Dinakar Suvarna, Bangalore V. Deputy Commissioner of Income tax, Mangalore

MA 52/BANG/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3372 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Keywords: Unexplained investment; Revised return; Documents seized
• Section: 44AD; 143(3); 133A; 131; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER M.P. NOS.52 TO 54/BANG/2015 [IN ITA NOS.829, 830 & 852/BANG/2012] ASSESSMENT YEARS : 2005-06 TO 2007-08 SRI DINAKARA SUVARNA, 1-34-3017/1, PROP. BALAJI CONSTRUCTIONS, SHESHAPPA COMPOUND, ASHOK NAGAR, MANGALORE 575 006. PAN: AVWPS 7175D VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, MANGALORE. APPLICANT RESPONDENT APPLICANT BY : SHRI G. VENKATESH, ADVOCATE RESPONDENT BY : SHRI P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 10.07.2015 DATE OF PRONOUNCEMENT : 07.08.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE MISCELLANEOUS PETITIONS ARE FILED BY THE AS SESSEE SEEKING TO RECTIFY CERTAIN MISTAKES APPARENT ON THE FACE OF TH E COMMON ORDER DATED 14.8.2014 PASSED IN ITA NOS. 829, 830 & 852/B/2012 AS WELL AS CO NO.24/BANG/2013. MP NOS.52 TO 54/BANG/2015 PAGE 2 OF 16 2. THE TRIBUNAL DISPOSED OF THE GROUP OF APPEALS BY THE AFORESAID COMMON ORDER PERTAINING TO THE FOLLOWING APPEALS AG AINST THE COMMON ORDER OF THE CIT(APPEALS)-VI, BANGALORE DATED 16.3. 2012:- (A) ITA 849/12 (REVENUES APPEAL) AND CO 23/13 BY T HE ASSESSEE FOR A.Y. 2004-05; (B) ITA NOS. 829 & 830/12 (ASSESSEES APPEALS) AND 850 & 851/12 (REVENUES APPEALS) FOR A.YS. 2005-06 & 2006 -07; AND (C) ITA NOS.852 TO 854/12 (REVENUES APPEALS) AND CO NOS.24 TO 26/13 FOR AYS 2007-08 TO 2009-10 BY THE ASSESSEE . 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS A CONTRACT OR CARRYING OUT CONTRACT WORK ON BEHALF OF OTHERS. FOR THE A.YS. 2 004-05 TO 2009-10, THE ASSESSEE FILED RETURNS OF INCOME U/S. 139(1) OF THE INCOME TAX ACT, 1961 (ACT) DECLARING THE FOLLOWING INCOME:- A.Y ORIGINAL RETURN OF INCOME (U/S. 139) (RS.) 2004-05 1,46,686 2005-06 3,94,510 2006-07 18,09,501 2007-08 14,37,560 2008-09 2,77,670 2009-10 4,77,760 4. A SEARCH U/S. 132 OF THE ACT WAS CONDUCTED IN TH E RESIDENTIAL PREMISES OF SHRI ASHOK KUMAR CHOWTA AT FLAT NO.1003 , CONCORD APARTMENT, FALNIR, MANGALORE ON 13.2.2009. IN THE COURSE OF SEARCH, MP NOS.52 TO 54/BANG/2015 PAGE 3 OF 16 CERTAIN DOCUMENTS WERE FOUND AND SEIZED. SOME OF T HE DOCUMENTS SEIZED VIZ., A/AKC/C/8, A/AKC/9, A/AKC/12 AND A/AKC/14 CON TAINED DETAILS OF PAYMENT BY MR.ASHOK KUMAR CHOWTA TO THE ASSESSEE. THE ASSESSEE HAD SIGNED AGAINST EACH ENTRY OF PAYMENT AS FOUND IN TH E SEIZED DOCUMENT. SOME PAYMENTS WERE BY CHEQUE AND SOME PAYMENTS WERE BY WAY OF CASH. THESE DOCUMENTS, ACCORDING TO THE REVENUE, I NDICATED PAYMENTS MADE BY WAY OF CASH BY ASHOK KUMAR CHOWTA TO THE AS SESSEE FOR CONTRACT WORK DONE BY THE ASSESSEE FOR ASHOK KUMAR CHOWTA. 5. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED I N THE BUSINESS PREMISES OF THE ASSESSEE ON 21.4.2009. IN THE COUR SE OF SURVEY, STATEMENT OF THE ASSESSEE WAS RECORDED. IN SUCH STATEMENT TH E ASSESSEE STATED THAT HE WAS A CIVIL CONTRACTOR AND HAD IN THE PAST 6 YEA RS CONSTRUCTED REGENT PARK, CONCORD ROYAL PARK, VENKATARAMANA ARCADE, VEN KATARAMANA TOWERS. ALL THE ABOVE PROJECTS WERE DONE FOR AND O N BEHALF OF MR.ASHOKUMAR CHOWTA OF CLASSIC PROMOTERS & DEVELOPE RS BESIDES A PROJECT CALLED GREENWOOD AT MANIPAL FOR ANOTHER BUI LDER OF UDUPI. IT WAS ALSO STATED BY HIM THAT FOR THE PROJECT DONE FOR AS HOKUMAR CHOWTA THERE WAS NO WRITTEN AGREEMENT BUT A QUOTATION HAD BEEN G IVEN ON THE BASIS OF WHICH, BASED ON COMPLETION OF WORK, THE ASSESSEE WO ULD RECEIVE PAYMENT FROM ASHOKUMAR CHOWTA. QUESTION NO.13 TO 18 AND AN SWERS THERETO HAS A BEARING ON ISSUE TO BE DECIDED IN THE APPEAL AND TH E SAME IS BEING REPRODUCED: MP NOS.52 TO 54/BANG/2015 PAGE 4 OF 16 Q.NO.13: PLEASE EXPLAIN THE NATURE OF CONTRACT WO RK CARRIED OUT FOR SHRI ASHOK KUMAR CHOWTA WAS IT ONLY JOB-WORK CO NTRACT OR WERE YOU TO PROCURE THE MATERIALS AND CONSTRUCT THE BUILDING? ANS: AS PER THE UNDERSTANDING BETWEEN ME AND SRI.C HOWTA, I WAS REQUIRED TO DO THE CIVIL CONSTRUCTION WORK ON J OB WORK BASIS, BUT THERE WAS NO WRITTEN AGREEMENT BETWEEN US TO TH IS EFFECT. SO FAR PAST TWO PROJECT THE MATERIALS WERE ALSO PURCHA SED BY ME AND THE CONTRACT WORK WAS COMPLETED BY ME ONLY. SRI.CH OWTA MADE THE ENTIRE PAYMENTS TO ME ONLY AND I IN TURN MADE P AYMENTS TO THE MATERIAL SUPPLIERS. THIS METHOD WAS FOLLOWED S INCE SRI.CHOWTA DID NOT HAVE SALES TAX REGISTRATION AT T HAT TIME. HOWEVER, FOR THE OTHER PROJECT CEMENT & STEEL WERE PURCHASED AND SUPPLIED BY SRI.ASHOK KUMAR CHOWTA. THESE PURC HASES WERE MADE IN HIS OWN NAME. BUT PURCHASE OF MATERIA LS LIKE LATERITE, STONE, BLUE METAL, SAND ETC., WERE MADE I N MY NAME AND CASH PAYMENTS WERE MADE FOR THESE PURCHASERS. I WA S DOING ONLY THE CIVIL WORKS FOR SRI.ASHOK KUMARS PROJECTS. FO R TWO PROJECTS, ROYAL PARK AND CONCORD, I HAVE DONE WOOD WORK FOR T HE WINDOW SHUTTERS. THE PLUMBING, ELECTRICAL, FLOORING WORKS ETC., WERE NOT DONE BY ME. Q.NO.14: HOW WAS SRI.ASHOK KUMAR CHOWTA MAKING PAY MENTS TO YOU, IN CHEQUE OR ANY OTHER MODE? ANS: FOR THE PURCHASE OF MATERIALS LIKE CEMENT & S TEEL AND ALSO TOWARDS THE LABOUR CHARGES, CHARGES PAYABLE TO ME, SRI.CHOWTA WAS MAKING PAYMENTS IN CHEQUE. SRI.CHOWTA WAS MAKI NG CASH PAYMENTS FOR PURCHASE OF MATERIALS LIKE LATERITE ST ONE, BLUE METAL ETC., AND WAS POSTING SUCH PAYMENTS TO MY ACCOUNT A ND GETTING MY SIGNATURE FOR SUCH PAYMENTS. Q.NO.15: WHAT WAS THE TOTAL VOLUME OF THE WORK DON E BY YOU FOR THE F.Y.S 2003-04, 2004-2005, 2006-2007M 2007-2008 AND 2008-2009 AND HOW MUCH PAYMENTS HAVE YOU RECEIVED T OTALLY FROM SRI.ASHOK KUMAR CHOWTA? I HAVE NOT MAINTAINED BOOKS OF ACCOUNT FOR MY TRANS ACTIONS WITH SRI.ASHOK KUMAR CHOWTA. AS EXPLAINED EARLIER, SRI. CHOWTAS ENGINEERS USED TO TAKE MEASUREMENT ON COMPLETION OF CERTAIN SPECIFIED STAGES OF WORK AND USED TO DRAW BILLS IN MY NAME WHICH I USE TO SIGN AND SUBMIT TO SRI.CHOWTA. HOWEVER, S RI.CHOWTA HAS NOT PASSED EVEN A SINGLE BILL RAISED IN MY NAME. H E USE TO MAKE MP NOS.52 TO 54/BANG/2015 PAGE 5 OF 16 PAYMENTS TO ME ON WEEKLY BASIS FOR THE LABOUR CHARG ES AND FOR THE MATERIALS PURCHASED, SO AS TO ENABLE ME TO MAKE PAYMENTS TO THE LABOURERS AND THE MATERIAL SUPPLIERS. CERTAIN PAYMENTS FOR MATERIAL SUPPLIERS WERE DIRECTLY MADE BY SRI.ASHOK KUMAR CHOWTA, BUT SUCH PAYMENTS WERE BOOKED AGAINST MY NA ME AND MY SIGNATURE WAS TAKEN. SINCE, I HAVE NOT MAINTAIN ED BOOKS FOR THE WORKS CARRIED OUT FOR SRI.ASHOK KUMAR CHOWTA AN D ALSO THAT I AM NOT ABLE TO TRACE OUT ALL THE BILLS SUBMITTED BY ME, I DO NOT KNOW THE TOTAL VOLUME OF THE WORK DONE BY ME FOR SR I.ASHOK KUMAR CHOWTA. I ALSO DO NOT KNOW THE EXACT AMOUNT RECEIVED BY ME FROM SRI.ASHOK KUMAR CHOWTA. Q.NO.16: YOU HAVE STATED THAT SRI.CHOWTA HAS MADE CERTAIN PAYMENTS DIRECTLY TO SUPPLIERS OF THE MATERIALS AND BOOKED SUCH PAYMENTS AGAINST YOUR NAME AND OBTAINED YOUR SIGNAT URE. PLEASE TELL ME TO WHOM SUCH PAYMENTS WERE MADE BY SRI.CHOW TA AND WHAT ARE THE MATERIALS SUPPLIED BY SUCH PERSONS? ANS: SRI.ASHOK KUMAR CHOWTA WAS MAKING CASH PAYMENT S TO SUPPLIERS POLES, REQUIRED FOR CENTERING WORK, CENTE RING SHEETS, SUPPLIERS LATERITE STONE ETC. Q.NO.17: PLEASE FURNISH THE NAMES AND ADDRESS OF T HE PERSONS TO WHOM SUCH PAYMENTS FOR SUPPLY OF CENTERING MATERIAL S, LATERITE STONE ETC., IS MADE BY SRI.ASHOK KUMAR CHOWTA? ANS: I DO NOT KNOW THE NAME & ADDRESS OF THE SUPPL IERS. Q.NO.18: ACCORDING TO YOU WHAT BENEFIT ARISES TO S HRI.CHOWTA IN BOOKING THE ABOVE CASH PAYMENTS IN YOUR NAME AND BY NOT BOOKING SUCH PAYMENTS IN THE NAMES OF THE ACTUAL SU PPLIERS OF THE MATERIALS? ANS: THE REASON FOR BOOKING THE ABOVE CASH PAYMENT S TO THE SUPPLIERS OF SUCH MATERIALS AGAINST MY NAME IS THAT THE QUOTATION SUBMITTED BY ME TO SRI.CHOWTA FOR THE CONTRACT WORK S IS INCLUDING THE COST OF ALL MATERIALS AND LABOUR CHAR GES, BUT EXCLUDING THE COST OF STEEL. AS PER THE ORAL AGREE MENT BETWEEN ME AND SRI.ASHOK KUMAR CHOWTA, HE IS REQUIRED TO SU PPLY STEEL AND I AM REQUIRED TO PROCURE ALL OTHER MATERIALS IN CLUDING CEMENT, LATERITE STONE, BLUE METAL, CENTERING SHEET, SAND E TC., AND CONSTRUCT THE BUILDING. THIS IS THE REASON FOR SRI.CHOWTA BO OKING THE PAYMENTS MADE TO THE SUPPLIERS OF ABOVE MATERIALS A GAINST MY NAME IN HIS BOOKS OF ACCOUNTS. MP NOS.52 TO 54/BANG/2015 PAGE 6 OF 16 6. THE ASSESSEE STATED THAT THE SUPPLIERS OF MATERI ALS REFERRED TO IN ANSWER TO Q.NO.15 DID NOT ISSUE ANY BILLS TO THE AS SESSEE NOR HAS HE ACCOUNTED FOR SUCH MATERIALS NOR DOES HE KNOW WHETH ER THE SUPPLIERS ISSUED BILLS TO SRI.ASHOK KUMAR CHOWTA. Q.NO.25, 2 7 TO 29 & 36 AND ANSWERS THERETO ARE ALSO IMPORTANT AND THEY ARE REP RODUCED AS BELOW: Q.25: WHAT ARE THE CASH PAYMENTS MADE FOR BY SRI A SHOK KUMAR CHOWTA AND BOOKED AGAINST YOUR NAME, AS STATE D BY YOU? ANS: AS FAR AS I UNDERSTAND THE ABOVE PAYMENTS ARE MADE FOR PURCHASE OF LATERITE STONE, BLUE METAL, SAND AND FO R THE CHARGES CENTERING POLES AND CENTERING SHEETS. SOMETIMES WHE N WORK IS REQUIRED TO BE COMPLETED URGENTLY, SRI CHOWTA EMPLO YEES, LABOURERS DIRECTLY AND MAKES PAYMENTS DIRECTLY BUT THE BOOKS SUCH EXPENSES ALSO AGAINST MY NAME. Q.27 WHY DID YOU SIGN FOR THE RECEIPT OF THE PAYME NT IF SUCH PAYMENTS ARE NOT MADE TO YOU AND WHEN YOU DO NOT KN OW TO WHOM SUCH PAYMENTS ARE MADE? ANS. HE DOES NOT MAKE PAYMENT TO ME FOR THE WORK. I HAVE DONE IF I REFUSE TO SIGN FOR THE ABOVE-MENTIONED CA SH PAYMENTS. SO, I AM FORCED TO SIGN FOR THESE CASH PAYMENTS. Q.NO.28: HAVE YOU EVER REFUSED TO SIGN FOR THE ABO VE CASH PAYMENTS AND HAD HE EVER REFUSED PAYMENTS TO YOU? ANS: YES. Q.NO.29: IN THAT CASE WHY DID YOU NOT REFUSED TO CARRY ON WITH THE WORK AND STOP THE WORK? ANS: IF I STOP THE WORK HE WILL NOT MAKE THE PAYME NTS DUE TO ME AND I WILL NOT BE ABLE TO MAKE PAYMENTS TO THE LABO URERS. Q.NO.36: PLEASE TELL ME WHETHER ALL THE RECEIPTS F ROM SRI.ASHOK KUMAR CHOWTA IN CHEQUE AS WELL AS CASH ARE ACCOUNTE D IN YOUR MP NOS.52 TO 54/BANG/2015 PAGE 7 OF 16 BOOKS AND ARE INCLUDED IN THE TURNOVER DISCLOSED IN YOUR INCOME TAX RETURNS? ANS: I HAVE DISCLOSED THE TURNOVER IN MY INCOME TA X RETURN AS PER THE BILLS RAISED ON SRI.ASHOK KUMAR CHOWTA. I DO N OT KNOW WHETHER THE BILLS RAISED BY ME TALLY WITH THE TOTAL CHEQUE AND CASH RECEIPT FROM SRI.ASHOK KUMAR CHOWTA, AS PER THE MAT ERIALS SEIZED IN THE SEARCH IN HIS CASE. I REQUEST YOU TO PROVIDE ME THE DETAILS OF THE PAYMENTS MADE TO ME AND ACKNOWLEDGED BY ME AS PER THE BOOKS AND OTHER ACCOUNTS SEIZED FROM SRI.AS HOK KUMAR CHOWTA DURING THE SEARCH IN HIS CASE, SO THAT, I WI LL BE ABLE TO RECONCILE THE TURNOVER DECLARED BY ME IN MY INCOME TAX RETURNS. IN THIS CONNECTION, I ASSURE THAT IF THE TURNOVER D ISCLOSED BY ME IN MY INCOME TAX RETURNS IS LESS THAN THE PAYMENTS REC EIVED FROM SRI.ASHOK KUMAR CHOWTA AS PER THE SEIZED MATERIALS, I WILL OFFER THE DIFFERENCE IN INCOME FOR TAXATION FOR THE RELEV ANT ASST. YEARS, PAY THE TAXES AND FILE MY RETURNS OF INCOME. 7. ON 11.05.2009 THE ADIT (INV.), MANGALORE RECORDE D ANOTHER STATEMENT OF THE ASSESSEE U/S.131 OF THE ACT. Q.NO .2 & 3 AND ANSWERS THERETO ARE IMPORTANT AND THE SAME ARE REPRODUCED A S UNDER: Q.2: PLEASE CALL BACK TO YOUR MEMORY TO THE STATE MENT RECORDED U/S 131 OF THE I. T. ACT ON 21.4.2009 DURING THE CO URSE OF THE SURVEY U/S 133A IN YOUR BUSINESS PREMISES. IN YOUR ABOVE STATEMENT, YOU HAD STATED THAT YOU WILL CO-OPERATE WITH THE DEPARTMENT AND FURNISH ANY INFORMATION THAT IS REQU IRED IN CONNECTION WITH YOUR I. T.ASSESSMENT. YOU HAD ALSO STATED THAT IF THERE IS ANY DIFFERENCE IN THE INCOME THAT YOU ALRE ADY OFFERED FOR ASSESSMENT AND THAT IS ACTUALLY RECEIVED INCLUDING THE CASH RECEIPTS FROM SRI ASHOK KUMAR CHOWTA. PLEASE TELL M E HOW MUCH CASH YOU HAD ACTUALLY RECEIVED FROM SRI ASHOK KUMAR CHOWTA DURING THE RELEVANT PREVIOUS YEARS. ANS: I HAVE VERIFIED THE RETURNS OF INCOME FILED BY ME FOR THE EARLIER ASST. YEARS AND COMPARED IT WITH THE REGULA R BOOKS OF ACCOUNTS I MAINTAINED FOR THE RELEVANT ACCOUNTING P ERIODS. I HAVE ALSO SCRUTINIZED THE RELEVANT PORTIONS OF THE DIARIES OF MP NOS.52 TO 54/BANG/2015 PAGE 8 OF 16 SRI ASHOK KUMAR CHOWTA, WHICH YOU HAD SEIZED FROM H IS RESIDENCE DURING THE COURSE OF THE SEARCH IN HIS CA SE. IT IS SEEN FROM THE ABOVE SCRUTINY THAT THE FOLLOWING CAS H RECEIPTS HAVE NOT BEEN INCLUDED IN THE GROSS CONTRACT RECEIP TS DISCLOSED IN MY RETURNS OF INCOME FOR THE RELEVANT ASST. YEARS. FINANCIAL YEAR PAYMENTS (RS.) 2003-04 17,80,000 2004-05 1,27,35,005 2005-06 28,05,000 2006-07 60,26,250 2007-08 27,00,000 2008-09 5,75,000 TOTAL 2,66,21,255 Q.3: AS ASSURED IN YOUR SWORN STATEMENT U/S 131 REF ERRED TO ABOVE, ARE YOU OFFERING THE ABOVE INCOME AS YOUR AD DITIONAL INCOME FOR THE RELEVANT ASST. YEARS? ANS: THE ABOVE RECEIPTS DO NOT REPRESENT MY INCOME . THE ABOVE AMOUNTS WERE RECEIVED TOWARDS CASH FOR PURCHA SE OF MATERIALS LIKE SAND, LATERITE STONE, BRICKS, JELLY, HOLLOW BLOCKS ETC. I HAVE MADE CASH PAYMENTS OUT OF THE ABOVE RECEIPTS FOR THE PURCHASE OF THESE MATERIALS REQUIRED FOR CONSTRUCTI ON. MY INCOME FROM THE ABOVE RECEIPTS WILL BE VERY NEGLIGIBLE. TH ESE PAYMENTS ARE RECEIVED IN CASH ONLY BECAUSE THE SUPPLIERS OF THE ABOVE MATERIALS INSISTED ON CASH PAYMENT. IN FACT, THESE PAYMENTS ARE MADE FOR AND ON BEHALF OF SRI ASHOK KUMAR CHOWTA FO R THE CONSTRUCTION OF HIS PROJECTS. HOWEVER, TO PURCHASE PEACE WITH THE DEPARTMENT, I AM PREPARED TO OFFER 8% OF THE ABOVE RECEIPTS AS MY ADDITIONAL INCOME FOR THE RELEVANT ASST. YEARS. 8. WE MAY MENTION HERE THAT THE INCRIMINATING DOCUM ENT REFERRED TO BY THE AO IS A DIARY SEIZED FROM ASHOK KUMAR CHOWTA SH OWING CERTAIN CASH PAYMENTS HAVING BEEN PAID TO THE ASSESSEE. APART F ROM THE CONTRACT MP NOS.52 TO 54/BANG/2015 PAGE 9 OF 16 RECEIPTS REFERRED TO ABOVE, THERE WERE ALSO ENTRIES REGARDING CASH PAYMENTS RECEIVED FROM THE ASSESSEE FOR PURCHASE OF PROPERTIES BY THE ASSESSEE FROM SRI.ASHOK KUMAR CHOWTA. ON THE ABOVE CASH PAYMENTS FOR PURCHASE OF PROPERTY AND CASH RECEIPTS FOR EXECUTIO N OF CONTRACT WORK, QUESTION NO.9 & 11 AND ANSWERS THERETO IN THE STATE MENT RECORDED ON 11.5.2009 ARE IMPORTANT AND THE SAME WAS AS FOLLOWS :- Q. NO. .9. THE DIARIES SEIZED FROM SRI. ASHOK KUMA R CHOWTA ALSO SHOWS THAT YOU HAVE PURCHASED CERTAIN RESIDENT IAL AND COMMERCIAL PREMISES FROM HIM AND THAT YOU HAVE PAID A PART OF THE CONSIDERATION TO HIM IN CASH. ON VERIFICATION O F YOUR BALANCE SHEET, IT IS SEEN THAT THE ABOVE CASH PAYMENTS ARE NOT INCLUDED IN THE COST OF THE ABOVE ASSETS DISCLOSED IN YOUR BALA NCE SHEET AND THAT THE COST OF THOSE ASSETS ARE ACCOUNTED AT THE VALUE FOR WHICH PAYMENTS ARE MADE IN CHEQUE. THE ABOVE FACTS INDICA TE THAT YOU HAVE INCURRED EXPENDITURE OUTSIDE BOOKS FOR ACQUISI TION OF ASSETS. HENCE, THE ANSWER GIVEN BY YOU TO QUESTION NO,8 DOE S NOT APPEAR TO BE CORRECT. WHAT IS YOUR COMMENT? ANS.: THE CASH PAYMENTS TO SRI. CHOWTA FOR PURCHASE OF RESIDENTIAL PREMISES AND COMMERCIAL PREMISES FROM H IM IS ADJUSTED AGAINST THE CONTRACT AMOUNTS DUE TO ME. I HAVE NOT PHYSICALLY PAID ANY CASH TO SRI. ASHOK KUMAR CHOWTA FOR THE ACQUISITION OF THE ASSETS MENTIONED ABOVE. CONSIDER ING ALL THE ABOVE FACTS AND CIRCUMSTANCES AND ALSO WITH THE SOL E INTENTION OF PURCHASING PEACE WITH THE DEPARTMENT AND TO AVOID P ROTRACTED LEGAL PROCEEDINGS, I OFFER TAXABLE INCOME AT 8% OF THE GROSS CONTRACT RECEIPTS INCLUDING THE CONTRACT RECEIPTS I N CHEQUE AND CASH MENTIONED ABOVE, AS GIVEN BELOW: MP NOS.52 TO 54/BANG/2015 PAGE 10 OF 16 FIN. YEAR ASST. YEAR CONTRACT RECEIPTS ALREADY OFFERED IN R/I RS. CASH RECEIPTS RS. GROSS CONTRACT RECEIPTS RS. 8% OF THE GROSS RECEIPTS RS. 2003-04 2004-05 18,33,579 17,80,000 36,13,579 2,89,086 2004-05 2005-06 3,17,64,494 1,27,35,005 4,44,99,499 35,59,960 2005-06 2006-07 3,08,69,877 28,05,000 3,36,74,877 26,93,990 2006-07 2007-08 1,92,04,714 60,26,250 2,52,30,964 20,18,477 2007-08 2008-09 2,69,800 27,00,000 29,69,800 2,37,584 2008-09 2009-10 25,81,315 5,75,000 31,56,315 2,52,505 I AM OFFERING THE ABOVE REVISED TOTAL INCOME FOR TH E RELEVANT ASST. YEARS. THE ABOVE TOTAL INCOME IS OFFERED IN TERMS O F SECTION 44AD I.E. AFTER DEDUCTING ALL THE EXPENSES AND DEPR ECIATION. I WILL NOT CLAIM ANY DEDUCTION FROM THE ABOVE TOTAL INCOME OTHER THAN THAT IS ELIGIBLE TO ME U/S. 88/80C. Q.11. DO YOU WANT TO STATE ANYTHING, ELSE? ANS. : I WILL FILE MY REVISED RETURNS OFFERING TOTA L INCOME AS GIVEN IN MY ANSWER TO YOUR QUESTION NO. 9 AND PAY THE TAX ES. CONSIDERING THE ECONOMIC RECESSION IN GENERAL AND A LSO THE FINANCIAL DIFFICULTIES THAT I AM FACING NOW, I REQU EST YOU TO ALLOW ME SUFFICIENT TIME FOR PAYMENT OF THE TAX. I ASSURE THAT, I WILL PAY THE TAXES IN INSTALLMENTS. I HAVE FULLY CO-OPERATED WITH THE DEPARTMENT DURING THE COURSE OF THE SURVEY CONDUCTE D IN MY OFFICE PREMISES AND ALSO IN THE POST SURVEY ENQUIRI ES AS WELL AS IN FURNISHING THE DETAILS REQUIRED BY YOU. CONSIDERING THE CO- OPERATION EXTENDED BY ME, AND ALSO THE FACT THAT I HAVE VOLUNTARILY COME FORWARD AND OFFERED THE ADDITIONAL INCOME I REQUEST THAT I MAY BE ABSOLVED OF ALL THE PENAL CON SEQUENCES. I ONCE AGAIN ASSURE THAT I WILL START PAYING THE TAXE S AT THE EARLIEST. 9. THE CASH RECEIPTS NOT SO ACCOUNTED, AS ADMITTED IN THE STATEMENT RECORDED AT THE TIME OF SURVEY, FOR THE VARIOUS ASS ESSMENT YEARS ARE AS FOLLOWS:- MP NOS.52 TO 54/BANG/2015 PAGE 11 OF 16 A.Y GROSS RECEIPTS NOT INCLUDED (RS.) 2004-05 17,80,000 2005-06 1,27,35,005 2006-07 28,05,000 2007-08 60,26,250 2008-09 27,00,000 TOTAL 2,66,21,255 10. ON THE AFORESAID GROSS RECEIPTS NOT INCLUDED IN THE BOOKS OF ACCOUNT, THE ASSESSEE AGREED TO OFFER 8% ADDITIONAL CONTRACT RECEIPTS AS INCOME FOR THE VARIOUS ASSESSMENT YEARS. AS STATED IN THE STA TEMENT RECORDED THE ASSESSEE DID NOT IN FILE RETURN OF INCOME OFFERING ADDITIONAL INCOME. 11. THE AO THEREFORE ISSUED NOTICE U/S. 148 OF THE ACT ON 26.3.2010 FOR ASSESSMENT YEARS 2004-05 TO 2008-09. FOR THE A.Y. 2009-10, NOTICE U/S. 143(2) WAS ISSUED BECAUSE FOR THE SAID ASSESSMENT Y EAR, ASSESSMENT WAS NOT COMPLETED U/S. 143(3) OF THE ACT BY THEN. IN R ESPONSE TO THE SAID NOTICES U/S.148 OF THE ACT, THE ASSESSEE FILED RETU RNS OF INCOME IN WHICH THE ASSESSEE DECLARED THE SAME INCOME AS WAS DECLAR ED IN THE ORIGINAL RETURN OF INCOME FILED. FOR AY 2009-10 THE ASSESS EE DID NOT DECLARE ANY ADDITIONAL INCOME ON ACCOUNT OF ENTRIES FOUND IN TH E DIARY SEIZED IN THE SEARCH OF MR.ASHOK KUMAR CHOWTA. 12. IN THE APPEALS FILED BEFORE THE TRIBUNAL IN CON CISE GROUNDS NO.4 TO 6 IN ALL THE ASSESSMENT YEARS, THE ASSESSEE HAD CHALL ENGED THE ESTIMATION OF MP NOS.52 TO 54/BANG/2015 PAGE 12 OF 16 8% OF THE CONTRACT RECEIPTS AS DISCLOSED IN THE BOO KS OF ACCOUNT OF THE ASSESSEE. THE RELEVANT CONCISE GROUNDS IN THIS REG ARD ARE AS UNDER:- 4. THE LEARNED COMMISSIONER (APPEALS) IS NOT JUSTI FIED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER OF ESTIMATING PROFITS AT 8% OF CONTRACT RECEIPTS. 5. THE LEARNED COMMISSIONER (APPEALS) IS NOT JUSTIF IED IN FAILING TO APPRECIATE THAT THE APPELLANT DOES NOT F ALL UNDER THE PROVISIONS OF SECTION 44AD FOR THE REASON THAT THE APPELLANTS GROSS RECEIPTS EXCEED FORTY LAKHS RUPEES. SUCH BEI NG A CASE, SHE OUGHT NOT TO HAVE ESTIMATED PROFITS AT 8% OF THE CO NTRACT RECEIPTS. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMM ISSIONER (APPEALS) IS NOT JUSTIFIED IN FAILING TO APPRECIATE THAT THE APPELLANT HAS MAINTAINED THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS REQUIRED UNDER SUB-SECTION 2 OF SECTION 4 4AA AND GOT HIS ACCOUNTS AUDITED UNDER SECTION 44AB AND WITHOUT ANYTHING MORE, THE LEARNED ASSESSING OFFICER OUGHT TO HAVE A CCEPTED THE BOOK PROFITS. 13. THE TRIBUNAL DECIDED THE APPEAL BY FRAMING THE FOLLOWING ISSUES:- (I) WHETHER THE INITIATION OF REASSESSMENT PROCEEDI NGS U/S.147 FOR A. YS.2004-05 TO 2008-09 IS VALID ? (II) WHETHER THE ACTION OF THE CIT (A) IN DELETING THE ADDITION OF 8% OF THE UNDISCLOSED CONTRACT RECEIPTS AS EVIDENCE D BY THE SEIZED DOCUMENT AND AS OFFERED BY THE ASSESSEE IN T HE STATEMENT RECORDED ON 11.05.2009 (Q.9) WAS PROPER ? (III) WHETHER THE ACTION OF THE CIT (A) IN SUSTAINI NG THE ADDITION AT 1.5% OF THE CASH PAYMENTS FOUND IN THE SEIZED DI ARY AS WELL AS ACCORDING TO THE STATEMENT RECORDED ON 11.0 5.2009, CAN BE SUSTAINED ? AND (IV) WHETHER ACTION OF THE CIT(A) IN DELETING THE A DDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PROPERTIES FOR A. Y. 2007-08 MADE BY THE AO WAS PROPER? MP NOS.52 TO 54/BANG/2015 PAGE 13 OF 16 14. AS CAN BE SEEN FROM THE AFORESAID ISSUES FRAMED BY THE TRIBUNAL FOR CONSIDERATION, ESTIMATION OF 8% PROFIT ON DISCLOSE D CONTRACT RECEIPTS IN THE BOOKS OF ACCOUNT WAS NOT CONSIDERED BY THE TRIBUNAL AT ALL. THEREFORE, THERE IS AN APPARENT ERROR IN THE ORDER OF THE TRIB UNAL, INASMUCH AS THE GROUNDS RAISED BY THE ASSESSEE HAVE NOT BEEN ADJUDI CATED. 15. WE HAVE HEARD THE PARTIES ON THE QUESTION OF ES TIMATION OF 8% PROFIT ON DISCLOSED CONTRACT RECEIPTS. IT IS SEEN FROM TH E ASSESSMENT ORDER THAT THE AFORESAID ESTIMATION OF PROFITS AT 8% WAS MADE PURELY ON THE BASIS OF STATEMENT RECORDED AT THE TIME OF SEARCH. WE HAVE ALREADY, WHILE DECIDING THE ESTIMATION OF PROFITS ON UNDISCLOSED CONTRACT R ECEIPTS, THAT ESTIMATION OF INCOME AT 1.5% OF THE CASH RECEIPTS WAS ALSO NOT JU STIFIED. THE FOLLOWING WERE THE CONCLUSIONS OF THE TRIBUNAL IN THIS REGARD :- 37. WE HAVE CONSIDERED THIS ARGUMENT OF THE LEARN ED DR. WE HAVE ALSO PERUSED THE ORDERS OF ASSESSMENT PASSED I N THE CASE OF ASHOK KUMAR CHOWTA FOR THE A. YS. 2005-06 TO 2007-0 8, WHICH IS PLACED AT PAGES 145 TO 167 OF THE ASSESSEE'S PAP ER BOOK. WE FIND THAT THERE IS NO BREAK UP OF THE AMOUNTS BROUG HT TO TAX IN THE CASE OF ASHOK KUMAR CHOWTA. IT IS THEREFORE NOT PO SSIBLE TO ASCERTAIN AS TO WHETHER THE ENTRIES FOUND IN THE SE IZED DIARY PERTAINING TO THE ASSESSEE WERE ALSO PART OF THE UN DISCLOSED INCOME BY ASHOK KUMAR CHOWTA. FURTHER IT IS ALSO N OT CLEAR AS TO WHETHER UNDISCLOSED INCOME IS ON ACCOUNT OF UNDI SCLOSED EXPENDITURE OF ASHOK KUMAR CHOWTA. IF IT IS UNEXPL AINED EXPENDITURE OFFERED AS INCOME BY ASHOK KUMAR CHOWTA THEN THAT WOULD SUPPORT THE PLEA OF THE ASSESSEE TAKEN IN THE ASSESSMENT PROCEEDINGS THAT CASH PAYMENTS RECORDED IN THE SEIZ ED DIARY WERE USED TO PROCURE MATERIALS FOR ASHOK KUMAR CHOWTA BY THE ASSESSEE AND NOT FOR EXECUTION OF ANY CONTRACT WORK . EVEN IN THIS ASPECT THERE HAS BEEN NO ATTEMPT MADE BY THE ASSESS ING OFFICER MP NOS.52 TO 54/BANG/2015 PAGE 14 OF 16 TO CORRELATE THE INCOME OFFERED BY ASHOK KUMAR CHOW TA WITH UNACCOUNTED CONTRACT RECEIPTS OF THE ASSESSEE AS RE CORDED IN THE SEIZED DIARY. 38. THE ASSESSMENT IS BASED PURELY ON STATEMENT MAD E AT THE TIME OF SURVEY AS WELL AS ON 11.5.2009 BEFORE THE A DIT (INV.) MANGALORE, WHICH ACCORDING TO US IS A CONDITIONAL S TATEMENT AND CANNOT FORM THE BASIS FOR MAKING AN ASSESSMENT. IN OUR VIEW, THE ASSESSEE HAS BEEN CONSISTENTLY TAKING A STAND THAT THE CASH PAYMENTS RECORDED IN THE SEIZED DIARY WAS FOR PROCU RING MATERIALS ON BEHALF OF CHOWTA AND HAS NOTHING TO DO WITH THE CONTRACT RECEIPTS OF THE ASSESSEE. IN OTHER WORDS, CASH PAY MENTS WERE ONLY PAYMENTS MADE TO THE ASSESSEE FOR PROCURING MATERIA LS FOR ASHOK KUMAR CHOWTA AND IT HAS NOTHING TO DO WITH THE CONT RACTS EXECUTED BY THE ASSESSEE FOR ASHOK KUMAR CHOWTA. I N FACT AS WE HAVE ALREADY SEEN THE ASSESSEE HAD AFFIXED HIS SIGN ATURE IN THE SEIZED DIARY ONLY FOR THE REASON THAT THE PAYMENTS FOR CONTRACT WORK EXECUTED BY THE ASSESSEE WOULD BE REALIZED BY ASHOK KUMAR CHOWTA ONLY IF SUCH SIGNATURE IS MADE BY THE ASSESSEE. THIS WILL BE CLEAR FROM ANSWER BY THE ASSESSEE TO Q UESTION 27 IN THE STATEMENT RECORDED AT THE TIME OF SURVEY. TAKI NG INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES, WE A RE OF THE VIEW THAT THE REVENUE HAS FAILED TO BRING IN MATERIAL ON RECORD TO CORROBORATE ITS CONCLUSION THAT THE ENTRIES FOUND I N THE SEIZED DIARY ARE UNACCOUNTED CONTRACT RECEIPTS OF THE ASSE SSEE AND THEREFORE THE PROFIT ELEMENT IN EXECUTING SUCH RECE IPTS HAS TO BE BROUGHT TO TAX. 39. IN OUR VIEW, THERE WAS NO BASIS FOR THE CIT (A) TO HAVE COME TO A CONCLUSION THAT 1.5% OF THE RECEIPTS AS E VIDENCED IN THE SEIZED DIARY SHOULD BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT (A) DELE TING THE ADDITION OF 8% OF THE RECEIPTS AS FOUND IN THE SEIZ ED DIARY, HOWEVER HOLD THAT THE ACTION OF THE CIT (A) IN BRIN GING TO TAX 1.5% OF THE CASH RECEIPTS RECORDED IN THE SEIZED DI ARY WAS WITHOUT ANY BASIS. THERE WAS NO STATEMENT ADMITTIN G ANY OTHER INCOME AND THE CIT(A) HAS BASED HIS CONCLUSIONS IN SUSTAINING ADDITION AT 1.5% OF CASH RECEIPTS RECORDED IN THE S EIZED DIARY BASED ON AN NON-EXISTENT ADMISSION OF OTHER INCOMES NOT DECLARED. THUS THE RELEVANT GROUNDS OF THE ASSESS EE IN ITS APPEAL AS WELL AS THE CROSS OBJECTIONS ARE ALLOWED WHILE T HE APPEALS BY THE REVENUE ON THIS ASPECT AS RAISED IN ITS APPEALS ARE DISMISSED. MP NOS.52 TO 54/BANG/2015 PAGE 15 OF 16 16. AS FAR AS DISCLOSED CONTRACT RECEIPTS IN THE BO OKS OF ACCOUNT ARE CONCERNED, AS ALREADY STATED, THE ADDITION WAS MADE ONLY ON THE BASIS OF STATEMENT RECORDED AT THE TIME OF SURVEY. THE BOOK S OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO U/S. 145 OF THE ACT. IN SU CH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ESTIMATION OF PROFITS AT 8% OF THE CONTRACT RECEIPTS DISCLOSED IN THE BOOKS OF ACCOUNT CANNOT BE SUSTAIN ED. THE PROFITS DISCLOSED BY THE ASSESSEE AS PER THE BOOKS OF ACCOU NT IN RESPECT OF DISCLOSED CONTRACT RECEIPTS FOR AY 2005-06, 2006-07 & 2007-08 SHOULD BE ACCEPTED AS DECLARED BY THE ASSESSEE. WE MAY ALSO ADD THAT NEITHER THE AO NOR THE CIT(APPEALS) HAVE GIVEN ANY REASON FOR M AKING THE AFORESAID ADDITION. 17. THE MISCELLANEOUS PETITIONS OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DAY OF AUGUST , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 07 TH AUGUST , 2015 . /D S/ MP NOS.52 TO 54/BANG/2015 PAGE 16 OF 16 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.