SRI RAMAPPA CHANDRU @ R CHANDRU ,BANGALORE vs. DEPUTY COMMISSSIONER OF INCOME TAX CENTRAL CIRCLE-2(4), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE

BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER

ITA Nos. 2013 to 2019/Bang/2017 Assessment Years :2009-10 to 2015-16

Shri Ramappa Chandru, Ahuja Chambers, 204 II Floor, The Deputy Commissioner of # 1, Kumara Krupa Road, Income-tax, Vs. Bangalore – 560 001. Central Circle – 2[4], Bangalore. PAN: ACHPC 6860H APPELLANT RESPONDENT

ITA Nos. 2105 to 2111/Bang/2017 Assessment Years :2009-10 to 2015-16

Shri Ramappa Chandru, The Assistant Commissioner of Ahuja Chambers, 204 II Floor, Income-tax, # 1, Kumara Krupa Road, Vs. Central Circle – 2(4), Bangalore – 560 001. Bangalore. PAN: ACHPC 6860H APPELLANT RESPONDENT

Assessee by : Shri V. Srinivasan, Advocate Revenue by : Shri E.S.N. Prasad, CIT (DR)

Date of hearing : 12.02.2018 Date of Pronouncement : 06.04.2018

O R D E R PER BENCH: Out of this bunch of these 14 appeals, 7 appeals are filed by the assessee and the remaining 7 appeals are filed by the revenue and all these appeals are directed against a combined order of ld. CIT (A) -11, Bangalore dated 28.08.2017 for Assessment Years 2009-10 to 2015-16. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.

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the post search proceedings out of the earlier withdrawals made from the very same bank account by rejecting the explanation on most unsustainable grounds, which is purely out of suspicion and surmise and consequently, the addition made requires to be deleted. 3.1 The learned CIT [A] failed to appreciate the fact that the income reported by the appellant on estimate basis itself was Rs. 2,04,96,539/-, which was far greater than the extent of deposits of Rs. 1,20,60,000/- drawn from the very same bank account and the source by way of such withdrawals was to make the deposits fully substantiated and self-manifest which was not disputed at all and consequently, the addition made requires to be deleted. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234B and 234C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 4.1 The learned A.O. failed to appreciate that the income of the appellant by way of contract as well as from operating the wine stores was subject to TDS/TCS and in view of that, there was no obligation for the appellant to file an estimate of advance-tax consequently there was no justification to charge interest u/s.234B of the Act, having regard to the parity ratio of the decision of the Hon'ble Supreme Court in the case of PETER MORRIS reported in 389 ITR 501 [SC]. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2010-11:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. Without prejudice to the above, in the absence of seizure of any incriminating materials during the course of search relevant for the year under appeal and there being, no assessment proceedings pending by way of issuance of notice u/s.143[2] or 148 of the Act, at the time of search to abate, the invocation of jurisdiction u/s.153A of the Act, is bad in law and the consequential assessment u/s.153A read with 143[3] is also bad in law and requires to be annulled having regard to the ratio of the following decisions made in view of the fact the Hon'ble Supreme Court stayed the operation of the order of the Hon'ble Delhi High Court in the case of SMT. DAYAWANTI & ORS reported in 390 ITR 496 (Del) by its order dated 07/10/2017 :

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1) IBC KNOWLEDGE PARK LIMITED reported in 385 ITR 346 [Kar]; 2) DIPAK JASHVANTLAL PANCHAL reported in 397 ITR 153 (Guj) 3) SAUMYA CONSTRUCTIONS PVT. LTD. reported in 387 ITR 529 (Guj) 4) DESAI CONSTRUCTION P. LTD., reported in 387 ITR 552 [Guj] 5) CONTINENTAL WAREHOUSING CORPN. [NHAVA SHEVA] LTD., reported in 374 ITR 654 (Bom) 6) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 378 ITR 84 (Bom] affirmed by the Hon'ble Supreme Court in 297 CTR 441 (SC) 7) CIT V. KABUL CHAWLA reported in 380 ITR 573 (Del) 8) MEETA GUTGUTIA PROP. M/s. FERNS "N" PETALS reported in 395 ITR 526 (Del) 9) Ms. LATHA JAIN reported in 384 ITR 543 (Del) 2.1 Without prejudice to the above, the impugned search proceedings in the case of the appellant are bad in law and are ultra-vires the provisions of Section 132[1][a], [b] and [c] of the Act, which have not been contradicted by the authorities below despite having contended before them and therefore deemed to have been accepted by the doctrine of non-traverse and therefore the impugned order is bad in law and patently illegal and requires to be cancelled as void-ab-initio having regard to the parity of the ratio of the Hon'ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80 and the Hon'ble Karnataka High Court in the case of C. RAMAIAH REDDY reported in 339 ITR 210. 3. Without prejudice to the above, the learned CIT[A] is not justified in confirming the addition of Rs. 68,99,500/- being the aggregate cash deposits in the bank account of the appellant, which was not an incriminating seized material at all but one obtained from the bank in the post search proceedings out of the earlier withdrawals made from the very same bank account by rejecting the explanation on most unsustainable grounds, which is purely out of suspicion and surmise and consequently, the addition made requires to be deleted. 3.1 The learned CIT[A] failed to appreciate the fact that the income reported by the appellant on estimate basis itself was Rs. 4,37,45,474/-, which was far greater than the extent of deposits of Rs. 68,99,500/- drawn from the very same bank account and the source by way of such withdrawals was to make the deposits fully substantiated and self-manifest which was not disputed at all and consequently, the addition made requires to be deleted. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234B and 234C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.

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4.1 The learned A.O. failed to appreciate that the income of the appellant by way of contract as well as from operating the wine stores was subject to TDS/TCS and in view of that, there was no obligation for the appellant to file an estimate of advance-tax consequently there was no justification to charge interest u/s.234B of the Act, having regard to the parity ratio of the decision of the Hon'ble Supreme Court in the case of PETER MORRIS reported in 389 ITR 501 [SC]. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2011-12:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. Without prejudice to the above, in the absence of seizure of any incriminating materials during the course of search relevant for the year under appeal and there being, no assessment proceedings pending by way of issuance of notice u/s.143[2] or 148 of the Act, are pending at the time of search to abate, the invocation of jurisdiction u/s.153A of the Act, is bad in law and the consequential assessment u/s.153A read with 143[3] is also bad in law and requires to be annulled having regard to the ratio of the following decisions made in view of the fact the Hon'ble Supreme Court stayed the operation of the order of the Hon'ble Delhi High Court in the case of SMT. DAYAWANTI & ORS reported in 390 ITR 496 (Del) by its order dated 07/10/2017 : 1) IBC KNOWLEDGE PARK LIMITED reported in 385 ITR 346 [Kar]; 2) DIPAK JASHVANTLAL PANCHAL reported in 397 ITR 153 (Guj) 3) SAUMYA CONSTRUCTIONS PVT. LTD. reported in 387 ITR 529 (Guj) 4) DESAI CONSTRUCTION P. LTD., reported in 387 ITR 552 [Guj] 5) CONTINENTAL WAREHOUSING CORPN. [NHAVA SHEVA] LTD., reported in 374 ITR 654 (Bom) 6) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 378 ITR 84 (Bom] affirmed by the Hon'ble Supreme Court in 297 CTR 441 (SC) 7) CIT V. KABUL CHAWLA reported in 380 ITR 573 (Del) 8) MEETA GUTGUTIA PROP. M/s. FERNS "N" PETALS reported in 395 ITR 526 (Del) 9) Ms. LATHA JAIN reported in 384 ITR 543 (Del)

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notice u/s.143[2] of the Act, to make an assessment u/s.143[3] of the Act or u/s.148 of the Act, to make an assessment and finality was reached in the matter of assessment to consider an) such proceedings being pending at the time of search to abate and therefore, the notice u/s.153A of the Act, in the absence of seizure of any incriminating materials relating to the assessment year under appeal by the invocation of jurisdiction u/s.153A of the Act, is bad in law and consequential assessment made requires to be annulled having regard to the ratio of the decision of the Hon'ble Supreme Court in the case of CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 297 CTR 441 (SC)

5.1 Without prejudice to the above, the learned CIT[A] is not justified in estimating the income from contract receipt at 10% in as much as the appellant brought to his notice that in the same Commissionerate income from contracts was estimated at 8%.

5.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to evidence on record and consequently, the same requires to be deleted.

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u/s. 234B and 234C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 7.1 The learned A.O. failed to appreciate that the income of the appellant by way of contract as well as from operating the wine stores was subject to TDS/TCS and in view of that, there was no obligation for the appellant to file an estimate of advance-tax consequently there was no justification to charge interest u/s.234B of the Act, having regard to the parity ratio of the decision of the Hon'ble Supreme Court in the case of PETER MORRIS reported in 389 ITR 501 [SC]. 8. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2012-13:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. Without prejudice to the above, in the absence of seizure of any incriminating materials during the course of search relevant for the year under appeal and there being, no assessment proceedings pending by way of issuance of notice u/s.143[2] or 148 of the Act, are pending at the time of search to abate, the invocation of jurisdiction u/s.153A of the Act, is bad in law and the consequential assessment u/s.153A read with 143[3] is also bad in law and requires to be annulled having regard to the ratio of the following decisions made in view of the fact the Hon'ble Supreme Court stayed the operation of the order of the Hon'ble Delhi High Court in the case of SMT. DAYAWANTI & ORS reported in 390 ITR 496 (Del) by its order dated 07/10/2017 : 1) IBC KNOWLEDGE PARK LIMITED reported in 385 ITR 346 [Kar]; 2) DIPAK JASHVANTLAL PANCHAL reported in 397 ITR 153 (Guj) 3) SAUMYA CONSTRUCTIONS PVT. LTD. reported in 387 ITR 529 (Guj) 4) DESAI CONSTRUCTION P. LTD., reported in 387 ITR 552 [Guj] 5) CONTINENTAL WAREHOUSING CORPN. [NHAVA SHEVA] LTD., reported in 374 ITR 654 (Bom) 6) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 378 ITR 84 (Bom] affirmed by the Hon'ble Supreme Court in 297 CTR 441 (SC) 7) CIT V. KABUL CHAWLA reported in 380 ITR 573 (Del) 8) MEETA GUTGUTIA PROP. M/s. FERNS "N" PETALS reported in 395 ITR 526 (Del) 9) Ms. LATHA JAIN reported in 384 ITR 543 (Del)

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4.1 Without prejudice to the above, the learned CIT[A] is not justified in sustaining an addition of Rs. 3,60,000/- being the aggregate of cash deposits in the bank account of the appellant, which was not an incriminating seized material at all but one obtained from the bank in the post search proceedings out of the earlier withdrawals made from the very same bank account by rejecting the explanation on most unsustainable grounds, which is purely out of suspicion and surmise and consequently, the addition made requires to be deleted on merits.

4.2 The learned CIT[A] failed to appreciate the fact that the income reported by the appellant on estimate basis is itself is Rs.5,91,46,190/- , which is far greater than the extent of amounts drawn of Rs.10,31,63,000/- to make the impugned extent of deposits of Rs.3,60,000/- drawn from the very same bank account and the source by way of such withdrawals is to make the deposits fully substantiated and self-manifest which is not disputed at all and consequently, the addition made requires to be deleted on merits. 5.1 Without prejudice to the above, the learned CIT[A] is not justified in estimating the income from contract receipt at 10% in as much as

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the appellant brought to his notice that in the same Commissionarate income from contracts was estimated at 8%.

5.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to evidence on record and consequently, the same requires to be deleted.

7.1 Without prejudice to the above, the income so directed to be assessed by the learned CIT[A] requires to be telescoped with such income similarly directed to be assessed by him in the subsequent years in addition to the additions made by the learned A.O. and sustained by the learned CIT[A] which were telescoped by him during the previous year relevant to the assessment year under appeal.

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probabilities, facts and circumstances of the case. 2. Without prejudice to the above, in the absence of seizure of any incriminating materials during the course of search relevant for the year under appeal and there being, no assessment proceedings pending by way of issuance of notice u/s.143[2] or 148 of the Act, are pending at the time of search to abate, the invocation of jurisdiction u/s.153A of the Act, is bad in law and the consequential assessment u/s.153A read with 143[3] is also bad in law and requires to be annulled having regard to the ratio of the following decisions made in view of the fact the Hon'ble Supreme Court stayed the operation of the order of the Hon'ble Delhi High Court in the case of SMT. DAYAWANTI & ORS reported in 390 ITR 496 (Del) by its order dated 07/10/2017 : 1) IBC KNOWLEDGE PARK LIMITED reported in 385 ITR 346 [Kar]; 2) DIPAK JASHVANTLAL PANCHAL reported in 397 ITR 153 (Guj) 3) SAUMYA CONSTRUCTIONS PVT. LTD. reported in 387 ITR 529 (Guj) 4) DESAI CONSTRUCTION P. LTD., reported in 387 ITR 552 [Guj] 5) CONTINENTAL WAREHOUSING CORPN. [NHAVA SHEVA] LTD., reported in 374 ITR 654 (Bom) 6) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 378 ITR 84 (Bom] affirmed by the Hon'ble Supreme Court in 297 CTR 441 (SC) 7) CIT V. KABUL CHAWLA reported in 380 ITR 573 (Del) 8) MEETA GUTGUTIA PROP. M/s. FERNS "N" PETALS reported in 395 ITR 526 (Del) 9) Ms. LATHA JAIN reported in 384 ITR 543 (Del) 3. The authorities below failed to appreciate that the appellant filed the return originally on 27/09/2013 estimating the income from contract at 8% and no proceedings were initiated by issuance of notice u/s.143[2] of the Act, to make an assessment u/s.143[3] of the Act or u/s.148 of the Act, to make an assessment and finality was reached in the matter of assessment to consider an) such proceedings being pending at the time of search to abate and therefore, the notice u/s.153A of the Act, in the absence of seizure of any incriminating materials relating to the assessment year under appeal by the invocation of jurisdiction u/s.153A of the Act, is bad in law and consequential assessment made requires to be annulled having regard to the ratio of the decision of the Hon'ble Supreme Court in the case of CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 297 CTR 441 (SC) 4. Without prejudice to the above, the learned CIT[A] is not justified in sustaining the estimation of income from contract receipts at 10% as against 8% reported by the appellant on estimate under the facts and in the circumstances of the appellant's case in the absence of any incriminating seized material relevant for the assessment year under

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appeal to warrant a conclusion that the appellant has not made a full disclosure of income as the assessment records by way of return of income and orders for the assessment years 2009-10 and 2010-11, which were relied upon by the learned CIT[A] to estimate the income at 10% as against the estimate of 8% were neither found or seized during the search or even if they were to be considered as seized during search, they do not constitute incriminating seized material as they were already with the department.

4.1 Without prejudice to the above, the learned CIT[A] is not justified in sustaining an addition of Rs. 5,94,000/- being the aggregate of cash deposits in the bank account of the appellant, which was not an incriminating seized material at all but one obtained from the bank in the post search proceedings out of the earlier withdrawals made from the very same bank account by rejecting the explanation on most unsustainable grounds, which is purely out of suspicion and surmise and consequently, the addition made requires to be deleted on merits.

4.2 The learned CIT[A] failed to appreciate the fact that the income reported by the appellant on estimate basis is itself is Rs. 1,54,93,230/-, which is far greater than the extent of amounts drawn of Rs. 43,85,000/- to make the impugned extent of deposits of Rs. 5,94,000/- drawn from the very same bank account and the source by way of such withdrawals is to make the deposits fully substantiated and self-manifest which is not disputed at all and consequently, the addition made requires to be deleted on merits.

5.1 Without prejudice to the above, the learned CIT[A] is not justified in estimating the income from contract receipt at 10% in as much as the appellant brought to his notice that in the same Commissionarate income from contracts was estimated at 8%.

5.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to evidence on record and consequently, the same requires to be deleted.

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7.1 Without prejudice to the above, the income so directed to be assessed by the learned CIT[A] requires to be telescoped with such income similarly directed to be assessed by him in the subsequent years in addition to the additions made by the learned A.O. and sustained by the learned CIT[A] which were telescoped by him during the previous year relevant to the assessment year under appeal.

9.1 The learned A.O. failed to appreciate that the income of the appellant by way of contract as well as from operating the wine stores was subject to TDS/TCS and in view of that, there was no obligation for the appellant to file an estimate of advance-tax consequently there was no justification to charge interest u/s.234B of the Act, having regard to the parity ratio of the decision of the Hon'ble Supreme Court in the case of PETER MORRIS reported in 389 ITR 501 [SC]. 10. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal

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may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.

Assessment Year 2014-15:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. Without prejudice to the above, in the absence of seizure of any incriminating materials during the course of search relevant for the year under appeal and there being, no assessment proceedings pending by way of issuance of notice u/s.143[2] or 148 of the Act, are pending at the time of search to abate, the invocation of jurisdiction u/s.153A of the Act, is bad in law and the consequential assessment u/s.153A read with 143[3] is also bad in law and requires to be annulled having regard to the ratio of the following decisions made in view of the fact the Hon'ble Supreme Court stayed the operation of the order of the Hon'ble Delhi High Court in the case of SMT. DAYAWANTI & ORS reported in 390 ITR 496 (Del) by its order dated 07/10/2017 : 1) IBC KNOWLEDGE PARK LIMITED reported in 385 ITR 346 [Kar]; 2) DIPAK JASHVANTLAL PANCHAL reported in 397 ITR 153 (Guj) 3) SAUMYA CONSTRUCTIONS PVT. LTD. reported in 387 ITR 529 (Guj) 4) DESAI CONSTRUCTION P. LTD., reported in 387 ITR 552 [Guj] 5) CONTINENTAL WAREHOUSING CORPN. [NHAVA SHEVA] LTD., reported in 374 ITR 654 (Bom) 6) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 378 ITR 84 (Bom] affirmed by the Hon'ble Supreme Court in 297 CTR 441 (SC) 7) CIT V. KABUL CHAWLA reported in 380 ITR 573 (Del) 8) MEETA GUTGUTIA PROP. M/s. FERNS "N" PETALS reported in 395 ITR 526 (Del) 9) Ms. LATHA JAIN reported in 384 ITR 543 (Del)

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of CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY reported in 297 CTR 441 (SC)

4.1 Without prejudice to the above, the learned CIT[A] is not justified in sustaining an addition of Rs. 2,80,000/- being the aggregate of cash deposits in the bank account of the appellant, which was not an incriminating seized material at all but one obtained from the bank in the post search proceedings out of the earlier withdrawals made from the very same bank account by rejecting the explanation on most unsustainable grounds, which is purely out of suspicion and surmise and consequently, the addition made requires to be deleted on merits.

4.2 The learned CIT[A] failed to appreciate the fact that the income reported by the appellant on estimate basis is itself is Rs. 2,42,49,060/-, which is far greater than the extent of amounts drawn of Rs. 1,93,00,000/- to make the impugned extent of deposits of Rs. 2,80,000/- drawn from the very same bank account and the source by way of such withdrawals is to make the deposits fully substantiated and self-manifest which is not disputed at all and consequently, the addition made requires to be deleted on merits.

5.1 Without prejudice to the above, the learned CIT[A] is not justified in estimating the income from contract receipt at 10% in as much as the appellant brought to his notice that in the same Commissionarate income from contracts was estimated at 8%.

5.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to evidence on record and consequently, the same requires to be deleted.

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SUPPRESSION OF INCOME, which he had initially erroneously offered in the return, which was withdrawn in time before receipt of the order by filing a revised return and the learned A.O. on his own has also not made any addition at all, in the exercise of his appellate powers, which apart from not being justified on merits technically in effect an enhancement of income by CIT[A] which is not in conformity with the procedure for making the enhancement accordingly, the direction to assess such income not assessed by the A.O. requires to be deleted. 7.1 Without prejudice to the above, the income so directed to be assessed by the learned CIT[A] requires to be telescoped with such income similarly directed to be assessed by him in the subsequent years in addition to the additions made by the learned A.O. and sustained by the learned CIT[A] which were telescoped by him during the previous year relevant to the assessment year under appeal. 7. Without prejudice to the above, the impugned search proceedings in the case of the appellant are bad in law and are ultra-vires the provisions of Section 132[1][a], [b] and [c] of the Act, which have not been contradicted by the authorities below despite having contended before them and therefore deemed to have been accepted by the doctrine of non-traverse and therefore the impugned order is bad in law and patently illegal and requires to be cancelled as void-ab-initio having regard to the parity of the ratio of the Hon’ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80 and the Hon’ble Karnataka High Court in the case of C. RAMAIAH REDDY reported in 339 ITR 210. 8. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234B and 234C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 8.1 The learned A.O. failed to appreciate that the income of the appellant by way of contract as well as from operating the wine stores was subject to TDS/TCS and in view of that, there was no obligation for the appellant to file an estimate of advance-tax consequently there is no justification to charge interest u/s.234B of the Act, having regard to the parity ratio of the decision of the Hon'ble Supreme Court in the case of PETER MORRIS reported in 389 ITR 501 [SC]. 9. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.

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Assessment Year 2015-16:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2.1 The learned CIT[A] is not justified in estimating the income from contract receipt at 10% in as much as the appellant brought to his notice that in the same Commissionarate income from contracts was estimated at 8%.

2.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to evidence on record and consequently, the same requires to be deleted.

3.1 Without prejudice to the above, the learned CIT[A] failed to appreciate that the income reported of Rs. 1,93,99,290/- from contract business as well as from wine stores for the previous year relevant to the assessment year under appeal and taking into account such income earned by the appellant not only for the previous year but for earlier years also and its accumulation, there is no justification for making the impugned addition and consequently, the addition made requires to be deleted on merits.

4.1 Without prejudice to the above, the learned CIT[A] failed to appreciate that the income reported of Rs. 1,93,99,290/- from contract business as well as from wine stores for the previous year relevant to the assessment year under appeal and taking into account such income earned by the appellant not only for the previous year but for earlier years also and its accumulation, there is no justification for making the impugned addition and consequently, the addition made requires to be deleted on merits.

5.1 The learned A.O. failed to appreciate that the income of the appellant by way of contract as well as from operating the wine stores was subject to TDS/TCS and in view of that, there was no obligation

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for the appellant to file an estimate of advance-tax consequently there was no justification to charge interest u/s.234B of the Act, having regard to the parity ratio of the decision of the Hon'ble Supreme Court in the case of PETER MORRIS reported in 389 ITR 501 [SC]. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.” 3. The grounds raised by the revenue in its appeals are as under. “Assessment Year 2009-10:-

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Officer on the estimation @ 10% as against assessed @ 12% of Gross receipts in the hands of assessee?

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CIT(A) was right in directing the Assessing Officer to telescope the addition made by the Assessing Officer on account of cash deposits of Rs 5,94,000 /and unexplained investment of Rs 54,00,000/- with the addition sustained by estimating the income @10% of gross receipt?

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Addl. Income Rs. 3 Crores in 2012– 13 Ground No. 7 AY 2012 – 13, 1.8 Crores in AY 5 Assessee 2013– 14 Ground No. 7 2013 – 14 & 1.7 Crores in AY 2014– 15 Ground No. 6 2014 – 15 declared by the

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assessee and later retracted, AO not added the same but CIT (A) directed the AO to add it.

Addition of Rs. 54 Lakhs made by the AO in respect of the payments made to Shri N.P. 6 Assessee 2013– 14 Ground No. 6 Mahesh on 07.09.2012 as unexplained investment.

Assessee G. No. Addition of Rs. 4,27,410/- and 3, By Revenue as Assessee & Rs. 7,76,756/- being the cash per G. No. 2 7 Revenue 2015– 16 and foreign currency found and against both seized during the course of telescoping search. allowed by CIT (A). Assessee G. No. 4, Addition of Rs. 25 Lacs being Assessee & By Revenue as per the investment by the assessee 8 Revenue 2015– 16 G. No. 2 against for purchase of property as per both telescoping seized material. allowed by CIT (A). AO made additions in these years in respect of alleged income of 6 associates but deleted by CIT (A). Addition AY 2009 – was Rs. 75,38,567/- in 09-10, 9 By Revenue 10 to 2014 - Ground No. 2 Rs. 783,73,237/- in 10 -11, Rs. 15 10,91,63,775/- in 2011 – 12, Rs. 852,45,730/- in 12 – 13, Rs. 657,71,890/- in 2013 – 14 & Rs. 852,45,730/- in 14 – 15. Telescoping granted by CIT (A) 10 Revenue AY 2013-14 Ground No. 3 against addition of Rs. 54 lacs as unexplained Investment.

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the ratio of the decision of the special bench of the Tribunal in case of All Cargo Global Logistics Ltd. Vs. CIT as reported in 18 ITR (Trib) 106. Hence it is seen that in that case, the only document found and seized was accounts maintained by the assessee in Tally software and under these facts, it was held by the CIT(A) and Tribunal in that case that there was no incriminating material found during the course of search and this is the finding of Hon'ble Karnataka High Court that merely on the basis of the books of accounts which had been already submitted by the assessee and accepted by the AO at the time of regular assessment, the revenue cannot get a second opportunity to reopen the concluded assessment. Now we examine the facts of the present case. In Para no. 6 of the assessment order for Assessment Year 2009-10, it is noted by the AO that during the course of search proceedings, some evidence was gathered from assessee’s premises revealing that the assessee had procured various contracts in the names of different persons. The AO has also noted that the evidence revealing the bank transactions by the assessee in the names of other persons was found and on the basis of those evidence, the AO made addition of Rs. 75,38,567/- being 12% of total credits in those accounts in that year. Similarly in Assessment Year 2010-11, the addition was made by the AO of Rs. 7,83,73,236/- on the basis of transactions in those bank accounts. Such addition in Assessment Year 2011-12 is of Rs. 10,91,63,773/- and in Assessment Year 2012-13, such addition is of Rs. 15,24,60,761/- and in Assessment Year 2013-14, such addition made by the AO is of Rs. 6,57,71,888/- and in Assessment Year 2014-15, such addition is of Rs. 7,00,23,255/- and in Assessment Year 2015-16, the assessment order is u/s. 143(3) and not u/s 153A and therefore, this aspect is not relevant for that year. Hence it is seen that in the present case, incriminating material was found in the course of search and the addition was also made by the AO on the basis of such material. Although such addition is deleted by CIT(A) and the revenue is in appeal before us against such deletion but irrespective of this whether such addition made by the AO and deleted by the CIT(A) survives or not, it has to be accepted that some incriminating material was found in the course of search and therefore, this judgment of Hon'ble Karnataka High Court rendered in the

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case of CIT Vs, Lancy Constructions (supra) is not applicable in the present case.

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year. He submitted that under these facts, the cash deposit in bank in these two years should be accepted as properly explained and the addition made by the AO and confirmed by the CIT(A) should be deleted. Regarding the remaining years, he submitted that although confirming of addition of in those years is also not proper but in view of this fact that telescoping benefit has been allowed by CIT(A) and no such addition ultimately survives after such telescoping benefit, the assessee has nothing much to say for these years. The ld. DR of revenue supported the assessment order in all these years.

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“9.3. However for the assessment years 2012-13, 2013-14 and 2014- 15, the cash deposits added by the A.O. is Rs.3,60,000/-, Rs.5,94,000/- and 2,80,000/- respectively. I have already taken a view that the business income of the appellant should be estimated at 10% of the gross receipts for these years. Hence, the income sustained by me would be available for telescoping and therefore, these additions are not required separately. Hence the additions towards cash deposits for the assessment years 2012-13, 2013-14 and 201415 are deleted.” 13. From the above Para reproduced from the order of CIT(A), it is seen that it is noticed that CIT(A) has granted the benefit of telescoping on this basis that as per his decision, he has estimated the income of assessee at 10% of gross receipts for these three years whereas the same was reported by assessee by estimating it @ 8% of gross receipts. Hence extra income to the extent of 2% in these three years stands confirmed by CIT(A). Gross receipts in these three years is Rs. 71.03 Crores for Assessment Year 2012-13, Rs. 1619.17 lakhs for Assessment Year 2013-14 and Rs. 1165.42 lakhs for Assessment Year 2014- 15. 2% extra income of the gross receipts of these 3 years amounts to much more than the amount of cash deposit in these 3 years of Rs. 3.60 lakhs, Rs. 5.94 lakhs and Rs. 2.80 lakhs only and hence, we find no infirmity in the order of CIT(A) regarding granting of telescoping benefit in these 3 years i.e. Assessment Years 2012-13, 2013-14 and 2014-15. Hence we decline to interfere in the order of CIT(A) on this aspect of this issue in these three years i.e. Assessment Years 2012-13 to 2014-15.

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that the assessee is a contractor and the assessee works for BBMP and the assessee has not maintained books of accounts and filed the return of income in all the years by estimating the income at given percentage of the gross receipts. For Assessment Year 2009-10, the assessee has estimated the income at 9% and in Assessment Year 2010-11, the assessee has estimated the income at 10.5% and in the remaining years, the assessee has estimated at 8%. As per the provisions of section 44AD of IT Act which is applicable to only those assessees who are having gross receipts less than Rs. 40 lakhs in a year which was increased to Rs. 1 Crore in Assessment Year 2013-14 and as per this section, presumptive income should be 8% of gross receipts but in all the years before us, the gross receipts of the assessee is many times more than the prescribed gross receipts in this section and therefore, this section is not applicable to the present assessee in any of the years which are before us. Hence, we do not get any guidance from section 44AD of IT Act. In all these years, the AO has estimated the income of the assessee at 12% of gross receipts but he has not provided any basis for estimating the income at 12%. Similarly, ld. AR of assessee is also not giving any basis for estimating the income at 9%, 10.5% or 8% and it is seen that highest percentage of income shown by the assessee at 10.5% is in Assessment Year 2010-11. In spite of a specific query of the bench, the ld. AR of assessee could not point out any difference in facts in Assessment Year 2010-11 as compared to Assessment Years 2009-10 and 2011-12 to 2015-16 and therefore, we feel that when the assessee himself is estimating the income at 10.5% in one year i.e. Assessment Year 2010-11 then in all the remaining years also, the income should not be estimated at a rate lower than that i.e. 10.5% because no case is made out by ld. AR of assessee to estimate the income below 10.5% in any of the years. In our considered opinion, estimating the income of the assessee at 10.5% in all years which are before us will meet the ends of justice in the facts of the present case. Hence we hold accordingly and direct the AO to estimate the income at 10.5% of the gross receipts in Assessment Years 2009-10 to 2015-16. This issue is decided accordingly. Grounds raised by the assessee in this regard are rejected whereas the grounds raised by the revenue in this regard are partly allowed.

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“Conclusions

(1) The Tribunal has got powers to look into all aspects of search and a valid search is sine qua non for initiating block assessment.

(2) Materials seized during an invalid search cannot be used in block assessment proceeding but can be used in other assessment proceedings under the Act.

(3) The power to put prohibitory order under s. 132(3) is under law but the reasons for doing so have to be recorded in writing and are justiable.

(4) The period of limitation starts on the date on which the last of authorisations has been executed and not when the authorised officer states that the search is finally concluded. Putting a prohibitory order under s. 132(3) does not elongate the starting point of limitation.

In the light of the aforesaid discussion, as the Tribunal has declined to go into the jurisdictional aspect, the appropriate course would be to set aside the order and remit the entire matter back to the Tribunal for fresh consideration keeping in mind the observations made in this judgment and also consider the jurisdiction aspect which it had declined to consider while passing the impugned order.

Therefore the finding recorded by the Tribunal that action of the IT authorities anterior to search cannot be the subject- matter of the appeal, the legality of the validity of the search proceedings cannot be gone into in the appeal against the order of block assessment, and statute has not provided any right of appeal against such an order cannot be sustained. Accordingly the said findings are set aside. Consequently the entire matter is now remitted back to the

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Tribunal to consider the appeal afresh, on merits, including the question of the validity and legality of the search, in the light of the law laid down in this decision.”

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This issue was decided by CIT (A) as per paras 10.2 and 10.3 of his order and the same are reproduced herein below for the sake of ready reference.

“10.2 I have considered the submissions and materials on record. It is a fact that a document was found in course of search showing an investment of Rs.54,00,000/- made by the appellant with Sri N.P.Mahesh & others in connection with purchase of a property. The appellant has claimed that the aforesaid property deal was cancelled and he had received the amounts paid. No evidence has been furnished in this regard. As rightly held by the A.O. the source for payment of cash has not been properly explained. Hence, the A.O. was justified in making the addition of Rs.54,00,000/-. 10.3 However, the alternate contention of the appellant of telescoping of the aforesaid addition with the income sustained on estimate basis is well-founded. The A.O. is directed to telescope this addition with the income from business estimated at 10% and the additional income offered in the return of income filed for the assessment year 2013-14, Ns hid' has not been accepted by the A.O. while assessing the appellant, which 1 will now advert to. It is directed accordingly.

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Assessment Year 2013-14 while deciding the issue related to cash deposit in bank. Hence the remaining benefit available is only Rs. 34.54 Lakhs but CIT(A) has allowed telescoping benefit of Rs. 54 Lakhs. But this is also important that the assessee has declared extra income in Assessment Year 2013-14 of Rs. 1.8 Crores. Although such income was not added by the AO in the assessment order but the CIT(A) has directed the AO to make the addition. We have confirmed the order of CIT(A) on that issue and therefore, granting of telescoping of Rs. 54 Lakhs against this addition had no infirmity. This issue is decided against the revenue. Issue no. 10 is decided against the revenue.

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respective bank accounts and it is not established that the said funds were found its way to the appellant. It is also contended that TDS has been made in respect of these 6 contractors and they have filed returns of income for various years. 8.4 I find merit in the contentions of the appellant that the income earned by these 6 persons cannot be assessed in the hands of the appellant. Although the A.O has pointed out various circumstances to show that these persons are not men of means but, the fact that they have a contract license in their own name to execute the work cannot be brushed aside so easily. It is also a fact that the A.O. has not established that these persons are benamis of the appellant by showing that the appellant provided funds to them to execute the works. which has later come back to the appellant directly or indirectly. Merely on the suspicion that these persons are not capable of doing the work cannot lead to the conclusion that they are benamis of the appellant. The appellant has given a plausible explanation for the role played by him in assisting these 6 persons to open bank accounts and help them to operate the bank accounts for conduct of their business. All the 6 persons were produced in course of search operations and their statements have been recorded by the Investigation Wing. In the statement recorded by the Investigation Wing there is no suggestion that these persons are benamis of the appellant and their income is to be assessed in the hands of the appellant. The assessee has discharged the onus casted upon him by producing the 6 persons before the Investigation Wing and statement having been recorded from all the 6 persons. In the statements recorded of 6 persons there is nothing even to suggest that the appellant was beneficiary of the works carried out by them but, on the other hand, it is seen that these persons have accepted carrying out contract work. Since, the said 6 persons have accepted carrying on the contract work by themselves, the income arising out of their contract work carried requires to be considered in their respective hands and not in the hands of the appellant as added by the A.O. There should be some corroborative and positive evidence required to bring the income earned by these persons to tax in the hands of the appellant. since. suspicion, howsoever strong, cannot be a substitute for evidence. Hence, I direct the A.O. to delete the additions of 12% of these receipts that has been treated as the income of the appellant.”

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the assessment order. These four persons are Shri Nagraj, Shri Sampath Kumar, Shri Santosh Kumar and Shri Vishwanath. He drawn our attention to the statements of these four persons reproduced by the AO in the assessment order and pointed out that in reply to one question regarding giving of any mandate to anyone to operate any of the bank accounts, it was replied that Shri R. Chandru was authorized to operate the bank accounts because Shri R. Chandru is big contractor and the authorization was given to him to purchase material on his behalf. It is also stated that these persons were taking help of Shri R. Chandru in connection with preparation of papers. He submitted that only because the assessee helped some new contractors in developing their business, it cannot be held that such income belonged to the assessee. He also submitted that return of income was filed by Shri B. Basavaraju pursuant to the notice issued by the AO u/s. 148 on 31.03.2017 and the assessment order is framed by the AO for Assessment Years 2010-11 to 2014-15 on 20.12.2017 and he submitted a copy of these assessment orders passed by the AO u/s. 144 r.w.s 147 of the IT Act and it was pointed out that in Assessment Year 2010-11 the income of Shri Basavaraju was assessed at Rs. 1,02,06,500/- @ 12% of his contract receipts of Rs. 8,50,54,170/-. Similarly in Assessment Year 2011-12, his income was assessed at Rs. 8,85,05,111/- being 12% of his gross receipts of Rs. 73,75,42,592/-. In Assessment Year 2012-13 his income was assessed at Rs. 9,74,74,129/- being 12% of gross receipts of Rs. 81,22,84,405/- and similarly in Assessment Year 2013-14, his income was assessed at Rs. 57,11,023/- being 12% of gross receipts of Rs. 4,75,91,860/- and Rs. 3,27,07,793/- being 12% of gross receipts of Rs. 27,25,64,939/- as per Karnataka Bank A/c. No. 363501. He also pointed out that in Assessment Year 2014-15, his income was assessed at Rs. 39,39,767/- being 12% of gross receipts in that year of Rs. 3,28,31,389/-. He submitted that when the income of these persons is being assessed in the hands of those persons, the same cannot be added in the hands of the present assessee. Regarding other five persons, he submitted that he is not aware of this aspect in respect of these five persons as to whether any assessment is framed in those cases or not but this is not the case of the department that the facts in the case of Sri Basavraju is different with the remaining five persons and therefore,

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whether assessment is framed in remaining cases or not is not relevant. The ld. DR of revenue supported the assessment order on this issue. He also submitted that on this issue, order of CIT(A) should be reversed and that of AO should be restored.

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same Para that the statement of four persons clearly reveal that they are the persons of no means and they do not have any knowledge, experience, skill, proficiency, capability and financial base etc. The AO has also noted that all of them have said that they use the office premises of the assessee. On this basis, the AO came to the conclusion that these receipts are of the assessee and he brought to tax 12% of such year wise receipts to tax in the hands of the assessee. Year wise receipt & 12% there of assessed as income is as under:- Year Receipts Income @ 12% 2009 – 10 628,21,392/- 75,38,567/- 2010 – 11 6531,10,313/- 783,73,236/- 2011 – 12 9096,98,127/- 1091,63,775/- 2012 – 13 12705,06,376/- 1524,60,765/- 2013 – 14 5480,99,087/- 657,71,890/- 2014 – 15 5125,35,907/- 615,04,309/-

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of 6 persons there is nothing even to suggest that the appellant was beneficiary of the works carried out by them but, on the other hand, it is seen that these persons have accepted carrying out contract work. Since, the said 6 persons have accepted carrying on the contract work by themselves, the income arising out of their contract work carried requires to be considered in their respective hands and not in the hands of the appellant as added by the A.O. There should be some corroborative and positive evidence required to bring the income earned by these persons to tax in the hands of the appellant, since. suspicion. howsoever strong, cannot be a substitute for evidence. Hence, I direct the A.O. to delete the additions of 12% of these receipts that has been treated as the income of the appellant.”

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account no. are same i.e. Canara Bank Account No. 0413201028053, Corporation Bank current A/c no. 3681 and Karnataka Bank A/c No. 0632000400339701. When the receipts in the same bank account is considered as receipts of Shri B. Basavraju and income to the extent of 12% of such receipts is taxed in his hands, the department cannot tax income in respect of same receipts in the hands of the present assessee. This is settled law that correct income should be taxed in correct hands and no income can be taxed in the hands of two persons. Various reasons given by the AO as noted above to hold that the receipts in the bank accounts of these 6 persons including Shri Basavraju are in fact the receipts of the present assessee may be good reason to make further enquiry because these reasons raise suspicion but suspicion alone cannot be the basis of addition particularly when on the basis of same bank accounts, the department itself has started proceedings u/s 147 in the hands of Shri B. Basavraju by alleging that the deposits in these bank accounts of Shri B. Basavraju are his contract receipts and taxed 12 % of such receipts as his income. the same cannot be taxed again in the hands of any other person. If this would have been a claim of Shri B. Basavraju that these receipts are his income and department had made protective addition in one person’s hands and substantive addition in the hands of the other person, it would have been a matter of adjudication as to in whose hands, the income is to be taxed but when the department itself has alleged that these are contract receipts of Shri B. Basavraju and taxed in his hands for the same receipts, even adjudication is not called for to decide whether any such addition can be made in the hands of the present assessee and deletion of such addition by CIT (A) does not require any interference from our side.

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in the order of CIT (A) in respect of this issue regarding the remaining five persons also. This issue is decided in favour of the assessee in respect of all six persons.

Order pronounced in the open court on the date mentioned on the caption page.

Sd/- Sd/- (LALIET KUMAR) (ARUN KUMAR GARODIA) Judicial Member Accountant Member Bangalore, Dated, the 06th April, 2018. /MS/ Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order

Senior Private Secretary, Income Tax Appellate Tribunal, Bangalore.