TaxTMI 
TaxTMI 
2015 (4) TMI 767
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....d Nos. 1 and 10 of the Revenue's appeal for assessment years 2005-2006, 2006-2007, 2007-2008 and 2008-2009 are general, requiring no specific adjudication. 3. The common issue involved in all the seven appeals of the Revenue as raised in ground Nos. 2 and 3 relates to the deletion by the Ld. CIT(A) of the additions made by the A.O. to the total income of the assessee on account of undisclosed income arising from suppressed turnover. 4. The assessee in the present case is an individual who is engaged in the business of catering contractor in the name and style of his proprietary concern M/s. Niyantran Caterers. Search and seizure action under section 132 of the Act was conducted in his case on 12.12.2007. Consequently, notices under section 153A were issued by the A.O. on 26.08.2010 in response to which, the returns of income for A.Ys. 2002-2003 to 2007-2008 were filed by the assessee on 31.12.2008. The return of income for A.Y. 2008-2009 was also separately filed by the assessee on 15.10.2008. In the said returns, income declared by the assessee was as under : A.Y. Returned Income 2002-03 1,83,705 2003-04 4,17,748 2004-05 4,70,556 2005-06 7,65,321 2006-07 12,95,523 2....
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.... years under consideration were disputed by the assessee in the appeals filed before the Ld. CIT(A). During the course of appeal proceedings before the Ld. CIT(A), it was pointed out by the assessee that evidence found during the course of search was sufficient only to show the suppression of catering receipts to the extent of Rs. 56,17,750 for A.Y. 2008- 2009 and since income of Rs. 50 lakhs was already offered by the assessee to tax as surrendered during the course of search to cover-up the income from suppressed catering receipts as well as other adverse findings, if any, of the search there was no justification in the action of the A.O. to make a separate addition of Rs. 29,53,813 on account of undisclosed income of the assessee from the suppressed catering receipts. It was also submitted by the assessee that other than the five instances of unrecorded catering receipts found during the course of search amounting to Rs. 56,17,750 for A.Y. 2008-2009, there was no material found during the course of search to show any other instance of suppression of catering receipts by the assessee. It was contended that the A.O. however presumed the suppression of catering receipts for A.Ys. 2....
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....lt of material found during the course of action under section 132(1), such additions are also not sustained and the A.O. is directed accordingly. 7.5. In as much as the declaration made by the appellant for this assessment is concerned, it is seen that the appellant has made a declaration for Rs. 50,00,000/-, but whereas actual amount shown in the computation of income was Rs. 30,00,000/- only. When this was pointed out to the A.R. he has said that he would come back with proper explanation, which was not to be. In the circumstances, the A.O. is directed to add the remaining amount of Rs. 20,00,000/- for this A.Y. 2008-09, while giving effect to this order. it may however be noted that as far as the A.Y. 2007-08 is concerned, the appellant has honored the declaration of Rs. 5,00,000/- by including the same in the computation statement. Thus, the first ground of appeal is allowed for all the assessment years, with a direction to the A.O. for the assessment year 2008-09 as spell out herein above." 8. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. The Ld. Counsel for the assessee has supported the impugned order of the ....
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....x years prior to the assessment year in which the search had taken place, but he will get the free hand only in respect of those assessments which had not attained finality on the date of search. It was held that the pending assessments in such cases will abate and the A.O. while framing the assessment under section 153A/153C of the Act will get free hand through abatement and will frame the assessment afresh. It was held that where proceedings have reached finality, the assessment under section 153A read with 143(3) however has to be made as was originally made/assessed and further addition should be restricted only to the extent they are supported/justified by any material found during the course of search. 11. In this context, when it was pointed out to the Ld. Counsel for the assessee at the time of hearing that the search having been conducted in the case of the assessee on 12.12.2007, the assessment proceedings only up to A.Y. 2006- 2007 had become final and the assessment proceedings for A.Y. 2007-2008 being pending on the date of search, the scope of assessment for A.Y. 2007-2008 was wide akin to the regular assessment, he has not disputed this position. We, therefore, uph....
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....ground of the Revenue appeal i.e., ground Nos. 2 and 3 for A.Y. 2002- 2003 to 2006-2007 and 2008-2009 are dismissed while ground Nos. 2 and 3 of Revenue's appeal for A.Y. 2007-2008 are treated as allowed for statistical purposes. 13. The next common issue raised in ground Nos. 4 and 5 of the Revenue's appeal for all the years under consideration relates to the deletion by the Ld. CIT(A) of the addition made by the A.O. towards inflation of expenditure. 14. Along with the search action, survey under section 133A was simultaneously carried out on 12.12.2007 at the business premises of Hotel Tourist Plaza, Kachiguda where assessee was the Managing Director. During the course of said survey, debit vouchers of M/s. Niyantran Caterers were found and impounded as per pages 184 to 341 of Annexure- A/NTH/2007. These vouchers written by the same person were found to be without any supporting bills or vouchers. Most of the vouchers were not even signed by the receivers and the payments under said vouchers were also found to be made in cash. The expenses claimed under the said vouchers were mainly on account of labour, repairing charges, decoration, salary, petrol, diesel etc., and the total....
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....on this issue to 5% of the relevant expenses after certain verification or clarification by observing as under : "8.3.5. Having regard to the facts and circumstances of the case with particular reference to the case of Hyderabad House P. Ltd., where similar operations took place, even though no incriminating documents were found, on expenditure incurred in cash, due to involvement of factors like self made vouchers, not producing bills and vouchers fully, non production of books, purchases from unorganized sectors etc., 15% disallowance made by the A.O. was reduced to 7% by CIT(A) and which was further reduced to 5% by the Tribunal. The case in hand of the appellant stands on a better foundation than the case of the Hyderabad House P. Ltd., where the material found in the action under section 132(1) like most of the payments were made in cash, vouchers were not signed by the recipients, purpose of payments were not mentioned and in most of the papers found dates were not mentioned, as culled out from page No.184 to page No.341 of annexure A/NTH/07. On the basis of such annexure, the A.O. has found unaccounted expenditure to the tune of Rs. 3,92,141/- which is 9.04% debited to the ....
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....e relevant vouchers were sufficient to show that the expenditure claimed by the assessee was not fully verifiable, but there was no reason for the A.O. to allege that the same represented expenditure inflated by the assessee. Having regard to all these facts and circumstances of the case, we are of the view that the Ld. CIT(A) was fully justified in directing the A.O. to restrict the disallowance made on this issue to the extent of 5% of the relevant expenses for unverifiable element involved therein and his impugned order on this issue, in our opinion, does not call for any interference. It is pertinent to note here that the addition made on this issue although was supported by the evidence found during the course of survey for A.Ys. 2007- 2008 and 2008-2009, there was no such evidence to support this addition for A.Ys. 2002-2003 to 2006-2007. The assessee however, has not filed any appeal or cross objection disputing the disallowance confirmed by the Ld. CIT(A) to the extent of 5% of the relevant expenditure in these years apparently because of the smallness of the amounts involved. Ground Nos. 4 and 5 of the Revenue's appeal for all the seven years under consideration are accord....
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....te that for meeting these expenses, I purchased foreign currency equivalent to Indian rupees from the following organisations as mentioned hereunder : A.Y. Name of the organisation Amount 2005-06 Sambtek Forex Ltd., 66,600 2006-07 Sambtek Forex Ltd., 1,37,250 2007-08 Sambtek Forex Ltd., 1,79,000 2008-09 Sambtek Forex Ltd., 2,78,700 As per my instructions payment was made from Nimantran Caterers for the A.Ys. 2005-06, 2006-07 and 2007-08, my proprietary concern and debited to my Capital account. In respect of A.Y. 2008-09, the payment was made from Tourist India Convention and Hotels Pvt. Ltd., paid on my behalf by debiting my loan a/c. In this regard, I submit herewith copy of bank statement for the relevant periods for your records. The A.O. overlooked these facts all together. Out of the total foreign currency purchased for the A.Y. 2008-09, foreign currency equivalent to Rs. 193575/- was expended. Since, I met expenditure on foreign travel, out of my own explained sources, the additions made by the A.O. are totally uncalled for. Therefore, I request you to delete the same." 19.2. The Ld. CIT(A) found merit in the submissions made by the assessee on this ....
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....ained and the expenditure spent during such tours was met out of the business activities of the appellant. Another, question that might have bothered the A.O. must be that the appellant spent expenses during foreign tours, which was not proper for the reason that such expenses also could have been borne by Legend Estates Pvt. Ltd, who has sponsored the foreign tour as there was a nexus between the foreign tour and the business of Legend Estates Pvt. Ltd. The A.O. was perfectly right in his analysis, but as mentioned already, such analysis fits into grew when the assessment was made as a scrutiny case or in a reopened proceedings, but not in search assessments. Here, the material found during the course of action under section 132(1) is important, which is not the case here. In the alternative, as in the Hyderabad Tribunal's case like the Hyderabad Hotels Pvt. Ltd, vis-àvis cash expenditure incurred which could not be explained to the A.O. properly and the facts and circumstances point out to inflation, a degree of disallowance was felt proper even in case of a search assessments, but, no such sanction by any of the appellate authorities is available as on the impugned subjec....
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.... giving the assessee an opportunity of being heard. Ground Nos. 6 to 9 of Revenue's appeals for A.Ys. 2005-2006 and 2006-2007 are dismissed and for A.Ys. 2007- 2008 and 2008-2009 are treated as allowed for statistical purposes. 21. Now, we take-up the appeal of the assessee for A.Y. 2008-2009 being ITA.No.1702/Hyd/2012 which involves a solitary issue relating to the direction given by the Ld. CIT(A) to the A.O. to make the addition of Rs. 20 lakhs on account of income surrendered by the assessee during the course of search. 22. During the course of search, a declaration was made by the assessee surrendering Rs. 50 lakhs as additional income for A.Y. 2008-2009 on account of suppression of catering receipts etc., as found during the course of search. On perusal of the computation of total income filed by the assessee, the Ld. CIT(A), however, found that sum of Rs. 30 lakhs only was declared by the assessee as additional income surrendered during the course of search. Since the assessee could not offer any explanation in respect of the balance amount of Rs. 20 lakhs inspite of opportunity given in this regard, the Ld. CIT(A) directed the A.O. to add the balance amount of Rs. 20 lakh....