TaxTMI 
TaxTMI 
TaxTMI 
2004 (10) TMI 315
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to be envisaged, for this reliance was placed on the order of the Hon'ble apex Court in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC). 4. The learned Departmental Representative was fair enough to concede the fact that the additional ground of the assessee should be admitted. 5. After carefully considering the submissions of both the parties and also the order of the Hon'ble apex Court in the case of National Thermal Power Co. Ltd. vs. CIT, we permit the assessee to take the additional ground of appeal along with ground No. 2. 6. Ground Nos. 1 & 10 are general in nature and, therefore, do not requires any adjudication. 7. Before adjudicating the grounds of appeal, we note the following brief facts of the case as gathered from the material on record. 8. The assessee is a partnership firm carrying on business in the purchases and sales of coal. Search and seizure operations were carried on the premises of the partner Sri M. Sivarama Krishnaiah on 15th Oct., 1998 which continued till 21st Oct., 1998. Prohibitory order was issued on 21st Oct., 1998 which was lifted on 8th Dec., 1998 and for that a Panchnama was executed on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t I have already explained that search operations were conducted on me for a continuous period of 21 hours since October 14th morning till 4 A.M. on 15th Oct., 1998. I am 73 years old. At that time a statement was obtained from me against my free will and I completely deny the statement. Sri G. Rama Rao is running a business while he is working under me. The books which were called as duplicate books of account by you belong to Sri G. Rama Rao and as already been explained vide my letter dt. 26th Oct., 1998, Sri G. Rama Rao is the proper person to explain about those books. I do not have any interest or knowledge in those books. In these circumstances, there is no case for prosecution as I have not maintained any duplicate books as alleged by you." 10. The statement of Sri G. Rama Rao was recorded under s 131. Extracts from which are reproduced at pp. 8 and 9 of the assessment order. The AO took the view that duplicate books belonged to the assessee on the basis of his finding given in pp. 2 to 8 of the assessment order ignoring the plea of the assessee that this set of books did not belong to the assessee but to Sri Sai Ram Traders. The AO after making certain additions complet....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be the search warrant where no search was conducted, nor any asset or article was seized. Reliance was placed on the following case laws in this regard: (a) CIT vs. Mrs. Sandhya P. Naik (2002) 178 CTR (Mumbai) 448 : (2002) 253 ITR 534 (Mum) (b) Late Ananta N. Naik through LR vs. Dy. CIT (2000) 66 TTJ (Pune) 533 (c) G. Kanagaraj vs. Dy. CIT (2001) 73 TTJ (Chennai) 731 (d) Madhuvana House Building Co-op. Society vs. Asstt. CIT (2002) 76 TTJ (Bang) 948 (e) Microland Ltd. vs. Asstt. CIT (1999) 63 TTJ (Bang) 701 : (1998) 67 ITD 446 (Bang) (f) T.S. Chandrasekhar vs. Asstt. CIT (2000) 66 TTJ (Bang) 360 13. On the other hand, the learned Departmental Representative, merely stated that the assessment has been framed within the time-limit, but did not utter a single word in respect of the case laws relied by the Authorised Representative. Instead, he agreed that on this issue the case of the assessee is duly covered by the decision of Hon'ble Bombay High Court Mrs. Sandhya P. Naik. He expressed his inability of having knowledge of any decision which would have taken view contrary to the one taken by the Bombay High Court. 14. We have considered the rival submissions. We find s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... search proceedings have been continued without any purpose by putting P.O. under s. 132(3) on any part of the premises or on any almirah in such premises, the Explanation inserted cannot come to the rescue of the Department." 17. We have perused the various decisions cited by the Authorised Representative. In our opinion, if a search has got to be continued in a valid manner, then it should be done in the manner without offending the provisions of ss. 132(1) and 132(3) of the Act. On 8th Dec., 1998, no doubt a Panchanama has been drawn up wherein prohibitory order under s. 132(3) is stated to be revoked but on that day, there was no search or seizure of any valuable and other assets. The search proceedings are stated to have been closed. We are of the view that the purpose of this Panchanama was merely to lift the prohibitory order passed under s. 132(3) of the Act which cannot be equated to authorize search for the purpose of recognizing last Panchanama made under s. 158BE(1) of the Act. Even the Panchanama executed on 8th Dec., 1998 does not speak of any search in the premises on which the seal was put by way of prohibitory order as under s. 132(3). Therefore, under these circu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs was a registered dealer for the period from 1st April, 1998 to 14th Oct., 1998. The sales in coal business was Rs. 6,55,869. The sales were mainly made to 1 Delta Paper Mills Ltd., 2 Chenupati Retrading Company, and 3 VBC Foods. The AO verified the transactions of Sri Sai Traders with Delta Paper Mills Ltd., M/s Delta Paper Mills Ltd., also confirmed the same. Mr. G. Rama Rao stated on oath before the AO about the writing of the books of the said firm. The AO has merely relied on one entry in the books regarding payment of telephone bill which was wrongly entered by Sri G. Rama Rao being the person maintaining the books for both the firms. No entry in these books was found dealing with the transaction of the assessee. Therefore, the AO was not justified in holding that the books belonged to the assessee. The total turnover recorded were Rs. 8,23,764 and the turnover to the extent of Rs. 3,70,116 was confirmed by the Delta Paper Mills of being made by Sai Ram Traders and it is only balance turnover Rs. 4,53,648 which remains to be confirmed. Therefore, the AO, was not justified in estimating the turnover at Rs. 20 lakhs on the basis of these books to be the undisclosed turnover a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cordingly, we sustain the addition to the extent of Rs. 27,682 for the profit on undisclosed turnover and Rs. 13,841 on account of capital investment. Thus, the additions of Rs. 1,50,000 sustained by CIT(A) are reduced to Rs. 41,523 and AO is directed accordingly. 24. Now coming to the ground No. 4 relating to the addition of Rs. 24,000 made in each of the year in the block period in respect of salary paid to, Sri Rama Rao, we find force in the submissions of learned Authorised Representative that if income is added, the expenditure incurred by way of salary must be allowed as deduction as this expenditure must have been incurred for earning the undisclosed income. Accordingly, we delete the addition of Rs. 24,000 in each of the assessment in the block period. 25. Now coming to ground No. 6 which relate the addition of income Rs. 1,34,786 for the asst. yr. 1999-2000 earned on sale of coal, we find the total sales as per the transactions mentioned in the books marked MSR/A2/35 & 36 are Rs. 6,55,868. After hearing the learned Authorised Representative and Departmental Representative carefully, we are of the view that only estimated profits has to be added. In respect of ground Nos.....