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TMI Blog2017 (1) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... A, JM AND SHRI ANIL CHATURVEDI, AM For The Assessee : Shri Nikhil Pathak For The Revenue : Shri Sandeep Garg, CIT ORDER PER SUSHMA CHOWLA, JM: The cross appeals filed by the assessee and the Revenue are against order of CIT(A), Kolhapur, dated 27.11.2012 relating to assessment year 2007-08 against the order passed under section 143(3) r.w.s. 153A(b) of the Income Tax Act, 1961 (in short the Act ). 2. The cross appeals filed by the assessee and Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No. 311/PUN/2013 has raised the following grounds of appeal :- 1] The learned CIT(A) erred in not appreciating that the asst. u/s 143(3) r.w.s 153A(b) passed by the learned A.O. was null and void. 2] The learned CIT(A) erred in not appreciating that the reference u/s 142(2A) for special audit was an illegal one as the A.O had not given an opportunity of hearing to the assessee as required under proviso to section 142(2A) and consequently, the asst. order passed is barred by limitation. 2.1] The learned CIT(A) further failed to appreciate that the reference to spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company that the said income belonged to Shri V. L. Patel (IndI). 3.3] While holding that the income from the notings in the seized diaries belonged to the assessee, the learned CIT(A) erred in relying upon only a few notings which according to him indicated transactions of the assessee company without appreciating that the notings in general did not pertain to the assessee company. 3.4] The learned CIT(A) failed to appreciate that these diaries on the basis of which the additions are made were found with Shri Mohan Patel and therefore, there was no reason to tax the entire income on the basis of these diaries in the hands of the assessee company. 3.5] The learned CIT(A) erred in not appreciating that there were various notings recorded in the diaries which clearly indicated that the transactions recorded therein did not pertain to the assessee company and hence, he was not justified in taxing the undisclosed income on the basis of the diaries in the hands of the assessee company. 4] The learned CIT(A) erred in holding that the claim of the assessee that the income be computed by applying a net profit rate of 15% on the total credits was not the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- on each occasion. 6.2] The learned CIT(A) erred in not appreciating that the provisions of section 40A(3) were not applicable to the payments made via banker's cheques and hence, there was no reason to make any disallowance in respect of such payments. 6.3] The learned CIT(A) erred in not appreciating that the disallowance u/s 40A(3) was not applicable in respect of the purchases made by the assessee by way of barter exchange. 6.4] The learned CIT(A) failed to appreciate that the disallowance u/s 40A(3) was made on the basis of the report submitted by the special auditor wherein he' had combined various entries which were individually less than ₹ 20,000/- each and therefore, such disallowance on account of grouped entries should have been deleted. 6.5] The learned CIT(A) failed to appreciate that the disallowance u/s 40A(3) was made on the basis of the report submitted by the special auditor even in the circumstances where payments have not exceeded ₹ 20000/- and therefore, such disallowance on account of entries which are not exceeding ₹ 20000/- should have been deleted. 7] The learned CIT(A) erred in holding that the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y.2007 08 Rs.30,66,720/- Considering the facts and legal aspect of the case, the CIT (A) erred in not appreciating the fact that, while computing the income of the assessee on income basis, the AO has already considered the expenditure in question and assessed the income only on income basis. 4. On account of Hawala entries an addition made of ₹ 53,27,500/- for ASSESSMENT YEAR 2005-06 is challenged in appeal. Considering the facts and legal aspect of the case, the CIT (A) erred in not appreciating the fact that, while computing the income of the assessee on income basis, the AO has already considered the hawala entries in question and assessed the income only on income basis. 5. Considering the facts and legal aspect of the case, the CIT (A) erred in not appreciating the fact that, the AO has rightly made an addition on account of seed money, because, in absence of seed money any business cannot be run. 6. The following additions on account of closing cash balances were made in assessment A.Y.2005 06 Rs.8,94,114/- A.Y.2006 - 07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings were vitiated. Once the proceedings of special audit are held to be vitiated, then the time period of 21 months expires in December, 2008 and the assessment order passed in June, 2009 is time barred and hence, is to be cancelled. 6. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. However, he admitted that the Tribunal had decided the issue on provisions of section 142(2A) of the Act. 7. We have heard the rival contentions and perused the record. In the facts of the present case, where search under section 132 of the Act was carried out at the premises of assessee on 23.08.2006 and this being the year of search, the provisions of section 153B(1)(b) of the Act are applicable. Section 153B(1)(a) (b) of the Act reads as under:- 153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A, within a period of two years from the end of the financial year in which the last of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her (2008) 300 ITR 403 (SC) and it has been held as under:- 41. Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (supra), we hold that where no show cause notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law. 42. Another point raised by both the authorities was in respect of extension granted. We are not going into the said factual aspects, in view of our holding that the initial order at the pre-decisional stage passed by the Assessing Officer without show causing the assessee as to whether any special audit should be conducted in his case under section 142(2A) of the Act is bad in law. Hence, consequential orders of extension, if any become of no consequence. Since, we have decided the jurisdictional issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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