9911796707
TMI Blog2015 (10) TMI 2021X X X X Extracts X X X X X X X X Extracts X X X X ..... hese years. - Decided in favour of assessee. Agricultural income declared by the assessee was assessed under section 68 of the Act by rejecting the claim of availability of agricultural activity - Held that:- In the case of A.T. Rayudu, the father of the assessee, we have directed the AO to disallow 25% of the agricultural income and we had followed the decision rendered by the coordinate bench in the case of A.Ammaji and M/s Avnash estates & resorts Ltd. Consistent with the view taken in the above said cases, we direct the AO to disallow 25% of the agricultural income and assess the same as income of the assessee under the head income from other sources. - Decided in favour of assessee in part Undisclosed jewellery - Held that:- Assessee has furnished the ownership details of the jewellery, but the said details were rejected by the assessing officer by pointing out certain defects. In respect of the jewelleries claimed to belong to the sister of Shri Avnash, the same was rejected on the reasoning that the customs documents were not available. Similarly the claim made by his wife was rejected on the reasoning that the parents and grant parents of Avnas’s wife did not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded or the contents of the loose papers have been established. Under these set of facts, we are of the view that the assessing officer has made the addition on inferences without proving the contents of the loose papers and the same cannot be sustained. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the addition made towards rental income. - Decided in favour of assessee. - I.T.A. Nos.313 to 319/Viz/2014, I.T.A. Nos.71 TO 77/Viz/2014, I.T.A. Nos.304 to 310/Viz/2014 - - - Dated:- 15-9-2015 - SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, Adv For The Respondent : Shri B. Narasimha Sharma, Sr. Standing Counsel and Shri G.Gurusamy, CIT DR ORDER Per Bench: 1. In all these cases, a common ground relating to the scope of assessments made u/s 153A of the Act has been raised by the assessees. 2. On behalf of the revenue, Shri Narasimha Sharma, Ld Standing Counsel appeared and advanced his arguments. On behalf of the assessees, Shri G.V.N. Hari appeared and advanced his arguments. Hence, we first proceed to dispose of this legal ground relating to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not applicable. In view of the above, the Learned CIT(A) rejected the contentions of the assessee urged on the above said legal issue. 6. Learned standing counsel Shri B. Narasimha Sharma, the Learned Standing counsel appearing on behalf of the revenue, commenced his arguments explaining the methodologies prescribed under the Income tax Act for assessing the income of an assessee. He submitted that under the Income-Tax Act, various methodologies have been provided for assessing the total income of an assessee. First of all, the assessee is required to file his return of income disclosing all sources of income in terms of provisions of sec. 139 of the Act, which shall be accepted either under section 143(1) or assessed under section 143(3). If the assessing officer has reason to believe that any income chargeable to tax has escaped the assessment in respect of any assessee, then he is entitled to reopen the said assessment by issuing notice under section 148 of the Act. There may be cases where the Assessing Officer may not have reason to believe about escapement of income and still the revenue may possess information about suppression of income by any person. Hence the Act p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to assess or reassess total income of each of the assessment year by passing separate assessment order for each of the six years. The Learned Standing Counsel submitted that the expression total income is defined, under sub-section 45 of section 2 of the Act, as under:- 2(45) total income means the total amount of income referred to in section 5, computed in the manner laid down in this Act. The Learned Standing Counsel submitted that total income , for the purposes of sec. 153A, shall consist of both disclosed income as well as undisclosed income, whereas under the special procedure prescribed in the erstwhile Chapter XIV-B of the Act, the Assessing Officer was required to compute Undisclosed income on the basis of seized material only and further he was required to pass a single assessment order for the block period assessing undisclosed income only. Where as in the scheme prescribed under sec. 153A of the Act, the Assessing Officer is required to pass separate assessment order for each of the assessment years and further he has to assess the total income for each of the years, meaning thereby the assessment made under section 153A of the Act is not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the scheme of the provisions of sec. 153A of the Act. The Learned Standing counsel reiterated that the total income shall consist of both income disclosed by the assessee and the income undisclosed and/or escaped the assessment. Accordingly he submitted that the existence of incriminating material should not be considered as a pre-condition for assessing any escaped income while determining total income under section 153A of the Act. Accordingly, the Learned A.R submitted that the power of the assessing officer is not restricted by any criteria under section 153A of the Act while determining the Total income under that section. 9. At that stage, a specific query was posed by the bench to the Learned Standing Counsel as to whether the Assessing Officer is entitled to revisit the concluded matters in the assessments carried out under section 153A of the Act. The bench also gave an illustration, viz., if the assessee had claimed depreciation on Printers @ 60% (treating it as part of Computers ) and it was also allowed in the original assessment and in that case, can the Assessing Officer restrict the depreciation to 15% (rate applicable to machineries) in the 153A proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhatia (2013) 352 ITR 493 wherein the High Court has made the following observations, after considering the provisions of chapter XIV-B and section 153 of the Act. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under section 153A would be similar to the orders passed in any reasse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under section 132, the said proceeding shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, question no.1 before us is answered as under: a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately; b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. The Learned standing counsel submitted that the decision rendered by the Special Bench of Tribunal to the effect that assessment can be made in the proceedings initiated under section 153A of the Act only on the basis of seized material is not correct proposition of law, in view of the decision rendered by Hon ble Karnataka High Court, referred above and also in view of the binding decision of Hon ble jurisdictional High Court in the case of Gopal Lal Bhadruka (Supra). Accordingly he contended that the assessee cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 153A and also the scope of assessment made there under should be understood in the context of search proceedings provisions of sec. 132 only. He submitted that the following observations made by the Hon ble Bombay High Court in the case referred supra, at para 30, explains this principle in clear terms:- 30 .. Not only the finalized assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and assessee or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words search and requisition appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked in such a situation. That question is therefore left open. The Ld A.R further submitted that the decision of Hon ble Andhra Pradesh High Court in the case of Gopal Lal Bhadruka (supra) was rendered in the context of facts prevailing in that case. The assessee therein was power of attorney holder of the firm named Ahura Holdings and the said firm was engaged in real estate business. The search revealed receipt of on-money on sale of eight plots. The firm had developed and sold 32 plots. In the statement, the assessee confirmed receipt of on-money, but claimed that it was received by him only. The AO came to the conclusion that M/s Ahura Holdings had received on-money in respect of the transactions and accordingly estimated the undisclosed income to the best of his judgment. The order of AO was confirmed by the Ld CIT(A) and the Tribunal. Under these set of facts, the Hon ble High Court came to the conclusion that the materials found during the course of search in the form of eight sale deeds and in the form of replies given by Gopal to the questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, i.e., the assessment of income escaping assessment. He further submitted that the assessing officer shall be entitled to assess the undisclosed income, if any, coming to his notice during the course of assessment proceedings, as in the case of provisions of sec. 147 of the Act. Accordingly, the Ld. Standing Counsel submitted that the assessments made u/s 153A of the Act need not necessarily be restricted to the materials found during the course of search and the assessing officer is empowered to assess or reassess all the income that comes to his notice, since the AO is required to determine the total income of the assessee in respect of each of six assessment years. On this proposition of law, the Ld Standing Counsel vehemently placed reliance on the following case law:- (a) CIT Vs. Anil Kumar Bhatia (2013)(352 ITR 493)(Delhi) (b) CIT Vs. Raj Kumar Arora (2014)(367 ITR 517)(All) (c) M/s Canara Housing Development Company Vs. DCIT (ITA 38/2014 dated 25th July, 2014). A careful perusal of the orders passed by the Hon ble High Courts in the above cited cases, we notice that all the three High Courts concur with the following propositions enunciated by Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for application of Section 153A is there should be a search under section 132. It was further held that initiation of proceedings under section 153A is not dependent on any undisclosed income being unearthed during such search. It was further held by the Hon ble Karnataka High Court as under:- When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed, it stands reopened. In the eyes of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass assessment order. It can be noticed that the Special bench in the case of All Cargo Global logistics Ltd (supra) has classified the assessment years covered by sec. 153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the proceedings relating to assessment or reassessment, which are pending on the date of initiation of the search u/s 132 of the Act or making of requisition u/s 132A of the Act. and (b) the proceedings relating to assessment or reassessment, which are not pending on that date. In the case of first category, it is expressly provided in the second proviso to sec. 153(1) that the assessment or reassessment pending shall abate. The Courts have held that the assessments, which stood concluded on the date of initiation of search, shall not abate. In view of the dichotomy prescribed by the Act, the Special bench of Tribunal has interpreted the scope of provisions of sec. 153A as under in respect of the assessment years which abate and which do not abate:- a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately; b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to agree with the said contentions. Under the scheme of the Act, after filing of return of income, the assessing officer can assume jurisdiction to assess the income by issuing notice u/s 143(2) of the Act. The return of income is accepted as it is, if the AO did not intend to scrutinize the said return of income. In that case, no notice is issued u/s 143(2) of the Act. It is pertinent to note that the Act prescribes a time limit for issuing notice u/s 143(2) of the Act and it is well settled proposition that the AO cannot issue such notice after the expiry of prescribed time limit. Hence, consistent with the view taken by the coordinate bench in the case of Gurinder Singh Bawa (supra), we also hold that the assessment of a particular year would not be considered to be pending as on the date of initiation of search, if the period for issuing notice u/s 143(2) of the Act had expired by the time the search is initiated u/s 132 of the Act and no notice was issued. In such kind of cases, the assessment shall be considered to have become final by operation of law after the expiry of time limit prescribed u/s 143(2) of the Act, if the AO did not issue notice u/s 143(2) of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusions which can be reached and upon reading of the legal provisions in question. Thus, it can be seen that the Hon ble Bombay High Court has expressed the view that the crucial words search and requisition appearing in the substantive provision and the proviso would throw light on the issue of applicability of provisions of sec. 153A. Further, the Hon ble Bombay High Court also considered decision rendered by the Hon ble Karnataka High Court, referred above, in paragraph 36 of the order and it has also extracted the relevant observations made by the Hon ble Karnataka High Court. It was further noticed that the Hon ble Karnataka High Court was considering the issue relating to validity of initiation of revision proceedings on an assessment order, against which proceedings u/s 153A had already been initiated consequent to search operations. Hence the Hon ble Bombay High Court has expressed the view that the Hon ble Karnataka High Court has only analysed the provisions of sec. 153A of the Act in the context of the issue relating to validity of revision proceedings and it does not lay down any proposition. Following observations made by the Hon ble Bombay High Court are rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment or reassessment of total income under Section 153A(1)(b) and the first and second proviso have to be considered. Further, for answering the above issues, guidance will have to be sought from Section 132(1) of the Act, as Section 153A of the Act cannot be read in isolation, in as much as, the same is triggered only on account of any search/requisition under sections 132 or 132A of the Act. If any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and, found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of Section 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, in as much as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertained only on the basis of materials found during the course of search. If no incriminating material showing any undisclosed income was found in the case of concluded proceedings, then the question of making any addition does not arise. In that case, the assessing officer should complete the assessment of those years by determining the very same total income that was assessed in the earlier proceeding. 24. In view of the above, we are unable to agree with the contentions of Ld Standing Counsel that the assessing officer would get unfettered powers in the case of unabated assessments, once they were reopened us 153A of the Act. In our view, in the case of unabated assessments, the total income should be determined by the assessing officer by combining the income already assessed/disclosed in the return of income and the undisclosed income, if any, found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory views have been expressed by the High Courts. In the instant case the Hon ble jurisdictional High Court comes to the support of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act for scrutinizing the return of income filed by the assessee has expired by the date of initiation of search, provided the notice has not been issued by that date. A perusal of above chart would show that the proceedings of the assessment years 2003-04 to 2006-07 were not pending on the date of initiation of search, since the time limit for issuing notice u/s.143(2) of the Act has expired on the date of initiation of search and notices under that section have not been issued. Accordingly, we find merit in the contentions of ld A.R. that addition can be made in respect of these five years only on the basis of incriminating materials found during the course of search, since the said contentions are supported by various decisions discussed in the preceding paragraphs. 28. The details of additions made in these five years are tabulated below: Particulars A.Y.2002-03 AY 2003-04 AY 2004-05 AY 2005-06 AY 2006-07 Agricultural income 118000 118000 118000 129000 150000 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. Ld D.R., on the contrary, strongly supported the orders passed by the ld CIT(A). He submitted that, during the course of assessment proceedings, the enquiry made by the AO revealed that some of the agricultural lands are barren in nature. Further, there was contradiction with regard to the method of carrying on agricultural activities. Accordingly, he submitted that Ld CIT(A) was justified in sustaining the addition to the extent of 50% of the agricultural income declared by the assessee. 32. We have gone through the order passed by the co-ordinate bench of this Tribunal in the case of A. Ammaji (supra). We notice that the coordinate bench of the Tribunal has considered an identical issue in the case of A Ammaji (supra) and also in the case of M/s. Avinash Estates Restors Ltd in ITA No.299 to 302/Viz/2014 dated 4.7.2014. In all these cases, the coordinate bench has taken the view that the agricultural income to the extent of 25% can be disallowed, which shall be assessed as income from other sources. Since a uniform view has been taken in other cases falling in the group, we are inclined to follow the same in the present case also. Accordingly, we modify the orders passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director, ATR Warehousing Pvt Ltd., 11-8-34, Dasapalla Hills, Visakhapatnam. Lr No.DBD/ Dt.1.11.2007 Dear Sirs, PROPOSAL FOR TERM LOAN OF RS. 21.00 CRORES UNDER RENT PLUS SCHEME With reference to the captioned proposal, we have to advise that for urgent information of the appropriate authority, we request you to arrange to advise us on the following points. a. Submit the Audited Balance Sheet for the financial year 2006-2007. b. On perusal of provisional balance sheet for the ending March 2007, it is observed that the Tangible Net Worth (TNW) as on 31.03.2007 is ₹ 7.64 crores and the Total Outside Liabilities (TOL) is nearly ₹ 45.96 crores. The TOL/TNW is worked out at 6.01, which is not a healthy indicator. Please substantiate. c. The company has paid interest on Terra Loans to the tune of ₹ 3.11 crores against a total income of ₹ 3.73 crores, d. The company is showing Profit After Tax (PAT) of ₹ 0.07 crores and having Term Loan liabilities of ₹ 26.82 crores as on 31.03.2007. Please advise how such huge debt will be repaid with a meager PAT of ₹ 0.07 crores. e. The company has invested substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are same 3) The source of investment for the above is out of bank loan, Since the main business of the ATR is not that of investment activities, entire interest paid on such borrowing are to be disallowed ( Sec.36 ). The interest paid is about ₹ 93 lacs. This would be disallowed. The business of utpl is also of warehousing and we intend to merge it into atrwpl. You may pt examine though the money was borrowed at the same time, there are reserves and earnings in the company to invest in additional assets. The company would have bought only the assets of utpl but in view of the huge cost of registration we preferred take over of equity.. 4) IOB Vizag, Account No.2655 - on 3.10.06 bank has debited sum of ₹ 14,31,200 as margin money on LG. What is the transaction?. Did the company issued any letter of guarantee? If so what is the nature and purpose? If not please clarify/we have obtained a Ig to be issued to undertake works of M/s. slumberger which was later canceled. 5) Form No. 8 and 13 2B.12..Q5 charge creation forms - page no 6 II para contain a mention about modification of charge registered in West Bengal ROC. What is the transaction? Why charge created ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3379601 7061563 Balance in dispute 80000 1692438 1692243 906449 721317 5901399 10874437 39. In this case also, the assessee has contended about the scope of assessments made u/s 153A of the Act. The Ld A.R submitted that the proceedings relating to assessment years 2002-03 to 2006-07 are not pending on the date of initiation of search and hence, they fall under the category of concluding proceedings. He submitted that the AO is entitled to make addition in respect of these years on the basis of incriminating materials found during the course of search. In this regard, ld A.R. furnished a chart showing following details: Particulars A.Y.2002- 03 AY 2003- 04 AY 2004-05 AY 2005-06 AY 2006- 07 AY.2007-08 AY 2008- 09 Date of filing of original return 31.10.2002 24.11.200 3 1.11.2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready in existence. He further submitted that both bank and the auditor have drawn certain inferences or expressed their opinion on the materials already available on record and hence the view expressed by the auditors or the query raised by the bank cannot considered to be incriminating materials falling within the scope of section 153A of the Act. Accordingly, he submitted that the AO was not justified in treating these materials as incriminating materials giving right to the AO to disturb the concluded proceedings. 42. Ld AR further submitted that on merits also, the impugned disallowance of interest cannot be made, since there is commercial expediency in giving these loans. Further the assessee has also utilized own funds for giving loans to sister concerns. With regard to the claim of commercial expediency, the Ld A.R submitted that the sister concerns are also engaged in similar line of business and further they have offered their respective immovable properties as collateral securities to the loans availed by the assessee from banks. In this regard, he invited our attention to a chart furnished by him giving the relevant details. Accordingly, he submitted that the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 367 (All) is completely out of context and facts in that cases are totally different from the facts in the case of the appellant company. iii) Thirdly, the appellant explained the purpose for which the advances were given to the sister concerns. The learned C1T(A) did not give due consideration to the following facts: a) That for the loans availed by the appellant company, properties of these sister concerns were offered as collateral security. b) The amounts were advanced to the sister concerns in order to promote the overall growth of the group as a whole which in turn benefits the appellant company as well. In this regard, the appellant places reliance on the following decisions: i) order dt.28.6.2013 of Hon ble A.P. High Court in the case of CIT vs. Balaji Industrial Corporation Ltd in ITA No.143 of 2013. ii) Order dt.4.7.2014 in ITA No.624/Viz/2013 in the case of Dr. Ch.Sri Padmavathi. 43. Ld D.R., on the contrary, submitted that the ld CIT(A) has analysed each and every loans advanced to the sister concerns in each of the assessment years and have given a categorical reply that there is no commercial expediency in giving loans. The ld CIT(A) has fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition. Hence, in our view the ratio laid down by Hon ble Bombay High court in the case of Aroni Commercials Ltd (supra) shall also squarely apply in 153A proceedings also. Accordingly, we hold that letter written by SBI and query raised by the auditors cannot be considered as tangible or incriminating materials, since the concerned officials have only expressed their opinion in those letters. Accordingly, in our view they cannot fall under the category of incriminating materials, which would warrant disturbance of the assessment already completed for assessment years 2002-03 to 2006-07. 45. Even otherwise, those letters cannot be considered as direct material warranting addition u/s.36(1)(vi) of the Act, since the question of disallowance to be made under that section is to be examined by considering various criteria. In fact, the ld CIT(A) has also set aside the matter to the file of the AO for assessment years 2006-07 to 2008-09 and the ld CIT(A) has granted partial relief in respect of this disallowance in assessment years 2003-04 and 2004-05. These facts show that the opinion expressed by the auditors is a debatable one and further requires examination. Hence, as alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer to exclude the investment made by the assessee in the two companies referred above for the purpose of working out disallowance of interest. 48. In respect of investment made in other sister concerns, the contention of the assessee is that the own funds have been used for the said purposes. Even though the Ld A.R contended that there is commercial expediency involved in the investments made in other sister concerns also in as much as, the property belonging to them have been used by the assessee to give collateral security to banks in respect of loan availed by it. In the alternative, it was contended that the AO did not examine the nexus between the borrowed funds and the investment. We notice all these contentions of the assessee require examination of facts relating to the same. Accordingly, we set aside the matter relating to disallowance of interest in respect of advances made to other sister concerns to the file of the assessing officer for fresh consideration. The order of Ld CIT(A) in respect of this issue in AY 2007-08 and 2008-09 stands modified accordingly. (c) A.AVNASH:- 49. We shall now take up the appeals filed by Shri A. Avnash for assessment years 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. For this proposition, the Ld A.R placed reliance on the decision rendered by Hon ble jurisdictional Andhra Pradesh High Court in the case of CIT Vs. Naresh Kumar Agarwal (2014)(369 ITR 0171). The Ld A.R submitted that the revenue did not unearth any incriminating material pertaining to AY 2002-03 to AY 2007-08 and hence, initiation of proceedings u/s 153C of the Act in respect of those years is bad in law. In this regard, he placed reliance on the following case law:- (a) Sri Rama Educational Trust (ITA Nos. 31 to 35/Viz/2012 dt. 13-12-2013) (b) Gadiraju Venkata Subba Raju (ITA No.360 361/Viz/13 dt. 05-03-2014) (c) A.Ammaji (ITA No.337 to 343/Viz/2014 dated 21.07.2014) 52. The Ld A.R further submitted that the proceedings u/s 153C of the Act were initiated on 15.12.2008 and on that date the proceedings relating to AY 2002-03 to 2007-08 were not pending. Further, the revenue did not unearth any incriminating material relating to the additions made by the assessing officer. Accordingly, by placing reliance on the decision of special bench rendered in the case of All Cargo Global logistics Ltd (supra), which has since been confirmed by the Hon ble Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completing the assessment, the AO has also placed reliance on certain loose sheets found during the course of survey operations conducted in the hands of a lessee, from which it was inferred by the AO that the assessee was receiving higher rent. It has been submitted that the lessee himself has denied the same and accordingly it was contended that the same does not form incriminating material found during the course of search. It was submitted that the jewellery was offered as income in AY 2008-09 only and accordingly it was submitted that the assessing officer did not refer to any of the incriminating material found during the course of search for making the additions in AY 2002-03 to 2007-08. Accordingly, it was contended that the very initiation of proceedings u/s 153C of the Act was not valid and even, if it is held to be valid for a moment, the additions made by the assessing officer by placing reliance on the information already available on record without referring to any of the seized materials is bad in law. 56. The co-ordinate bench of Visakhapatnam Tribunal has considered an identical issue in the case of Sri Rama Education Society (supra) G.Bangaramma (supra) and Smt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes resorts Ltd. Consistent with the view taken in the above said cases, we direct the AO to disallow 25% of the agricultural income and assess the same as income of the assessee under the head income from other sources. 60. The next issue relates to the assessment of undisclosed jewellery of ₹ 30,00,000/-. During the course of search proceedings, the jewellery found in the lockers and bedrooms was inventorised. The gross weight of jewellery was 8.8 Kgs and net weight of jewellery was 7.8 Kgs. We have noticed that the sworn statement u/s 132(4) of the Act was taken from Shri A.Avnash. He submitted that the jewellery belongs to his mother Smt. Ammaji, Sister Smt. Maitri and Wife Smt. Harshita and his daughter baby Aharya. He also submitted that the jewellery were reflected in their returns of income. However, he admitted that there is excess jewellery of 3 Kgs. (approx.) amounting to ₹ 30,00,000/-. He admitted that the same was his unexplained investment and agreed to offer the same for assessment year 2008-09. However, he filed an affidavit within three months before the DDI and retracted from the admission. Accordingly he did not offer the same in his return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He has stated that the excess jewellery was arrived at after consulting his mother and wife. Then he owns up the undisclosed investment made in the jewellery. All these sequence of events would show that there is no clarity and link between the initial declaration and subsequent admission made. Subsequently Shri A.T.Rayudu has written a letter to the DDI for release of jewelleries. Further the assessee s sister and assessee s wife have also put their claim over the jewellery. All these facts would show that admission of ₹ 30.00 lakhs made by Shri Avnash was not correct and against the facts surrounding the issue. Hence, we are of the view that Shri Avnash was justified in retracting from the admission made by him through the affidavit filed before the DDI. 64. Subsequently, the assessee has furnished the ownership details of the jewellery, but the said details were rejected by the assessing officer by pointing out certain defects. In respect of the jewelleries claimed to belong to the sister of Shri Avnash, the same was rejected on the reasoning that the customs documents were not available. Similarly the claim made by his wife was rejected on the reasoning that the pare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is not really a case, where the assessee alone has given the personal guarantee. Further we notice that the assessee has not given any of his securities as collateral security in connection with the loan availed by the sister concerns. Hence, we are unable to accept the contentions of the assessee that the advances received by the assessee should be considered as normal business transactions. 69. However, we notice that the Ld CIT(A) has set aside the matter to the file of the AO in order to ascertain the correct amount of accumulated profits and also to work out the correct amount of advances received by the assessee. Hence, in our view, the order passed by the Ld CIT(A) on this issue does not call for any interference. 70. The next issue relates to the enhancement of rental income. The assessee had given a property located in R.K. Beach, Visakhapatnam for monthly rent of ₹ 8000/- to a concern named M/s Supraja s Sandy Lane Bar Restaurant from January, 2005. The revenue conducted survey operations u/s 133A of the Act in the case of M/s Supraja s Sandy Land Bar Restaurant on 07-12-2007. From the impounded materials, it was noticed that the above said concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the lessee has agreed to carry out repair works, in which case the rent shall be fixed lower than the market rates. We notice that these submissions have been ignored by the AO and he has fully placed reliance on the uncorroborated loose sheets found in the control of the lessee. We notice that the Ld CIT(A) has confirmed the addition with the reasoning that the assessee did not rebut the impounded material. We have noticed that the loose sheets have been impounded from lessee and according to Ld A.R, the lessee himself has not accepted the contents of the loose paper. In our view, it is the lessee who has to first rebut the contents of the impounded materials. Only if it is conclusively established that the lessee has paid the rent as stated in the loose sheets, then the assessee should be question and a decision has to be taken. In the instant case, the assessing officer has not brought any material to show that the contents of loose papers have been accepted by the lessee from whom they were impounded or the contents of the loose papers have been established. Under these set of facts, we are of the view that the assessing officer has made the addition on inferences without pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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