Sri G Subhash Chandra Bose, Visakhapatnam V. The DCIT, Central Circle-1(1), Visakhapatnam

ITSSA 97/VIZ/2002

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8349 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-09-2010
• Assessment Year: misc
• Appeal Filed On: 22-05-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Keywords: Unexplained investment; Invalid notice; Peak credit; Block assessment; Capital receipt
• Section: 132; 15

Judgement Text

ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER IT(SS)A NO.97/VIZAG/2002 BLOCK PERIOD 1.4.1988 TO 26.11.1998 G. SUBHASH CHANDRA BOSE, VISAKHAPATNAM VS. DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, VISAKHAPATNAM (APPELLANT) PAN NO:ACYPG 6086 R (RESPONDENT) IT(SS)A NO.98/VIZAG/2002 BLOCK PERIOD 1.4.1988 TO 26.11.1998 DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, VISAKHAPATNAM VS. G. SUBHASH CHANDRA BOSE, VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO:ACYPG 6086 R ASSESSEE BY: SHRI I. KAMA SASTRY, CA DEPARTMENT BY: SHRI T.H. LUCAS PETER, CIT (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 08.03.2002 PASSED BY LEARNED CIT(A)-I, HYDERABAD AND THEY RELAT E TO THE BLOCK PERIOD FROM 1.4.1988 TO 26.11.1998 2. THE ASSESSEE HAS URGED FOLLOWING EFFECTIVE GROU NDS OF APPEAL BEFORE US IN THE ORIGINAL GROUNDS OF APPEAL:- 1. INVALID NOTICE: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S APPRECIATED THE LEGALITY OF NOTICE UNDER SECTION 15 8BC DATED 29.03.1999 THE NOTICE UNDER SECTION 158BC IS INVALID AND BAD IN LAW. ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 2 OF 12 2 . UNEXPLAINED INVESTMENT IN PURCHASE OF TIMBER THE ADDITION SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON ACCOUNT OF UNEXPLAINED INVES TMENT IN PURCHASE OF TIMBER FOR THE FINANCIAL YEAR 1996-9 7 IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE AND IS BAD IN L AW. 3. INTRODUCTION OF MONEY UNDER THE GUISE OF AGRICULTURAL INCOME THE ADDITION SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON ACCOUNT OF AGRICULTURAL INCO ME IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS BAD IN LAW. 4. UNEXPLAINED INVESTMENT IN PANDURANGAPURAM SITE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S NOT APPRECIATED THE FACTS OF THE CASE WHILE SUSTAINING THE ADDITION OF RS.1,77,013/- ON ACCOUNT OF UNEXPLAINED INVESTME NT IN PANDURANGAPURAM SITE. THE ASSESSEE HAS ALSO RAISED FOLLOWING ADDITIONAL G ROUND BY FILING A PETITION: 1 THE ENTIRE ASSESSMENT IS VOID AB INITIO FOR WANT OF JURISDICTION AS PROVIDED UNDER SECTION 132 (9A) OF THE INCOME TAX ACT, 1961. FOR THIS PROPOSITION RELIANCE IS PLA CED ON THE DECISION OF THE ALLAHABAD BENCH OF ITAT IN THE CASE OF MONGA METALS PVT. LTD VS. ASST. CIT (2000) 67 TTJ (ALL) 2 47. SINCE THE ADDITIONAL GROUND IS A LEGAL GROUND WHICH DOES NOT REQUIRE VERIFICATION OF ANY FACT, WE ADMIT THE SAME. AT TH E TIME OF HEARING, THE LEARNED A.R DID NOT PRESS THE GROUND NO.4 IN THE OR IGINAL GROUNDS OF APPEAL RELATING TO THE UNEXPLAINED INVESTMENT IN PANDURENG APURAM SITE. ACCORDINGLY THE SAME IS DISMISSED AS WITHDRAWN. 3. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GRO UND BEFORE US IN THE REVISED GROUNDS OF APPEAL FILED BY IT. 2. AS THE ASSESSEE COULD NOT EXPLAIN THE DEPOSITS OF RS.39,13,389/- AS APPEARING IN THE S.B ACCOUNT NO. 8912 WITH BANK OF BARODA, VISAKHAPATNAM, THE ENTIRE AMOUNT WA S TREATED AS UNEXPLAINED INCOME AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. HOWEVER,THE CIT (A) DIRECTED TO T REAT THE ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 3 OF 12 PEAK CREDIT OF RS.9,01,353/- ONLY AS UNDISCLOSED IN COME INSTEAD OF TREATING THE ENTIRE DEPOSIT OF RS.39,13, 389/-. HENCE THE DECISION OF THE CIT (A) IS ERRONEOUS. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A TIMBER MERCHANT. THE REVENUE CARRIED OUT SEARCH AN D SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEE ON 26.11.1998 UNDER SECTI ON 132 OF THE ACT. THE ASSESSEE FILED HIS BLOCK RETURN IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 158BC OF THE ACT ADMITTING THE UNDISCLOSED INCOME AT RS.13,16,320/-. HOWEVER, THE ASSESSING OFFICER COM PLETED THE BLOCK ASSESSMENT BY DETERMINING THE UNDISCLOSED INCOME AT RS.1,57,19,613/-. THE APPEAL FILED BY THE ASSESSEE WAS PARTLY ALLOWED . HENCE BOTH THE PARTIES ARE IN APPEAL BEFORE US. 5. WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FIRS T. THE ASSESSEE HAS RAISED TWO GROUNDS ON LEGAL ISSUES. THE FIRST LEGA L ISSUE RELATES TO THE VALIDITY OF NOTICE ISSUED UNDER SECTION 158BC OF TH E ACT. ACCORDING TO THE ASSESSEE THE SAID NOTICE IS VAGUE AND INVALID SINCE THE CORRECT STATUS OF THE ASSESSEE AND THE CORRECT ASSESSMENT YEAR WERE NOT M ENTIONED IN THAT NOTICE. IN THIS REGARD THE LEARNED AUTHORISED REPRE SENTATIVE PLACED RELIANCE ON THE FOLLOWING CASE LAW: (A) ACIT VS. HOTEL BLUE MOON (2010) (229 CTR (SC) 219). (B) MANISH MAHESHWARI VS. ACIT (2007) (289 I TR 341) (SC) HOWEVER, ON A CAREFUL PERUSAL OF THE ORDERS OF HON' BLE SUPREME COURT, WE NOTICE THAT BOTH THE DECISIONS HAVE BEEN RENDERED O N A DIFFERENT CONTEXT AND HENCE IN OUR VIEW, THEY ARE NOT APPLICABLE TO T HE FACTS OF THE INSTANT CASE. IN THE CASE OF HOTEL BLUE MOON (SUPRA), THE ISSUE WAS ABOUT THE NECESSITY OF ISSUING NOTICE UNDER SECTION 143 (2) O F THE ACT BEFORE COMPLETING THE ASSESSMENT. IN THE CASE OF MANISH MA HESWARI (SUPRA), THE ISSUE WAS WITH REGARD TO THE ASSUMPTION OF JURISDIC TION UNDER SECTION 158BD OF THE ACT. HOWEVER, IN THE INSTANT CASE, THE ISSU E RELATES TO THE MISTAKES POINTED OUT IN THE NOTICE ISSUED UNDER SECTION 158B C OF THE ACT. ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 4 OF 12 5.1 ACCORDING TO THE ASSESSEE, THE ASSESSING OFFICE R HAS NOT MENTIONED THE CORRECT ASSESSMENT YEAR IN THE IMPUGNED NOTICE. THE ASSESSEE HAS FILED A COPY OF NOTICE DATED 29.3.1999 ISSUED UNDER SECTI ON 158BC TO THE ASSESSEE. ON EXAMINATION OF THE SAID NOTICE, WE FI ND THAT THE BLOCK PERIOD HAS BEEN CLEARLY MENTIONED AS 1.4.1988 TO 26.11.199 8. HENCE WE DO NOT FIND ANY MERIT ON THIS ALLEGATION. THE NEXT DEFECT POINTED OUT BY THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS NOT STRU CK OFF THE INAPPLICABLE STATUS MENTIONED IN THE SAID NOTICE. THE NOTICE UN DER SECTION 158BC HAS BEEN PRESCRIBED UNDER THE INCOME TAX RULES FOR ALL T YPES OF ASSESSEES AND HENCE ALL TYPES OF STATUS ARE MENTIONED IN THE NOTI CE. ACCORDINGLY, WHILE ISSUING THE NOTICE THE INAPPLICABLE STATUS HAS TO B E STRUCK OFF. 5.2 IN THIS REGARD THE LEARNED A.R PLACED RELI ANCE ON THE DECISION RENDERED IN ITSSA NO.5/V/06 DATED 19-02-2007. HOWE VER THE COPY OF SAID ORDER WAS NOT PLACED ON THE RECORD AND HENCE WE ARE UNABLE TO GO THOUGH THE SAME. IN ANY CASE, THE LEARNED AUTHORISED REPR ESENTATIVE FAIRLY CONCEDED THAT THE INSTANT ISSUE HAS BEEN DECIDED AG AINST THE ASSESSEE BY THE SPECIAL BENCH OF THE ITAT IN THE CASE OF SMT. M AHESH KUMARI BATRA VS. JCIT (2005) (95 ITD 152 (ASR) (SB). IN THAT CASE, THE SPECIAL BENCH HAS HELD THAT THE DEFECTS WITH REGARD TO THE ISSUE OF N OTICE UNDER SECTION 158BC OF THE ACT CANNOT RENDER BLOCK ASSESSMENT PROCEEDIN GS TO BE NULL AND VOID AND SUCH DEFECTS WILL BE RECTIFIABLE UNDER SECTION 292B OF THE ACT. THE DIVISION BENCH, BEING INFERIOR TO THE SPECIAL BENCH , IS BOUND BY THE DECISION OF SPECIAL BENCH. 5.3 IN THE INSTANT CASE THE SEARCH HAS TAKEN PL ACE IN THE HANDS OF THE ASSESSEE AND THE ASSESSEE HAS FILED THE BLOCK RETUR N IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 158BC OF THE ACT, MEANI NG THEREBY THE ASSESSEE HAS CORRECTLY UNDERSTOOD THE STATUS IN WHI CH THE IMPUGNED NOTICE HAS BEEN ISSUED. HENCE, IN VIEW OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF SMT. MAHESH KUMARI BATRA (SUPRA), WE DO NOT FIND ANY MERIT IN THE OBJECTIONS OF THE ASSESSEE AND ACCORDINGLY WE REJEC T THIS LEGAL GROUND RAISED BY THE ASSESSEE. ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 5 OF 12 6. THE NEXT LEGAL GROUND RAISED BY THE ASSESSEE REL ATES TO THE JURISDICTION OF THE AUTHORISED OFFICER TO RECORD ST ATEMENT FROM THE ASSESSEE. IN THIS REGARD THE ASSESSEE RELIED UPON THE PROVISIO NS OF SECTION 132(9A) OF THE ACT. THE SAID SECTION EXISTED AT THE RELEVANT P OINT OF TIME READS AS UNDER: (9A) WHERE THE AUTHORISED OFFICER HAS NO JURISDI CTION OVER THE PERSON REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (1), THE BOOKS OF ACCOUNT OR OTHER D OCUMENTS OR ASSETS SEIZED UNDER THAT SUB-SECTION SHALL BE HA NDED OVER BY THE AUTHORISED OFFICER TO THE INCOME-TAX OFFICER HAVING JURISDICTION OVER SUCH PERSON WITHIN A PERIOD OF FI FTEEN DAYS OF SUCH SEIZURE AND THEREUPON THE POWERS EXERCISABLE B Y THE AUTHORISED OFFICER UNDER SUB-SECTION (8) OR SUB-SEC TION (9) SHALL BE EXERCISABLE BY SUCH INCOME-TAX OFFICER. IN THE INSTANT CASE THE SEARCH HAS TAKEN PLACE ON 26 .11.1998 AND THE AUTHORISED OFFICER HAS TAKEN SWORN STATEMENT FROM T HE ASSESSEE ON 25.1.1999, I.E. AFTER THE STATUTORY PERIOD OF FIFTE EN DAYS. ACCORDINGLY IT WAS CONTENDED THAT THE AUTHORISED OFFICER HAS VIOLATED THE PROVISION OF SEC. 132(9A) AND HENCE THE ASSESSMENT IS VOID AB INITIO. IN SUPPORT OF THIS CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE P LACED RELIANCE ON THE DECISION OF ALLAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF MONGA METALS (P) LTD VS. ACIT (2000) (67 TTJ (ALL) 247). 6.1 WE HAVE CAREFULLY GONE THROUGH THE CASE OF MONG A METALS (P) LTD. IN THAT CASE THE AUTHORISED OFFICER HAS RECORDED STA TEMENTS AFTER CONCLUSION OF SEARCH AND THE BLOCK ASSESSMENT WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT SO RECORDED BY THE AUTHO RISED OFFICER. UNDER THESE FACTS, THE HON'BLE TRIBUNAL HAS HELD THAT THE AUTHORISED OFFICER DOES NOT HAVE POWER TO PERFORM THE FUNCTIONS OF THE ASSE SSING OFFICER AND SINCE HE HAS RECORDED STATEMENTS BY RETAINING THE DOCUMEN TS IN VIOLATION OF PROVISION OF SEC.132(9A), THE SAID SWORN STATEMENTS CANNOT BE RELIED UPON FOR MAKING ASSESSMENT UNDER SECTION 158BC OF THE AC T. THUS IT IS SEEN THAT THE ASSESSING OFFICER, IN THE ABOVE CITED CASE, HAS MADE THE ASSESSMENT ONLY ON THE BASIS OF STATEMENTS RECORDED BY THE AUT HORISED OFFICER AFTER THE ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 6 OF 12 STATUTORY PERIOD OF 15 DAYS FROM THE DATE OF SEARCH . HENCE IT WAS HELD THAT THE ASSESSING OFFICER COULD NOT HAVE RELIED UPON TH E SAID STATEMENTS. HOWEVER, IN THE INSTANT CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSING OFFICER HEREIN HAS PLACED RELIANCE SOLELY ON THE STATEMENTS RECORDED BY THE AUTHORISED OFFICER. TO BE PRECISE, THE ASSESSEE HAS NOT POINTED OUT ANY ADDITION THAT WAS MADE ONLY ON THE BASIS OF THE SAID STATEMENT. HENCE, IN OUR VIEW, THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF MONGA METALS (P) LTD., (SUPRA) DOES NOT APP LY TO THE FACTS OF THE INSTANT CASE. ACCORDINGLY, WE REJECT THIS LEGAL GR OUND ALSO. IN VIEW OF THE ABOVE, BOTH THE LEGAL GROUNDS RAISED BY THE ASSESSE E FAIL. 7. WE SHALL NOW DEAL WITH THE ISSUES RAISED BY THE ASSESSEE ON MERITS. THE FIRST ISSUE PERTAINS TO THE ADDITION MADE FOR U NEXPLAINED INVESTMENT MADE IN PURCHASES OF TIMBER DURING THE FINANCIAL YE AR 1996-97 RELEVANT TO THE ASSESSMENT YEAR 1997-98. IN THAT YEAR THE ASSES SEE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNT. IN THE RETURN OF INCOME THE ASSESSEE HAD SHOWN THE SALES AT RS.38,65,788/- AND PURCHASES AT RS.25, 25,000/-. THE ASSESSING OFFICER TREATED THE ENTIRE PURCHASES AS U NEXPLAINED INVESTMENT. HOWEVER, HE GAVE SET OFF OF RS.12,82,906/-, BEING T HE SALE PROCEEDS OF THE IMMEDIATELY PRECEDING YEAR AND ACCORDINGLY ADDED TH E BALANCE FIGURE OF RS.12,45,094/-. IN THE BLOCK RETURN FILED, THE ASS ESSEE HAD DECLARED THAT THERE WAS INFLATION IN PURCHASES AND SALES TO THE T UNE OF RS.12,47,630/- IN THE FINANCIAL YEAR 1996-97 WHICH NEUTRALIZED WITH E ACH OTHER AND ACCORDINGLY NO INCOME WAS OFFERED. BY PLACING RELI ANCE ON THE BLOCK RETURN, THE ASSESSEE CONTENDED BEFORE THE LEARNED CIT(A) TH AT, IF THE INFLATED PURCHASE AMOUNT IS REMOVED, THERE IS NO REQUIREMENT TO MAKE ANY ADDITION. HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED WITH THE SAID CONTENTIONS AND ACCORDINGLY HELD THAT THE INFLATED PURCHASE AMO UNT OF RS.12,47,630/- REPRESENTS UNDISCLOSED INCOME OF THE ASSESSEE. ACC ORDINGLY HE DIRECTED THE ASSESSING OFFICER TO ADOPT THE AMOUNT OF RS.12,47,6 30/- IN THE PLACE OF RS.12,45,094/-. ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 7 OF 12 7.1 BEFORE US, THE ASSESSEE SUBMITTED THAT THE SALES AMOUNT OF RS.38,65,788/- DECLARED BY THE ASSESSEE FOR THE FIN ANCIAL YEAR 1996-97 INCLUDES SALES OF RS.28,24,910/- MADE TO SHRI G.VEN KATESWARA RAO, THE BROTHER OF THE ASSESSEE. IN THE HANDS OF SHRI G.VEN KATESWARA RAO, THE ALTERNATIONS MADE IN THE BILLS WERE TAKEN COGNIZANC E OF AND ACCORDINGLY THE PURCHASES MADE FROM THE ASSESSEE WAS TAKEN AT RS.15 ,77,280/-. ACCORDINGLY THE LEARNED A.R CONTENDED THAT THERE WA S INFLATION OF SALES BY THE ASSESSEE/PURCHASES BY G.VENKATESWARA RAO TO THE EXTENT OF RS.12,47,630/- AND THE SAME WAS PROVED IN THE HANDS OF SHRI G.VENKATESWARA RAO. IN SUPPORT OF THIS CONTENTION, THE LEARNED A.R PLACED A COPY OF ORDER DATED 19-12-2003 PASSED BY LEARNED CIT(A)-I, VISAKHAPATNAM IN THE HANDS OF SHRI G.VENKATESWARA R AO. 7.2 WE HAVE CAREFULLY PERUSED THE RECORD AND WE NOTICE THAT THE ASSESSEE DID NOT CONTEND ABOUT THE INFLATION OF PUR CHASES BEFORE THE ASSESSING OFFICE. ONLY BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS TAKEN THE STAND OF INFLATION OF PURCHASES THAT TOO CONS EQUENT TO THE FINDING RECORDED IN THE CASE OF G.VENKATESWARA RAO. IN THE CASE OF G.VENKATESWARA RAO, THE PURCHASE BILLS WERE FOUND A LTERED IN ORDER TO INFLATE THE PURCHASES, WHICH MEANS THAT THE SALES B ILL ISSUED BY THE ASSESSEE TO G.VENKATESWARA RAO HAS DEPICTED CORRECT AMOUNT ONLY. THE ALTERATION HAS TAKEN PLACE ONLY AT THE END OF SHRI G.VENKATESWARA RAO AND THERE WAS NO SUCH ALTERATION AT THE SIDE OF THE ASS ESSEE. HENCE THERE CANNOT BE ANY INFLATION IN THE SALES FIGURE REPORTE D BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DID NOT MAINTAI N ANY BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION AND HENCE THE CONT ENTION OF INFLATION OF SALES COULD NOT BE PROVED BY HIM. EVEN, FOR A MOME NT, IF IT IS ASSUMED THAT THERE WAS INFLATION IN SALES FIGURE, THE SAID FACT DOES NOT NECESSARILY MEAN THAT THERE WAS CORRESPONDING INFLATION IN THE PURCH ASE FIGURE ALSO. HENCE WE ARE UNABLE TO ACCEPT THE THEORY OF INFLATION OF PURCHASES WHICH WAS PROPOUNDED BY THE ASSESSEE ON THE BASIS OF FINDINGS GIVEN IN THE HANDS OF SHRI G.VENKATESWARA RAO. IT IS ALSO PERTINENT TO NO TE THAT EVEN AFTER TAKING THE STAND OF INFLATION OF PURCHASES, THE ASSESSEE H AS TAKEN AN ALTERNATE PLEA ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 8 OF 12 OF CONCEDING AN ADDITION OF RS.2,74,518/- BY MAKING CERTAIN WORKINGS AND IN THE SAID WORKINGS, THE ASSESSEE HAS TAKEN THE PU RCHASE FIGURE AS RS.25,25,000/-, I.E. THE AMOUNT DISCLOSED BY HIM IN HIS RETURN OF INCOME. THE SAID WORKINGS ARE EXTRACTED IN PAGE 8 OF THE OR DER OF LEARNED CIT(A). 7.3 IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGRE E WITH THE THEORY OF INFLATION OF PURCHASES. THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES FOR MAKING INVESTMENT IN PURCHASES OF TIMBER MADE DURIN G THE FINANCIAL YEAR 1996-97 RELEVANT TO THE ASSESSMENT YEAR 1997-98. A CCORDINGLY THE ADDITION OF RS.12,45,094/- MADE BY THE ASSESSING OFFICER HAS TO BE SUSTAINED AND WE ORDER ACCORDINGLY. THE ORDER OF LEARNED CIT(A) IS MODIFIED ACCORDINGLY. 8. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE RELATES TO THE ADDITION MADE TOWARDS AGRICULTURAL INCOME. THE ASSESSING OF FICER ADDED A SUM OF RS.13,00,440/- WHICH IS WORKED OUT AS UNDER: ASST. YEAR FINANCIAL YEAR CLAIMED BY THE ASSESSEE ALLOWED 1994-95 1993-94 1,27,5 00 -- 1995-96 1994-95 1,73,6 40 -- 1996-97 1995-96 4,82,720 -- 1997-98 1996-97 2,17,690 -- 1998-99 1997-98 3,80,210 81,320 -------------- --- ---------- 14,81,760 81,320 ======== ======= NET ADDITION = RS.14,81,760/- (-) RS.81,3 20/- = RS.13,00,440/- THE LEARNED CIT(A) NOTICED THAT THE ASSESSEE HAS FI LED RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98 PRIOR T O THE DATE OF SEARCH, IN WHICH THE ASSESSEE HAD DECLARED THE AGRICULTURAL IN COME. HENCE, BY FOLLOWING THE DECISION OF HYDERABAD BENCH OF ITAT I N THE CASE OF ESSEM INTRA PORT SERVICES (P) LTD VS. ACIT (2000) (72 ITD 228), THE LEARNED CIT(A) HELD THAT THE AGRICULTURAL INCOME OF THE ABO VE SAID YEARS WOULD FALL OUTSIDE THE PURVIEW OF BLOCK ASSESSMENT PROCEEDINGS . ACCORDINGLY HE DELETED THE ADDITION OF AGRICULTURAL INCOME PERTAIN ING TO THE ASSESSMENT YEARS 1993-94 TO 1997-98. THE LEARNED CIT(A), HOWEV ER, EXAMINED THE CLAIM OF AGRICULTURAL INCOME IN ASSESSMENT YEARS 19 92-93, 1998-99 AND ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 9 OF 12 1999-2000, BUT WAS NOT CONVINCED WITH THE EXPLANATI ON OF THE ASSESSEE AND MADE ADDITION TO RS.4,09,700/- WHICH IS AS UNDER: ASST. YEAR 1992-93 (F.Y 91-92) - 98,000 ASST. YEAR 1998-99 (F.Y 97-98) - 1,33,900 ASST. YEAR 1999-2000 (F.Y 98-99) - 1,77,800 --------------- 4,09,700 ======== A COMPARISON OF THE DETAILS OF ADDITION MADE BY THE ASSESSING OFFICER AND THE DETAILS OF ADDITION MADE BY LEARNED CIT(A) WOUL D SHOW THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION TOWARDS AGRICULTURAL INCOME PERTAINING TO THE ASSESSMENT YEARS 1992-93 AND 1999 -2000. IT IS ALSO NOT EMANATING FROM THE RECORD WHETHER THE FIRST APPELLA TE AUTHORITY HAS GIVEN ANY NOTICE OF ENHANCEMENT IN ORDER TO MAKE ADDITION FOR THE TWO YEARS MENTIONED ABOVE. NO DISCUSSION ABOUT ENHANCEMENT I S FINDING PLACE IN THE ORDER OF LEARNED CIT(A). IN THESE CIRCUMSTANCES THE ADDITION OF RS.98,000/- RELATING TO THE ASSESSMENT YEAR 1992-93 AND RS.1,77 ,800/- RELATING TO THE ASSESSMENT YEAR 1999-2000 MADE BY LEARNED CIT(A) AR E NOT IN ACCORDANCE WITH LAW AND HENCE THE SAID ADDITIONS ARE LIABLE TO BE DELETED. WE ORDER ACCORDINGLY. 8.2 NOW WE ARE LEFT WITH THE ADDITION OF RS.1,3 3,900/- RELATING TO THE ASSESSMENT YEAR 1998-99. FOR THAT YEAR, THE ASSESS EE HAD DECLARED AN AGRICULTURAL INCOME OF RS.3,80,120/-. THE ASSESSIN G OFFICER DETERMINED THE AGRICULTURAL INCOME OF THE ABOVE SAID YEAR AT RS.81 ,320/- AND ADDED THE BALANCE AMOUNT AS THE UNDISCLOSED INCOME OF THE ASS ESSEE. THE LEARNED CIT(A) DETERMINED THE AGRICULTURAL INCOME AT RS.2, 46,310/- AND ACCORDINGLY SUSTAINED THE ADDITION OF BALANCE AMOUNT OF RS.1,33 ,810/- (WRONGLY MENTIONED AS RS.1,33,900/-). THOUGH THE ASSESSEE D ISPUTES THE SAID ADDITION WITH THE AVAILABILITY OF AGRICULTURAL LAND S, HE COULD NOT PRODUCE SALE BILLS AND EXPENDITURE VOUCHERS IN SUPPORT OF HIS CL AIM. IN THESE CIRCUMSTANCES, WE DO NO FIND ANY REASON TO INTERFER E WITH THE ESTIMATE MADE BY THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 1998-99. ACCORDINGLY ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 10 OF 12 WE SUSTAIN THE ADDITION OF RS.1,33,810/- CONFIRMED BY THE LEARNED CIT(A) RELATING TO THE AGRICULTURAL INCOME OF THE ASSESSME NT YEAR 1998-99. 9. NOW WE SHALL TAKE UP THE APPEAL OF THE REVEN UE. THE ASSESSEE WAS HAVING AN UNDISCLOSED BANK ACCOUNT BEARING NUMBER S B 8912 WITH BANK OF BARODA. THE ASSESSEE HAD OFFERED THE PEAK CREDIT O F RS.9,01,353/- FROM THE SAID BANK ACCOUNT AS HIS UNDISCLOSED INCOME IN HIS BLOCK RETURN. HOWEVER, THE ASSESSING OFFICER TOOK THE ENTIRE DEPO SIT AMOUNT OF RS.39,13,389/- AS THE UNDISCLOSED INCOME OF THE ASS ESSEE. IN THE APPEAL, THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER T O ADOPT THE PEAK CREDIT OF RS.9,01,353/-. HENCE THE REVENUE IS IN APPEAL B EFORE US. 9.1 THE CONTENTION OF THE ASSESSEE IS THAT THE IM PUGNED BANK ACCOUNT WAS NOT UNEARTHED DURING THE COURSE OF SEARCH. HOW EVER, ON A CAREFUL PERUSAL OF THE RECORD, WE NOTICE THAT THE ASSESSEE HIMSELF HAS DECLARED THE PEAK CREDIT OF THE IMPUGNED BANK ACCOUNT AS HIS UND ISCLOSED INCOME IN HIS BLOCK RETURN. BESIDES THE ABOVE, THE ASSESSEE HAS TAKEN SUPPORT OF THE TRANSACTIONS CARRIED OUT IN THE IMPUGNED BANK ACCOU NT IN ORDER TO EXPLAIN THE SOURCES OF HIS OPENING CAPITAL AS CLAIMED BY HI M AND ALSO FOR EXPLAINING THE SOURCES FOR PURCHASE OF CERTAIN ASSETS. HENCE THE IMPUGNED BANK ACCOUNT IS INTERLINKED AND ALSO RELATABLE TO THE UN DISCLOSED ASSETS. HENCE, IN OUR VIEW, THE ASSESSEE IS OBLIGED TO EXPLAIN THE TR ANSACTIONS CARRIED OUT IN THE SAID BANK ACCOUNT. 9.2 THE ASSESSING OFFICER NOTICED THAT THERE WE RE DEPOSITS BOTH BY WAY OF CASH AND ALSO BY WAY OF TRANSFERS AND CLEARINGS . IN FACT, OUT OF THE AGGREGATE DEPOSITS OF RS.39,13,389/-, THE DEPOSITS MADE BY WAY OF TRANSFERS AND CLEARINGS WERE THE TUNE OF RS.38,32,6 00/-. ACTUAL CASH DEPOSITS FOUND WERE ONLY TO THE EXTENT OF RS.80,789 /-. ACCORDINGLY THE ASSESSING OFFICER REJECTED THE CLAIM OF ADDITION OF PEAK CREDIT WITH THE FOLLOWING OBSERVATIONS: THE POSSIBLE ARGUMENT BY THE ASSESSEE COULD BE THA T THE EARLIER WITHDRAWALS WERE ONLY DEPOSITED BACK. THIS ARGUMENT ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 11 OF 12 IS ALSO NOT ACCEPTABLE FOR THE FACT THAT EVEN THOUG H CERTAIN DEPOSITS OF CASH CAN BE RELATED TO THE WITHDRAWALS OF IMMEDIATE PRECEDING PERIOD IF THERE IS AN EVIDENCE TO SHOW THAT THE WITHDRAWN AMOUNTS WERE NOT UTILIZED OTHERW ISE AND REMAINED IDLE AS CASH TILL THE DATE OF NEXT DEPOSIT BUT THE SOURCES FOR DEPOSITS OF CHEQUES CANNOT BE TAKEN AS THE EARLIER WITHDRAWN CASH OR CHEQUES ISSUED TO SOM E OTHERS, SINCE CASH WITHDRAWN AND CHEQUES DEPOSITS ARE ENTIRELY DIFFERENT TRANSACTIONS. AS LONG AS THE ASSESSEE FAILS TO OR REFUSES TO REVEAL THE SOURCE O F DEPOSIT OF CHEQUES AND CASH, THE SAME SHOULD BE TAKEN AS UNEXP LAINED INCOME ONLY. WE FIND MERIT IN THE OBSERVATIONS OF THE ASSESSING OFFICER CITED ABOVE. OUT OF THE TOTAL DEPOSITS OF RS.39,13,389/-, MAJOR POR TION OF DEPOSITS, I.E. RS.38,32,600/- WERE BY WAY OF TRANSFERS AND CLEARIN G. THE THEORY OF PEAK CREDIT SHALL BE APPLICABLE ONLY IF THERE ARE CONTIN UOUS TRANSACTIONS OF DEPOSITS AND WITHDRAWALS WHICH ARE RELATABLE TO EAC H OTHER. IN THE INSTANT CASE, IT WAS NOT SHOWN THAT THE DEPOSITS AND WITHDR AWALS ARE RELATED TO EACH OTHER. HENCE, IN OUR VIEW, THE THEORY OF PEAK CREDIT DOES NOT APPLY TO THE FACTS OF THE CASE. ACCORDINGLY WE ARE NOT AGRE EABLE WITH THE VIEW OF LEARNED CIT(A) ON THIS ISSUE. AT THE SAME TIME, TH E ENTIRE DEPOSITS COULD ALSO NOT BE TAKEN AS THE INCOME OF THE ASSESSEE. F OR EXAMPLE, BEFORE LEARNED CIT(A), THE ASSESSEE HAS IDENTIFIED THE NAT URE OF DEPOSITS FOR AN AMOUNT OF RS.18,37,710/-, MAJOR PORTION OF IT WERE CAPITAL RECEIPTS. THE SAID LIST HAS BEEN EXTRACTED IN PAGE 17 OF THE ORDE R OF LEARNED CIT(A) AND THE SAME IS REQUIRED TO BE VERIFIED BY THE ASSESSIN G OFFICER. IF THE SAID LIST IS FOUND TO BE CORRECT AND IF WE REMOVE THE CAPITAL RECEIPTS ALREADY IDENTIFIED BY THE ASSESSEE, THEN ALSO THE PEAK CRED IT DETERMINED BY THE ASSESSEE WOULD FAIL. IF THE CAPITAL RECEIPTS ARE FO UND TO BE CORRECT, THE SAME CANNOT BE TAKEN AS THE INCOME OF THE ASSESSEE. THUS, IN OUR VIEW, THE CORRECT AMOUNT OF UNDISCLOSED INCOME FROM OUT O F THE TRANSACTIONS MADE IN THE IMPUGNED BANK ACCOUNT HAS NOT BEEN DETE RMINED BOTH BY THE ASSESSEE AND THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ISSUE OF DETERMINATION OF TAXABLE AMO UNT OUT OF THE TOTAL DEPOSITS MADE IN THE IMPUGNED BANK ACCOUNT REQUIRES RE-EXAMINATION. ACCORDINGLY WE SET ASIDE THE ORDER OF LEARNED CIT(A ) ON THIS ISSUE AND ITSSA NOS 97 AND 98 OF 2002 OF G SUBHASH CHANDRA BO SE VISAKHAPATNAM PAGE 12 OF 12 RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFIC ER FOR EXAMINATION OF THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW. THE ASSES SEE IS ALSO DIRECTED TO CO-OPERATE WITH THE ASSESSING OFFICER AND FURNISH T HE DETAILS REGARDING THE NATURE OF EACH DEPOSIT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND THE APPEAL OF REVENUE IS TREATED AS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:13 TH APRIL, 2011 COPY TO 1 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 , VISAKHAPATNAM 2 SHRI G. SUBHASHCHANDRA BOSE, PENT HOUSE, JANANI R ESIDENCE, MYTREYI NAGAR, PANDURANGAPURAM, VISAKHAPATNAM 530 003 3 4. THE CIT CENTRAL, HYDERABAD THE CIT(A)-I, HYDERABAD, 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM