEIZED MATERIAL MARKED AS SVCP/A1/1 WHICH IS ANNEXED TO THE ASSESSMENT ORDER AS ANNEXURE-3. IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 12 12 D) THE INVESTMENTS IN CHITS IS ANNEX4ED AS ANNEXURE-4 AND 5 TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER ARRIVED AT THE CREDITS AND DEBITS IN RESPECT OF ENQUIRIES CONDUCTED B Y HIM AT RS.43,67,798/- E) THE EXCESSIVE INCOME EARNED ON THE UNDISCLOSED CREDITS IS ARRIVED AT BV THE ASSESSING OFFICER AT RS.8,52,451/- F) THE ASSESSING OFFICER ALSO ADDED THE UNDISCLOSED INCOME ARISING OUT OF INTEREST OF THE CREDITS INTRODUCED IN THE NAMES OF OTHERS AT RS.6,18,803/- 11.1. THE ASSESSING OFFICER PREPARED A CASH FLOW STATEME NT INCORPORATING THE RECEIPTS AND PAYMENTS WHICH ACCORDING TO HIM ARE NOT ACCOUNTED FOR OR REPRESENT UNDISCLOSED INCOME. THE PEAK OFAMOUT ACCORDING TO THE ASSESSING OFFICER WAS ON 12.3.98 AMOUNTING TO RS.55,53,620/-. THIS AMOUNT IS ADDED BY THE ASSESSING OFF ICER. THE PEAK WORKING IS AT ANNEXURE I TO THE ASSESSMENT ORDER. THE ASSESSEE FILED THE APPEAL CONTESTING ALL THE FIVE ADDITIONS MAD E BY THE ASSESSING OFFICER. 12. WITH REGARD TO THE WORKING OF THE PEAK, THE A SSESSEE SUBMITTED THAT OUT OF RECEIPTS AND PAYMENTS TAKEN BY TH E ASSESSING OFFICER THERE ARE DEPOSITS AND WITHDRAWALS WHICH ARE AL READY RECORDED IN THE BOOKS OF ACCOUNT. IN CAN BE SEEN FROM THE SEIZED DOCU MENTS. A STATEMENT IS SUBMITTED BEFORE CIT(A). THIS IS CERTIFIED AFTER VERIFICATION BY THE ASSESSING OFFICER. AS ON 12.3.98 THE PEAK AMOUN T WORKS OUT AT RS.26,57,296 THESE AMOUNTS WERE ALSO CONSIDERED BY THE A SSESSING OFFICER AS THE UNDISCLOSED INCOME. FIRSTLY, THE ASSESSEE SUBM ITTED THAT THE ENTRIES MADE IN THE REGULAR BOOKS OF ACCOUNT CANNOT BE SUBJECT MATTER OF ASSESSMENT U/S 158BC OF THE IT ACT. THE VERIF ICATION OF THE IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 13 13 STATEMENTS DID NOT REVEAL ANY UNDISCLOSED INCOME. THE ENQUIRIES MADE DID NOT REVEAL THAT THE AMOUNT ADDED BY THE ASSESSING O FFICER REPRESENTS UNDISCLOSED INCOME. 12.1. THE ABOVE STATEMENT IS WITH REGARD TO THE BO OKS OF ACCOUNT SEIZED BY THE DEPARTMENT. 12.2. THE ASSESSEE SUBMITTED THAT THERE ARE CERTAIN BOO KS OF ACCOUNT WHICH WERE NOT SEIZED BY THE AUTHORITIES. THE ASSESSEE SUBMITTED THAT A STATEMENT SHOWING RECEIPTS AND PAYMENTS TAKEN INTO ACCOUNT BY THE ASSESSING OFFICER INSPITE OF THE FACT THAT SU CH FIGURES ARE FOUND IN THE REGULAR BOOKS MAINTAINED AND NOT SEIZED. THE PEAK OF ALL SUCH ITEMS AMOUNTS TO RS.1,18,804/-. AGGRIEVED OF THE AMOUNTS AS PER THE LIST WORKS OUT TO RS.27,76,1000. 13. THE ASSESSING OFFICER WORKED OUT INTEREST ON THE CR EDITORS AND TREATED THE SAME AS THE UNDISCLOSED INCOME. THE ASSE SSEE SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN HO LDING THAT THERE IS ANY INTEREST INCOME EARNED ON THE INCOME OFFERED AS UNDISCLOSED INCOME. THIS IS PURELY A PRESUMPTION AND IMAGINATION O F THE ASSESSING OFFICER AND NOT BASED ON ANY MATERIAL SEIZED DURING T HE COURSE OF SEARCH AND SEIZURE OPERATIONS. THEREFORE, THE ASSESSING OF FICER IS NOT JUSTIFIED IN MAKING ANY ADDITION. 14. THE SAID DOCUMENT SR/A2 REFLECTS THE RECEIPTS AND PAYMENTS EFFECTED AS ON 11 TH AND 12 TH OF EACH MONTH, THE DETAILS OF WHICH ARE EXPLAINED BEFORE THE ADI, INV. UNIT 2 (2) DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. A DETAILS WORKING OF THE PEAK CREDIT WAS ALSO SUBMITTED AND IN THE LATTER SUBMITTED BEFORE THE ADI, THE IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 14 14 UNDISCLOSED INCOME WAS ARRIVED AT RS.24,44,000 WHILE DO ING SO, THE ASSESSEE HAS TAKEN INTO CONSIDERATION BOTH THE RECEIPTS AND PAYMENTS. WHILE WORKING OUT THE PEAK, BY THE ASSESSING OFFICER, TH E FOLLOWING PAYMENTS/WITHDRAWALS HAVE BEEN CONSIDERED: S.NO. NAME DATE RS. 1 UMA RANI 11.11.96 60,000 2 YSR 11.11.96 60,000 3 MRS. VIJAYA DATTA 11.6.97 50,000 4 PGR NAIDU 11.8.97 2 LAKHS 5 UDAYA RAI 11.8.97 1.5 LAKHS 6 S. YADHGIRI 11.11.97 1 LAKH 7 K. R. KUMAR 11.11.97 1 LAKH 8 Y. LAKSHMINARAYANA 11.2.98 25,000 9 K. SRI HAIR 11.12.97 1 LAKH 10 NEELIMA 11.12.97 20,000 11 LUKMAN 5.2.98 50,000 15. THESE AMOUNTS HAVE NOT BEEN TAKEN INTO CONSIDERAT ION BY THE ASSESSING OFFICER AT THE TIME OF WORKING OUT THE PEA K. HE SUBMITTED THAT IN SO FAR AS K. R. KUMAR AND Y. LAXMINARAYANA IT EMS NO.7 & 8 ABOVE ARE CONCERNED, THEY ARE CHIT. IN SO FAR AS SRI HAR I, NEELIMA AND LUKMAN ARE CONCERNED, THE AMOUNTS ARE CLAIMED AS REPAYME NTS BASED ON THE ASSESSEE SUBMISSIONS BEFORE THE ADI. AS THESE FIVE ITEMS ARE NOT PART OF SEIZED MATERIAL, THE ASSESSEE HAS TAKEN INTO CONSIDERATION THE FIRST SIX ITEMS OF PAYMENT AND A REVISED WORKING IS SUBMITTED. ACCORDING TO THE REVISED WORKING THE PEAK CASH CREDIT WOR KS OUT TO RS.28,62,187 AS ON 11.7.97. IT MAY PLEASE BE SEEN THAT ANOTHER AMOUNT OF RS.1,18,804/-0 THE WORKING FOR WHICH WAS ALR EADY SUBMITTED BEFORE THE ASSESSING OFFICER WAS NOT CONSIDERED BY THE ASSESSEE WHILE ARRIVING AT THE PEAK OF RS.28,62,187/- AS THE CIT(A) EXPRESSED A VIEW THAT CREDIT FOR RS.1,18,804/- WOULD NOT BE GIVEN. IF THE ASSESSEE CLAIM FOR THE LATER SIX ITEMS AND THE PEAK OF RS.1,18,804/- IN RESPECT OF THE ITEMS NOTED AS NOT FOUND BY THE ASSESSING OFFICER ARE CONSID ERED, THE IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 15 15 PEAK CREDIT WOULD BE REDUCED FURTHER. IT IS THEREFORE , SUBMITTED THAT THE ASSESSING OFFICER WORKING OF THE PEAK IS NOT CORRECT. HE PRA YED TO CONFIRM THE ORDER OF THE CIT(A). 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATE RIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE CIT(A). THE FINDINGS OF CIT(A) THAT THERE IS NO MAT ERIAL TO CONCLUDE THAT THE ASSESSEES WERE SYSTEMATICALLY INTRODUCING FICTITIOU S ACCOUNTS IN THEIR REGULAR BOOKS. HE ALSO GIVEN A FINDINGS THAT THE ENTRIES OF CHITS AND CREDITS CULLED OUT FROM REGULAR BOOKS AND LISTED IN ANNEXURE 5 & 6 HAVE TO BE EXCLUDED FOR THE PURPOSE OF ARRIVING AT TH E PEAK CREDIT. THERE IS NO BASIS FOR HIM TO HOLD LIKE THIS. THE ASSESSING OFFICER GIVEN ALL OPPORTUNITY TO THE ASSESSEES TO PROVE THE GENUINENESS OF THE CREDIT IN THE FORM OF CHIT INVESTMENTS. THERE ARE DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES WITH REGARD TO INVESTMENT IN CHIT S SUBSCRIPTIONS, REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THE ASSESSING OFFICER ISSUED SUMMONS U/S 131 TO ALL SUBSCRIBERS ASKING THEM TO PRODUCE CONFIRMATIONS REGARDING THEIR INVESTMENT AS SHOW N IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES. MAJORITY OF THE SUBSCRIBERS CONF IRMED THE INVESTMENTS. FEW NOTICES WERE RETURNED BACK WITH A REMA RK PERSON NOT EXISTING/ADDRESS NOT CORRECT. ALL THESE DISCREPANCIES HAVE BEEN INFORMED TO THE ASSESSEES VIDE ASSESSING OFFICER LETTER DATED 2.5.2000. NO RESPONSE FROM THE ASSESSEES. FURTHER, ONE MORE OPPORTU NITY WAS GIVEN TO THE ASSESSEE ON 6.6.2000. ON THIS OCCASION, STATEM ENT RECORDED FROM THE ASSESSEE U/S 131 OF THE ACT AND ASSESSING O FFICER REQUIRED THE ASSESSEE TO FURNISH A CONFIRMATION LETTER F ROM THE CHIT SUBSCRIBERS. THE ASSESSEE NOT AVAILED THE OPPORTUNITY. FU RTHER, SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE ON 11.8.2000 AND ASSESSING O FFICER MADE IT CLEAR TO THE ASSESSEE THAT IN THE EVENT OF NON F URNISHING IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 16 16 CONFIRMATION LETTER, THE CREDITS APPEARING IN THE NAME OF SUCH CHIT SUBSCRIBERS ARE TO BE TREATED AS UNDISCLOSED INCOME OF THE A SSESSEE. NO RESPONSE FROM THE ASSESSEE. HOWEVER, THE ASSESSEE SUBMIT TED A REPLY ON 23.8.2000 WHICH READS AS FOLLOWS: WITH REGARD TO THE ENQUIRIES CONDUCTED WITH THE F INANCE CREDITORS IT IS SUBMITTED THAT THE ASSESSEE GROUP I S CARRYING ON BUSINESS IN FINANCE. MOST OF THE AMOUNTS ARE RECEI VED THROUGH CHEQUES AND ARE RECORDED IN THE BOOKS OF ACCOUNT PR OPERLY. A FEW OF THE ITEMS ARE IN CASH. A FEW OF THE CREDITO RS FOR VARIOUS REASONS MIGHT HAVE NOT ACCEPTED THE TRANSACTIONS AS GENUINE. BUT MOST OF THE TRANSACTIONS OF THE CREDITORS WERE MADE THROUGH BANK ACCOUNTS. IT IS FURTHER SUBMITTED THAT AS THE ASSESSEE GROUP PROPOSES TO CONTINUE IN THE BUSINESS OF FINAN CE THEY NEED THE COOPERATION OF THE CREDITORS AND THE ASSESSEE G ROUP DOES NOT PROPOSE TO SUBJECT THE CREDITORS TO HARASSMENT BY T HE DEPARTMENT. THEREFORE, THE ASSESSEE DID NOT MENTIO N ANY TIME THAT HE WOULD BE CROSS EXAMINING THE CREDITORS EXAM INED BY THE DEPARTMENT. 17. HENCE THE ASSESSING OFFICER CONSIDERED ONLY CASH SUBSCRIPTION OF CHIT FOR WORKING OUT THE PEAK CREDIT AN D SAME TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. HE HAS EXCLUDED THE ALL THE AMOUNTS WHICH ARE CREDITED OTHER THAN CASH FOR WORKING O UT THE PEAK CREDIT. IN OUR OPINION, IN CASE OF CASH CREDIT, ASSESSEE R EQUIRED TO PROVE THE IDENTITY OF CREDITOR, GENUINENESS OF THE TRA NSACTIONS AND CREDIT WORTHINESS OF THE CREDITORS. IN CASE OF CERTAIN CREDITORS, WHO HAVE DENIED THE CREDIT OR SUMMONS U/S 131 DULY SERVED ON THE CREDITOR BUT NO REPLY WAS RECEIVED OR SUMMONS U/S 131 WAS RETURNED UN- SERVED, THEN IT IS TO BE CONSTRUED THAT ASSESSEES ARE FAILED TO DI SCHARGE THE BURDEN CAST UPON THEM. ONCE THE ASSESSEE FILED THE PAN, I NCOME TAX DETAILS, CONFIRMATION LETTERS OF THE PARTIES, THEN IT CAN BE SAID THE BURDEN CAST UPON THE ASSESSEES HAVE BEEN DISCHARGED. IN T HE PRESENT CASE, IN OUR OPINION, THE ASSESSEES HAVE NOT DISCHARGED TH E PRIMARY IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 17 17 BURDEN CAST UPON THEM. IN THESE CIRCUMSTANCES, IT IS TO BE CONSIDERED AS UNEXPLAINED INCOME IN THE HANDS OF THE ASSESSEE. THE PLEA OF THE ASSESSEES COUNSEL IS THAT THESE ENTRIES ARE APPEARING IN THE REGULAR BOOKS OF ACCOUNTS. AS SUCH IT CANNOT BE CONSIDERED AS UN DISCLOSED INCOME OF THE ASSESSEE. THIS ARGUMENT OF THE ASSESSEES COUNSEL IS DEVOID OF MERIT. THERE IS A SEARCH ACTION IN THE CASE OF THE ASSESSEES GROUP U/S 132 READ WITH 158BC OF THE ACT AND THIS IS AN INDEPENDENT SEARCH ACTION AND CONSEQUENT TO THIS SEARCH ACTION, THE AS SESSMENT WAS FRAMED U/S 132 READ WITH SEC.158BC ON THE BASIS OF EVI DENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTH ER DOCUMENTS OF SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WI TH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE. THE PROVISIONS OF CLAUSE (B) TO SEC.158B AS OPERATIVE PRIOR TO FIRST JUNE 2002 UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLION, JEWELLERY OR OTHER VALUA BLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUN T OR OTHER DOCUMENTS OF TRANSACTIONS, WERE SUCH MONEY, BULLION, JEW ELLERY OR VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTIONS REPRESENTS WHOLLY OR PARTLY INCOME OR PR OPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURP OSE OF IT ACT. SUCH CLAUSE (B) OF SEC.158B HAS BEEN AMENDED W.,E.F. SAI D DATE THAT THERE IS SPECIFICALLY PROVIDED THAT ANY EXPENSE, DEDUCTIO N OR ALLOWANCE CLAIMED UNDER THE SAID ACT WHICH IS FOUND TO BE FALSE SHAL L BE INCLUDED IN THE UNDISCLOSED INCOME AS DEFINED IN THAT CLAUSE. THIS DE FINITION IS EXHAUSTIVE DEFINITION. THE CIT (A) TOOK A NARROW VI EW THAT THE DEFINITION OF UNDISCLOSED COVERS ONLY EXPENDITURE RECORDED IN THE BO OKS WHICH IS PROVED TO BE NOT GENUINE AND DOES NOT COVER CREDITS. I N OUR OPINION, SINCE THE CLAIM OF THE CHIT SUBSCRIPTION IS MADE BY THE ASSE SSEES, THE ONUS LIES ON THEM NOT ONLY TO ESTABLISH THE IDENTITY O F THE PERSON MAKING THE CHIT INVESTMENT BUT ALSO THEIR CAPACITY TO MAKE SUCH INVESTMENT. IN IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 18 18 THE PRESENT CASE, AS DISCUSSED EARLIER, THERE IS NOTHING ON RECORD TO SHOW AS TO WHAT WAS THE FINANCIAL CAPACITY OF THE CREDITOR S, WHAT ARE THE SOURCES OF FUNDS TO INVEST AND WHETHER THEY HAVE THE CAP ACITY TO MAKE SUCH INVESTMENT. IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER HAS TO TREAT THEM AS UNEXPLAINED CREDIT IN THE HANDS OF THESE ASSESSEES. HOWEVER, IF THE CREDITS WHICH HAVE BEEN ADDED AS UN DISCLOSED INCOME, HAVE BEEN DULY DISCLOSED IN THE REGULAR BOO KS OF ACCOUNTS, FOR WHICH REGULAR RETURNS OF INCOME HAVE ALSO BEEN FILED AND IF NO MATERIAL HAS BEEN DETECTED AS A RES ULT OF SEARCH OR GATHERED AS A RESULT OF ENQUIRIES CONDUCTED ON THE BASIS OF MATERIAL DETECTED DURING THE COURSE OF SEARCH TO ES TABLISH THAT SUCH CHIT INVESTMENTS REPRESENT THE UNDISCLOSED INC OME OF THE ASSESSEE, IN THAT EVENT, THAT CHIT INVESTMENT CANNO T BE CONSIDERED AS UNDISCLOSED INCOME IN BLOCK ASSESSMEN T. SIMILARLY, IF THERE IS NO MATERIALS HAVE BEEN FOUND DURING THE SE ARCH INDICATING THAT INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE WAS FALSE , NO ADDITION IN BLOCK ASSESSMENT WAS CALLED FOR. ON THE OTHER HAND, MERELY, SOME ENTRIES IN THE BOOKS OF ACCOUNTS IF SHOWN, DOES NOT PROHIB IT THE ASSESSING OFFICER TO TAX THAT AMOUNT IN THE BLOCK PERIOD, IF THAT AMOUNT REPRESENTS BOGUS CREDIT AND IT HAS NOT BEEN TAXED IN THE REGULAR ASSESSMENT. WHEN THE BOGUS CASH CREDIT NOT TAXED IN THE R ELEVANT ASSESSMENT YEARS, THEY CAN BE TREATED AS UNDISCLOSED INCOME AN D CAN BE TAXED AFTER SEARCH IN THE BLOCK PERIOD AS HELD BY RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. AJAY KUMAR SHARMA (259 ITR 24). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER ONLY TH AT CHIT INVESTMENT WHICH WERE FOUND TO BE NOT GENUINE THROUGH SEARCH ACTION AND TREAT IT AS UNDISCLOSED INCOME IN THAT BLOCK PERIOD PROVIDED IF THESE CHITS WERE NOT SUBJECT TO TAX IN THE REGULAR ASSESSMENT AND THERE CANNOT BE DOUBLE TAXAT ION. IT(SS)A-88 TO 97 OF 2003 S/SHRI S. RAVI KUMAR AND OTHER 3 HUFS AND SIX INDIV IDUALS 19 19 CONSEQUENTLY, CORRESPONDING INTEREST DISALLOWANCE T O BE MADE ON THE SAME BASIS. 18. IN THE RESULT, REVENUE APPEALS PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT : 30 .6. 2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE JUNE, 2010 COPY FORWARDED TO: 1. SHRI S. RAVI KUMAR, INDIVIDUAL, S. RAVIKUMAR HUF, S. SRINIVASULU, INDIVIDUAL, SRINIVASULU, HUF, S. VENKATESWARULU, HUF, SHRI S. VENKATESWARULU, INDIVI DUAL S. NAVEEN KUMAR, S. SUDHAKAR HUF, S. VIJAYALAKSHMI, SMT. SHOBA RANI, 11-1-339, SEETHAPALMANDI, SECUNDERA BAD 2. CIT(A) GUNTUR, CAMP AT HYDERABAD 3. DCIT, HYDERABAD, ACIT, CIRCLE 11(1), HYDERABAD 4. CIT, HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, HYDERABAD NP