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TMI Blog2015 (4) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial found during the course of search. 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, uphold the impugned order of the Ld. CIT(A) deleting the addition made by the A.O. on account of undisclosed income from the alleged suppression of catering receipts for A.Ys. 2002-2003 to 2006-2007 as there was no material found during the course of search to support and substantiate the said addition and this position has not been disputed even by the learned D.R. We however, do not find ourselves in agreement with the Ld. CIT(A) giving similar relief to the assessee for A.Y. 2007-2008 as the assessment for that year was pending as on the date of search and the scope of the said assessment therefore was wide and not restricted to make addition only on the basis of materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 accordingly dismissed. Addition on account of unexplained Foreign travel expenses - It is observed that the additions made by the A.O. in the relevant four years i.e., A.Ys. 2005-2006, 2006-2007, 2007-2008 and 2008-2009 on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come placed at page-3 of the paper book as well as copy of Trading and Profit and Loss Account placed at page-4 of the paper book and submitted that although additional income of ₹ 30 lakhs only was offered in the computation of total income, the sum of ₹ 20 lakhs was separately offered by crediting the same as other income to the P & L Account. As rightly contended by the learned D.R. in this regard, this explanation was not offered by the assessee during the course of appellate proceedings before the Ld. CIT(A) in spite of specific opportunity afforded in this regard. She has contended that an opportunity may therefore be given to the A.O. to verify the explanation of the assessee. We find merit in this contention of the D.R. Accordingly, the impugned order of the Ld. CIT(A) on this issue is set aside and the matter is restored to the file of the A.O. with a direction to decide the same after verifying the claim of the assessee that the amount of ₹ 20 lakhs credited to P & L account as other income represented the part amount of ₹ 50 lakhs surrendered during the course of search. The A.O. shall decide this issue after giving the assessee proper and suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2007-08 32,78,109 2008-09 72,50,860 5. During the course of search, certain documentary evidence was found showing suppression of receipts of his catering business by the assessee. Such documents identified as page Nos. 15 to 16 and 92 to 94 of Annexure-A/BJ/01 contained entries showing undisclosed receipts of catering business by the assessee aggregating to ₹ 56,17,750 during the previous year relevant to A.Y. 2008-2009. By applying the average gross profit rate of 52.58% as declared by the assessee from his catering business for A.Ys. 2003-2004 to 2007-2008, the undisclosed income of the assessee from suppression of catering receipts was worked out by the A.O. at ₹ 29,53,813 and the said amount was added by him to the total income of the assessee for A.Y. 2008-2009. Although, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search was sufficient only to show the suppression of catering receipts to the extent of ₹ 56,17,750 for A.Y. 2008- 2009 and since income of ₹ 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 ₹ 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 ₹ 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. 2002-2003 to 2007- 2008 in the same ratio as that of A.Y. 2008-2009 and estimated the undisclosed income of the assessee on similar line without there being any evidence to support and substantiate the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaration made by the appellant for this assessment is concerned, it is seen that the appellant has made a declaration for ₹ 50,00,000/-, but whereas actual amount shown in the computation of income was ₹ 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 ₹ 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 ₹ 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 Ld. CIT(A) giving relief to the assessee on this issue for A.Ys. 2002-2003 to 2007-2008 by relying on the decision of Special Bench of ITAT in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad 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, uphold the impugned order of the Ld. CIT(A) deleting the addition made by the A.O. on account of undisclosed income from the alleged suppression of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of such expenses was ₹ 3,92,141 for A.Y. 2007-2008 and ₹ 1,80,014 for A.Y. 2008-2009. Since the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) found merit in the submissions made by the assessee on this issue and directed the A.O. to restrict the addition made 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be incurred in the ordinary course of assessee s catering business. The defects/ deficiencies pointed out by the A.O. in the 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Ys. 2005-06 to 2008-09 towards estimated unexplained expenditure for boarding, lodging etc., related to the foreign travel. In this regard, I would like to state 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simple reason that the source stands explained. Regarding, funding for other family members, it is true that no business nexus was there, but the A.O. could view in such a way in a regular assessment but not in 153A assessments, as the material found during the search action is the basis for such an addition here. Thus, both the air fares and expenditure incurred by the appellant stands explained as sources for air tickets was explained 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. that this issue for A.Ys. 2007- 2008 and 2008-2009 should be restored to the file of A.O. for giving him an opportunity to verify the said additional evidence. Accordingly, we set aside the impugned order of Ld. CIT(A) on this issue for A.Ys. 2007-2008 and 2008-2009 and restore the matter to the file of the A.O. for deciding the same afresh in the light of additional evidence filed by the assessee before the Ld. CIT(A) after 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 ₹ 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 ₹ 50 lakhs as additional income for A.Y. 2008-2009 on account of suppression of catering receipts etc., as found during the course of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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