TaxTMI 
TaxTMI 
2014 (1) TMI 1684
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....hat three zeros were missing for non banking transactions. 2. The learned CIT (A) failed to appreciate this basic logic given by the AO that when banking and non banking transactions were written and summed up alike and all of them three zeros are missing. Had two zeros are missing in non banking transactions and three in the case of banking transactions, as opined by the Id. CIT(A), they must had written and summed up differently. The opening and closing balances go against the opinion made by the Id. CIT (A). 3. The CIT (A) could have appreciated that the AO not only rebutted the evidences submitted by the assessee, but also disproved them with examples in the assessment order. 4. The Id. CIT(A) ought to have appreciated the fact that the transactions were recorded by the two wives and managers of assessee continuously for about 6 years and that too in a uniform manner. He further failed to understand that it is impossible to record the transactions by different persons uniformly unless it is common for both banking and non banking transactions. 3. Brief facts of the case are that a search and seizure operation u/s. 132 of Income tax Act, 1961 was conducted ....
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....at the transactions that were noted in the seized books pertain to assessee and his family members; as such, the income generated on them should be brought to tax in their hands for the respective periods. AO also recorded a sworn statement of the assessee on 29 8 2008 during which assessee had given the details of working of his undisclosed income as recorded in the books marked as Annexure KBR/A/2 and KBR/A/4. The AO separated the bank transactions and non bank transactions. He also separated the personal expenditure, capital gains and investments made by the assessee. Assessee admitted that the bank transactions were entered by omitting the last three zeroes and other transactions were entered by omitting last two zeroes. Assessee also admitted that for the assessment years 2003 04 to 2008 09, there was undisclosed income from business, undisclosed investments and undisclosed capital gains in his hands and undisclosed income from other sources and undisclosed capital gains in both the hands of his wives Smt. K. Sridevi and Smt. K. Rani. Assessee explained to the AO that three digits were omitted for all the bank transactions and two digits were omitted for all non banking transa....
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.... expenses in other pages also. They are representing the salary payments, daily expenses for groceries, vegetables, fruits, medicines, other eatables diesel, petrol, repair expenses of car, TV, AC, telephone cell bills, ticket expenses, electricity bill etc. None of these items appearing on these documents would support the contention of the AO to base his addition for all the years under reference. 7. The CIT(A) observed that the AO has proceeded on the basis of some isolated entries that they do not correctly represent what the appellant has considered in his submission. He has made some enquiries independently and obtained information from Delhi Public School about the school fee paid by the appellant for his children. If the payment of school fee is not appearing in the documents, the AO could have made independent addition about such expenditure instead of trying to link such payment to the nearest figure appearing on the documents. He is resuming a particular entry of '100' as one lakh as against 10000 and trying to apportion Rs. 80,000/ towards school fee and balance Rs. 20,000/ as incidental expenses. The entry in the seized document for '100' is appea....
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....earing in the seized documents are to be multiplied with '1000'. In the absence of such evidences with direct evidences to the entries made in the documents it is very difficult to adopt one multiplication figure uniformly for all entries. More so, when the assessee furnished third party evidences to such entries and the same were not rebutted by the AO in his order. Mere rejection does not amount to rebuttal of the evidences furnished by the assessee. As narrated above, many of such entries do not require supporting evidence to suggest that they are to be multiplied with two zeroes only as they speak themselves. 9. The CIT(A) further observed that the seized papers do not represent regular books of account so that the accounting system is not to be applied. As admitted, they are written by various persons other than the assessee from time to time. Hence one cannot be expected a uniform method and the entries can at best be deciphered by the persons who have written those entries. In view of the above factual matrix, it is not correct to assume that a uniform method is followed in respect of totalling and balancing of the payments and receipts. They are written as and....
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....the income and the assets or expenditure, that nexus is clearly lacking on the facts as brought on record. Even though the AO has stated in the assessment order about the nature of entries relating to period prior to Sep. 2003 that the elimination of two zeroes and from Sep. 2003 onwards, elimination of three zeroes is considered, but in reality, he as in wholesome adopted affixing three zeroes for all the entries in the year. However, the assessee has taken uniform stand for all the entries in the diaries. Instead of identifying the nature of expenditure which necessitates the adoption of higher value than the value adopted by the assessee (by adopting two zeroes), the AO went on to assess the total amount based on affixing three zeroes for all entries which leads to abnormality as well as unrealistic figures. 11. The CIT(A) was of the view that it is very difficult to sustain the stand of the AO in making addition based on multiplication of the entries with '1000', He simply added one zero to the income disclosed by the assessee. Without rebutting the evidences filed by the assessee and without bringing any evidence to his logic, the addition made by him is unsustainab....
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.... income in the hands of the assessee without subscribing any reason for doing so. When such agricultural income was duly accepted in the hands of two wives of the assessee, it is not justified again subjecting the same agricultural income in the hands of the assessee for taxation. Therefore, he directed the AO to re compute the total income of the assessee for all these years under appeal i.e., 2003 04 to 2008 09 by deleting the agricultural income of assessee's wives and following the above directions of adding Rs. 5 lakhs to the income disclosed for each assessment year from 2004 05 to 2008 09. Against this, the Revenue is in appeal before us. 14. The learned DR submitted that the CIT(A) is not justified in deleting the addition by taking certain isolated entries in the seized material to suggest that the amount written by the assessee becomes exorbitant if "000" are added to the figures written by the assessee. Those entries are isolated entries and a conclusion cannot be drawn on the basis of those entries like non vegetarian plus parcel kirana 5.00, Doctor 4.00, Indica diesel 5.00, Sweet and mixture 3.00, Tirupatamma 30.00, Vengaiah (car repair) 3.00, Opel car petrol 5.....
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....ed both amounts received and paid on various dates and in names of various persons on various accounts. An amount of Rs. 4,00,000 cash was also seized by the Investigation Wing. During the course of post search operations, K. Babu Rao admitted that the notebooks contained receipts and payments which partly relate to him and partly to others. He also mentioned categorically that the amounts were written in coded form and further that these notebooks were written by his managers and sometimes by his two wives, viz., Smt. K. Sridevi and Smt. K. Rani. The statement of the assessee was recorded on 23 7 2008 by Dy. Director of Income tax (Inv) wherein the assessee has clearly stated about the nature of entries recorded in the seized documents. That these entries relate to receipts and payments of partly to the assessee and partly to others. That they are written by his Managers, workers and his two wives. That the entries are in coded form and all bank transactions are to be multiplied by '1000' and all other transactions are to be multiplied by '100'. 16. The AR submitted that during the course of post search operations, K. Babu Rao fully cooperated with the Depart....
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....otal 2,63,73,952 3,54,518 16,41,372 19. Further, in addition to the above, the assessees also admitted the income from agriculture in the Returns as per the evidences of Tahsildar receipts produced before the DDIT (Investigation). The agricultural income admitted by. the three assessees for each of the Assessment Years is as follows: F.Y. A.Y. Sri K. Babu Rao (Rs.) Smt. K. Sri Devi (Rs.) Smt. K. Rani (Rs.) 2002-03 2003-04 7,00,000 2,25,000 NIL 2003-04 2004-05 6,50,000 3,25,000 NIL 2004-05 2005-06 7,50,000 3,25,000 NIL 2005-06 2006-07 7,50,000 3,50,000 NIL 2006-07 2007-08 8,00,000 4,00,000 2,50,000 2007-08 2008-09 7,50,000 4,25,000 4,50,000 TOTAL 44,00,000 20,50,000 7,00,000 20. The AR submitted that the total disclosure (including agricultural income) made by K. Babu Rao on his as well as K. Sridevi and K. Rani behalf is Rs. 3,55,19,842. He also paid taxes and proved his bona fides. While making the payment of taxes, Rs. 4,00,0000 cash seized by the Department was also adjusted by him towards his tax dues. During the course of asses....
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....siness. To the extent that the third party evidence was available, K. Babu Rao was able to produce the same which conforms that the cash transactions were written by eliminating 2 zeros. 22. The AR submitted that the assessee contested the observation of the AO in respect of the entries made in the diaries. That nowhere has the assessee made any admission that the cash transactions were written in a codified form after eliminating 3 zeros. The Assessing Officer, however, has chosen to treat the submissions made with regard to the school and college fees as 'tacit admission' by the assessee. The Ld. CIT(A) will appreciate the diary is not a regular books and therefore principle of uniformity, balancing, negative cash etc., does not hold good as in the case of regular books of account, that the entire assessment has been made based on presumption, surmises and conjectures. The evidence produced by the assessee has been totally ignored without furnishing any reasons in the Order as to why they have been rejected. The entire assessment was made in hurried manner without verifying the contents of the seized material as well as the documentary proof such as bank statements, la....
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....y the AO in all the years under appeal. Accordingly it was pleaded that the same may be deleted. 24. The AR submitted that the Assessing Officer on Page 12 of his Order in Paragraph 3.5, has mentioned that there is a discrepancy between the income disclosed during the course of Investigation and admitted in his Return of Income. In this connection, it may be noted that there is no discrepancy in the income declared and the income admitted. The AO has again added the agricultural income belonging to Smt. K. Rani and K. Sridevi in the hands of the assessee although in their individual hands the same has been disclosed and accepted by the same AO. It is not correct on the part of the AO again subjecting such agricultural income in the hands of the assessee while computing his total income. The assessee has filed a detailed working of each assessment year wise reconciliation of the income disclosed and admitted as well as assessed by the AO. Accordingly the assessee pleaded for deletion of the addition made in each year under appeal as such additions are made purely on hypothetical basis without any real evidences. 25. We have heard both the parties and perused the material on re....
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.... to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 26. It is clear from the above provisions of section 153A that the income of the assessee in case of a person where search is initiated u/s. 132, the books of account or other documents or any assets are requisitioned u/s. 132A, the Assessing Officer after issue of a notice to furnish income of the assessee in respect of each assessment year falling within 6 assessment years immediately preceding the assessment year relevant to the pr....