Badam Bhogalinga Swamy, Visakhapatnam v. The Assistant Commissioner of Income Tax, Central Circle-1, , Visakhapatnam

CO 5/VIZ/2021 | 2017-2018
Pronouncement Date: 24-05-2021 | Result: Dismissed

Appeal Details

RSA Number 525323 RSA 2021
Assessee PAN AAGCP7803H
Bench Visakhapatnam
Appeal Number CO 5/VIZ/2021
Duration Of Justice 2 month(s) 25 day(s)
Appellant Badam Bhogalinga Swamy, Visakhapatnam
Respondent The Assistant Commissioner of Income Tax, Central Circle-1, , Visakhapatnam
Appeal Type Cross Objection
Pronouncement Date 24-05-2021
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 24-05-2021
Last Hearing Date 16-03-2021
First Hearing Date 16-03-2021
Assessment Year 2017-2018
Appeal Filed On 01-03-2021
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM . . BEFORE SHRI N.K.CHOUDHRY HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH HONBLE ACCOUNTANT MEMBER ./ I.T. A.NO. 04 /VIZ/20 21& 05 /V IZ /20 21 ( / A SSESSMENT Y EAR S : 20 1 5 - 16& 2016 - 17 ) ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 1 VISAKHAPATNAM VS. M/S PHOZ O DIGITAL PRESS PVT. LTD. D.NO.48 - 13 - 18 BHAGAVAN CASTLE SRI JANAKIRAMA STREET SRI NAGAR VISAKHAPATNAM [PAN : AAGCP7803H] ( / APPELLANT) ( / RESPONDENT) CROSS OBJECTION NO.03/VIZ/2021 AND 04/VIZ/2021 ( ARISING OUT OF I.T.A. NO.04/VIZ/2021 AND 05/VIZ/2021) M/S PHOZO DIGITAL PRESS PVT. LTD. D.NO.48 - 13 - 18 BHAGAVAN CASTLE SRI JANAKIRAMA STREET SRI NAGAR VISAKHAPATNAM [PAN : AAGCP7803H] VS. ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 1 VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) /REVENUE BY : SHRI D.K.SONOWAL CIT(DR) / ASSESSEE BY : SHRI G.V.N.HARI AR / DATE OF HEARING : 2 4 . 0 3 .202 1 / DATE OF PRONOUNCEMENT : 24 . 0 5 . 202 1 2 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM / O R D E R PER BENCH : CONDONATION OF DELAY THE ASSESSEE OUGHT TO HAVE FILED THE APPEALS IN THIS CASE ON OR BEFORE 27.12.2020. HOWEVER THE APPEALS WERE FILED BY THE ASSESSEE ON 08.01.2021. HONBLE SUPREME COURT HAS EXTENDED THE TIME LIMIT DUE TO CORONA PANDEMIC BY AN ORDER M.A.NO.665/2021 IN SMW(C) NO.3/2020 DT.15.07.2020 FOR THE LIMITATION FALLING DURING THE PERIOD BETWEEN 15.03.2020 TO 14.03.2021 BY 90 DAYS FROM 15.03.2021. THEREFORE THESE APPEALS ARE TREATED AS FILED WITHIN THE LIMITATION PERIOD AND ACCORDINGLY ADMITTED. THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 VISAKHAPATNAM BEARING NO.725/2019 - 20/10482/CIT(A) - 3/VSP/2020 - 21 DATED 09.10.2020 AND NO.727/2019 - 20/10484/CIT(A) - 3/VSP/2020 - 21 DATED 05.11.2020. SINCE THE FACTS ARE IDENTICAL THESE APPEALS ARE CLUBBED HEARD TOGETHER AND DISPOSED OF IN A COMMON ORDER FOR THE SAKE OF CONVENIENCE . THE FACTS OF THE CASE A RE EXTRACTED FROM ITA NO.04/VIZ/2021 FOR THE A.Y.2015 - 16 . 3 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM 2. FOR THE A.Y.2015 - 16 THE ASSESSEE FILED THE RETURN OF INCOME ON 28.09.2015 ADMITTING TOTAL INCOME OF RS.7 82 240/ - WHICH WAS PROCESSED/S 143(1) OF THE INCOME TAX ACT 1961 (IN SHORT ACT) ON 10.10.2015. A SEARCH U/S 132 WAS CONDUCTED IN THIS CASE ON 11.04.2017 IN THE PREMISES OF M/S PHOZO DIGITAL PRESS PVT.LTD. ( IN SHORT COMPANY) VISAKHAPATNAM AND THE RESIDENCES OF IT S PROMOTERS VIZ. SRI BADAM VENKATESWARLU AND HIS TWO SONS SRI BADAM BHOG ALINGA SWAMY AND SRI BADAM VENKATA DEMULLU RESIDING IN THE SAME BUILDING. SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY AND T HE ASSESSING OFFICER ( AO ) HA S ISSUED THE NOTICE U/S 153A OF THE ACT ON 22.02.2018 CALLING FOR THE RETURN OF INCOME AND IN RESPONSE TO WHICH THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 19.08.2019. SUBSEQUENTLY THE AO ISSUED THE NOTICE S U/S 143(2) AND CALLED FOR THE INFORMATION U/S 142(1) AND IN RESPONSE TO WHICH THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS AND FURNISHED TH E DETAILS CALLED FOR . 2.1 . DURING THE COURSE OF SEARCH IN THE RESIDENCE OF B ADAM VENKATESWARLU ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY A SCRIBBLING PAD WAS FOUND AND SEIZED AS ANNEXURE : A/BVS/02 TO PANCHNAMA DATED 12.04.2017. THE SCRIBBLING PAD CONTAIN THE HAND WRITTEN NOTINGS OF VARIOUS RECEIPTS AND THE PAYMENTS . O N AN ENQUIRY MADE BY THE INVESTIGATION WING 4 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM SHRI B. VENKATESWARLU STATED THAT IT WAS WRITTEN BY SHRI B.V. DEMULLU ONE OF THE DIRECTOR S IN THE STATEMENT RECORDED DURING THE COURSE OF SEARCH IN RESPONSE TO QUESTION NO.33 DATED 12 . 04 . 2017 . LATER ON 11 . 12 . 2019 DURING THE ASSESSMENT PROCEEDINGS THE AO RECORDED THE STATEMENT OF SHRI B.V.DEMULLU WHO STATED THAT IT WAS THE CASH ACCOUNT HANDLED BY HIM FROM NOV EMBER 2014 TO JAN UARY 2017 TO EXPLAIN THE CASH INFLOW AND OUTFLOW TO HIS BROTHER AND FATHER I.E OTHER DIRECTORS . HE FURTHER STATED THAT THE CASH WAS RECEIVED FROM THE CUSTOMERS OF THE COMPANY AFTER DEDUCTING THEIR COMMISSION / THE DESIGNING CHARGES WHICH WAS NOTED BY HIM IN THE SCRIBBLING PAD . HOWEVER THE AO DID NOT BELIEVE THE CONTENTION OF THE ASSESSEE AND VIEWED THAT THE HAND WRITTEN DETAILS WRITTEN IN THE NOTEBOOK WAS THE PROFIT EARNED BY THE COMPANY FROM NOVEMBER 2014 TO JANUARY 2017 AND A CCO RDINGLY TAKEN THE AMOUNTS MENTIONED IN THE VIJAYAS DIARY AS THE NET PROFIT(ESTIMATED PROFIT) OF THE RELEVANT FINANCIAL YEAR S (F.Y) AND ARRIVED AT THE FINANCIAL YEAR ( F.Y ) WISE NET PROFIT ADMITTED IN THE P&L ACCOUNT AND THE ESTIMATED PROFITS AS UNDER: FINANCIAL YEAR (EST I MATED PROFIT) AS PER THE SCRIBBLING PAD NET PROFIT ADMITTED IN THE RETURNS OF INCOME FILED U/S 139(1) 2014 - 15(5 MONTHS) 84 00 000 6 39.809 2015 - 16 2 11 00 000 4 49 924 2016 - 17 1 97 00 000 25 05 796 5 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM 2.2 . FURTHER T HE AO WORKED OUT THE ESTIMATED PROFIT OF 2014 - 15 FOR THE WHOLE YEAR EXTRAPOLATING THE INFORMATION FOR 12 MONTHS ON THE BASIS OF THE NOTINGS MADE IN THE SCRIBBLING PAD FOR 5 MONTHS AND ACCORDINGLY WORKED OUT THE INCOME OF RS.2 01 60 000/ - AND FINALLY ARRIVED AT THE UNDISCLOSED INCOME OF RS.1 95 20 191/ - FOR THE ASSESSMENT YEAR 2015 - 16 AND ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE CALLING FOR ITS EXPLANATION AS TO WHY THE SUM OF RS.1 95 20 191 / - SHOULD NOT BE ASSESSED AS UNDISCLOSED INCOME. 2.3 . IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO THE ASSESSEE FILED EXPLANATION STATING THAT THE ENTRIES MADE IN THE SCRIBBLING PAD WERE THE GROSS AMOUNTS RECEIVED FROM VARIOUS AGE NT S LOCATED IN D IFFERENT PLACES AFTER DEDUCTION OF THE DESIGNING CHARGES/COMMISSION APPROXIMATELY 37% PAYABLE TO THE DESIGNER / AGENT . THE SAID AMOUNT WAS RECEIVED BY SHRI B.V.DEMULLU THE DIRECTOR OF THE COMPANY . THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNTS RECEIVED BY THE DIRECTORS FROM PHOTOGRAPHERS / AGENTS WERE DULY TAKEN INTO BOOKS OF ACCOUNTS OF THE COMPANY AS GROSS TURNOVER . THE ASSESSEE VEHEMENTLY OPPOSED FOR THE PROPOSED ADDITION BY THE AO STATING T HAT THERE WAS NO UNDISCLOSED AMOUNT AND NO OTHER EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH IND ICATING UNACCOUNTED RECEIPT OR UNACCOUNTED ASSET OR UNACCOUNTED EXPENDITURE . THE ASSESSEE 6 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM FURTHER STATED THAT NO BILLS OR VOUCHERS WERE FOUND WITH REGARD TO SUPPRESSION OF TURNOVER . T HE TURNOVER ACCOUNTED IN THE BOOKS OF ACCOUNTS FOR THE PERIOD UNDER CONSIDERATION WAS MORE THAN THE TURNOVER FOUND IN THE HANDWRITTEN NOTINGS OF THE SCRIBBLING PAD . THE ASSESSEE ALSO FURNISHED THE MONTH WISE TURNOVER DECLARED IN T HE RETURN OF INCOME TO DEMONSTRATE THAT THE RECEIPTS IN THE SCRIBBLING PAD WERE ACCOUNTED AND THEREFORE ARGUED THAT NO ADDITION IS WARRANTED ON ACCOUNT OF THE NOT ING S MADE IN THE SCRIBBLING PAD. 2.4. THE AO WAS NOT CONVINCED WITH THE EXPLANATION OFFERED BY THE ASSESSEE SINCE HE HA D OBSERVED THAT AT SOME PLACE S IN THE NOTINGS THERE WAS MENTION OF PROFIT INTEREST RENT PAYMENTS TO SOME INDIVIDUALS AND OTHER EXPENSES ETC.. H ENCE T HE AO VIEWED THAT NOTINGS MADE IN THE SCRIBBLING PAD AT 63% /66%/67% ETC. WAS THE PROFITS OF THE COMPANY AFTER ALL THE EXPENSES AND THE SAME IS TO BE TREATED AS UNDISCLOSED PROFIT . THE SAID PROFITS NOTED IN THE SCRIBBLING PAD @ 63%/66%/67% W AS ENHANCED TO 100% SINCE NO EVIDENCE WAS PRODUCED BY THE ASSESSEE FOR PAYMENT OF COMMISSION/DESIGNING CHARGES STATED TO BE DEDUCTED @37% BY THE AGENTS AND HENCE VIEWED THAT SUCH RECEIPTS ARE TO BE TREATED 100% AS UNDISCLOSED PROFITS. T HE AO ALSO OBSERVED THAT THE EXPENSES /PAYMENTS MENTIONED IN THE NOTE P AD W AS NOT RELATED TO THE ASSESSEES BUSINESS HENCE NO FURTHER 7 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM EXPENDITURE NEEDS TO BE ALLOWED FROM SUCH UNDISCLOSED INCOME . F OR THE MONTHS NOV.201 3 TO MARCH 2014 THE RECEIPTS AS PER THE SCRIBBLING PAD WAS WORKED OUT TO RS.87 LAKHS AND ON THE BASIS OF THE NOTING OF SAID FIVE MONTHS THE A.O ESTIMATED THE INCOME BY EXTRAPOLATION OF RECEIPTS TO THE WHOLE OF YEAR I.E FOR 12 MONTHS ON ESTIMATION BASIS AND WORKED OUT TO THE SUM OF RS.2 0 8 8 0 000/ - (I.E. 87 00 000/5= 17 40 000X12) . FROM THE SAID ESTIMATED INCOME OF RS.2 08 80 000/ - THE AO REDUCED THE INCOME DECLARED IN THE ORIGINAL RETURN OF INCOME AMOUNTING OF RS.6 39 809/ - AND THE BALANCE AMOUNT OF RS. 2 02 40 191/ - WAS BROUGHT TO TAX FOR THE A.Y.2015 - 16 AS UNDER : RECEIPTS MENT IONED IN SCRIBBLING PAD RS.87 00 000 FOR THE PERIOD FROM NOV 2014 TO 31.03.2015 (5 MONTHS) ESTIMATED RECEIPTS FOR 2014 - 15 RS.2 08 80 000 87 00 000 X 12 5 LESS : INCOME DECLARED IN ORIGINAL RETURN RS.6 39 809 --------------------- TOTAL INCOME RS.2 02 40 191 ---------------------- HOWEVER WHILE MAKING THE ADDITION THE AO MADE THE ADDITION OF RS.2 08 80 000/ - IN THE STATEMENT OF COMPUTATION AND THUS THE TOTAL INCOME WAS ASSESSED AT RS.2 16 62 240/ - . 8 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM 2. 5. FOR THE A.Y.2016 - 17 THE ASSESSEE HAS FILED THE RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.4 49 923/ - AND THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A ON TOTAL INCOME OF RS.2 11 00 000/ - . THE AO ASSESSED TH E UNDISCLOSED INCOME OF RS.2 06 50 076/ - FOR THE A.Y.2016 - 17 ON THE BASIS OF NOTINGS I N THE SCRIBBLING PAD WHICH CONTAIN THE DETAILS FOR 11 MONTHS I.E. FROM APRIL 2015 TO FEBRUARY 2016 AND THE AO EXTRAPOLATED THE SAME FOR 12 MONTHS ON AVERAGE BASIS . F OR THE A.Y.2016 - 17 THE AO HAS NOTED SOME INSTANCES OF PAYMENTS MADE TO VARIOUS PERSONS I.E. RS.3 00 000/ - TO T.MAHESH IN MAY 2015 RS.2 00 000/ - TO B.RAVI IN JULY 2015 RS.3 35 000/ - TO RAMANA RS.1 10 000/ - TO NAIDU AND RS.1 50 000/ - TO SUBBU IN SEP TEMBER 2015 RS.5 00 000/ - TO VASU ETC. THE AO WAS OF THE OPINION THAT THE ABOVE MENTIONED AMOUNTS WERE RELATED TO THE MONEY LENDING BUSINESS BUT NOT RELATED TO THE BUSINESS OF THE ASSESSEE COMPANY . HENCE THE AO HELD THAT ASSESSEE HAD RECEIVED THE ABOVE U NACCOUNTED INCOME WHICH WAS SHARED BETWEEN ALL THE THREE DIRECTORS I.E. SHRI B.VENKATESWARLU SHRI B.BHOGALINGA SWAMY AND SHRI B.V.DEMULLU AND USED FOR PERSONAL PURPOSES. SINCE THE PAYMENTS AND EXPENDITURE MENTIONED IN THE SCRIBBLING PAD WAS NOT RELATED TO THE BUSINESS OF THE ASSESSEE THE AO TREATED THE ENTIRE SUM MENTIONED IN THE SCRIBBLING PAD AS INCOME OF THE 9 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM ASSESSEE AND ACCORDINGLY ESTIMATED THE UNACCOUNTED INCOME ( PROFIT ) OF RS.2 11 00 000/ - AND DEDUCTED THE INCOME ALREADY ADMITTED IN THE RETURN OF INCOME AMOUNTING TO RS.4 49 924/ - AND THE BALANCE AMOUNT OF RS.2 06 50 076/ - WAS ASSESSED TO TAX AS UNDISCLOSED INCOME OF THE ASSESSEE. 3 . AGAINST ORDER OF THE AO THE ASSESSEE WENT ON APPEAL BEFORE THE LD. CIT(A) AND ARGUED THAT THE EXTRAPOLATION OF RECEIPTS FOR 12 MONTHS ON THE BASIS OF SOME ROUGH NOT INGS IN THE SCRIBBLING PAD WAS UNCALLED FOR AND THE ADDITION OF RS.2 08 80 000/ - WAS ESTIMATED ON PRESUMPTIONS AND ASSUMPTIONS AND THE SAME IS UNJUSTIFIED . T HE ASSESSEE ARGUED BEFORE THE LD. CIT(A) THAT THE SCRIBBLING PAD ( DIARY) FOUND IN THE RESIDENTIAL PREMISES OF B.VENKATESWARLU CONTAIN THE DETAILS OF GROSS TURNOVER RECEIVED BY THE ASSESSEE WHICH WAS DULY ACCOUNTED AFTER REDUCING THE COMMISSION IN THE REGULAR BOOKS OF ACCOUNTS AND THE ADDITION MADE BY THE AO ON THE BASIS OF THE SAID SCRIBBLING PAD AMOUNTS TO DOUBLE ADDITION OF THE TURNOVER WHICH WAS ALREADY OFFERED TO INCOME AND THE SAME IS UNJUSTIFIED . THE ASSESSEE FURTHER SUBMITTED THAT T HE AO HAS TAKEN THE PARTIAL INFORMATION I.E ONLY THE R ECEIPTS AND IGNORED THE EXPENDITURE THE PAYMENTS MENTIONED IN THE SCRIBBLING PAD AND THE SUBMISSIONS OF THE ASSESSEE WHICH IS INCORRECT . THE LD.AR FURTHER ARGUED THAT T HE AO IS NOT PERMITTED TO TAKE PARTIAL 10 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM INFORMATION FROM THE ROUGH PAD AND ESTIMATE THE INCOME AT SOME ASTRONOMICAL FIGURES ON PRESUMPTIONS AND ASSUMPTIONS. EITHER THE AO HAS TO CONSIDER THE ENTIRE INFORMATION ALONG WITH THE EXPLANATION OFFERED BY THE ASSESSEE OR DISCARD THE SAME IN TOTAL. SINCE THE ASSESSEE HAD EXPLAINED THE CONTENTS THE AO CANNOT IGNORE THE EXPLANATION OF THE ASSESSEE AND ASSESS THE GROSS RECEIPTS MENTIONED IN THE SCRIBBLING PAD AS INCOME . THE ASSESSEE FURTHER SUBMITTED THAT THE DIARY WAS NOT FOUND IN THE PREMISES OF THE COMPANY OR NO NAME WAS WRITTEN ON THE DIARY THEREFO RE IT IS A DUMB DOCUMENT WHICH CANNOT BE TAKEN AS EVIDENCE FOR ASSESSMENTS IN THE HANDS OF THE COMPANY. 3.1 . THE LD.CIT(A) CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND HELD THAT IN THE ABSENCE OF COMPLETE DETAILS SUCH AS THE NAME OF THE PAYER PURPOSE OF PAYMENT DATE OF PAYMENT AND THE AMOUNT OF PAYMENT ETC. THE AO IS INCORRECT IN MAKING THE ADDITION ON THE BASIS OF M E RE NOTINGS IN SCRIBBLING PAD WHICH IS A DUMB DOCUMENT . SECONDLY THE LD. CIT(A) OBSERVED THAT SHRI B.V.DEMULLU IN THE STATEMENT NEVER STATED THAT THE AMOUNTS REPRESENT THE UNDISCLOSED OR UNACCOUNTED INCOME OF THE ASSESSEE COMPANY AND HE CATEGORICALLY STATED THAT THE AMOUNTS REPRESENT THE GROSS RECEIPTS OF THE COMPANY WHICH WAS ALREADY ADMITTE D IN THE REGULAR BOOKS OF ACCOUNTS . THE LD.CIT(A) VIEWED THAT T HE DEPARTMENT FAILED TO DISPROVE 11 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM THE CLAIM OF THE ASSESSEE THAT THE AMOUNTS MENTIONED IN THE DIARY REPRESENT THE GROSS CASH RECEIPTS AND THE SAME W ERE DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS. T HEREFORE THE LD.CIT(A) HELD THAT THE AO IS NOT JUSTIFIED IN TREATING THE AMOUNTS MENTIONED IN SCRIBBLING PAD AS INCOME OF THE ASSESSEE WITHOUT HAVING ANY CORROBORATIVE EVIDENCE TO SUGGEST THAT THE ASSESSEE HAS NOT ACCOUNTED AMOUNTS IN THE BOOKS OF ACCOU NTS. HENCE THE LD.CIT(A) HELD THAT THE NOTINGS MADE IN THE SCRIBBLING PAD DOES NOT REPRESENT THE UNACCOUNTED INCOME OF THE ASSESSEE AND A CCORDINGLY DELETED THE ADDITION AND ALLOWED THE APPEALS OF THE ASSESSEE. 4 . AGAINST THE ORDERS OF THE LD.CIT(A) THE DEPARTMENT HAS FILED APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING T HE LD.DR SUBMITTED THAT INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH MARKED AS ANNEXURE A/BVS/02 IN THE FORM OF SCRIBBLING PAD IN THE RESIDENCE OF B.VENKATESW ARLU WHO IS ONE OF THE PROMOTER DIRECTOR S OF THE COMPANY EVIDENCING THE PAYMENTS AND RECEIPTS . SHRI B.VENKATESWARLU STATED THAT THE SCRIBBLING PAD WAS WRITTEN BY HIS SON AND SHRI B.V.DEMULLU HAS ACCEPTED THE SAID FACT. SHRI B.V.DEMULLU EXPLAINED THE CONT ENTS OF THE DIARY AS CASH HANDLED BY HIM WHICH CONSISTS OF CASH RECEIPTS FROM THE CUSTOMERS AND THE EXPENSES INCURRED BY THE ASSESSEE COMPANY. A T THE BOTTOM OF EACH 12 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM PAGE THE SURPLUS CASH WAS MENTIONED WHICH ACCORDING TO THE DR WAS THE NET PROFIT OF THE MO NTH . ACCORDING TO THE LD.DR 63% 64% AND 66% MENTIONED IN THE DIARY INDICATES THE NET PROFIT AFTER THE BUSINESS EXPENSES . THE LD.DR ARGUED THAT EVEN THE ASSESSEE FAILED TO FURNISH THE EVEIDENCE FOR PAYMENT OF COMMISSION / DESIGNING CHARGES STATED TO BE DEDUCTED AT SOURCE. THEREFORE SUBMITTED THAT THE SAID COMMISSION / DESIGNING CHARGES ARE ALSO NOT ALLOWABLE DEDUCTION. HENCE THE RECEIPTS NOTED @ 63% ETC. REQUIRED TO BE ENHANCED TO 100% AND THE GROSS SUM OF 100% WAS THE UNDISCLOSED INCOME WHICH REQUIRED TO BE BROUGHT TO TAX. LD.DR EXPLAINED THAT 20% OF 63% MENTIONED AT PAGE NO.36 WAS TO BE TAKEN AS RS.20 00 000/ - A S AGAINST THE SUM MENTIONED A S RS. 12 60 000/ - IN THE SCRIBBLING PAD. THE LD.DR FURTHER SUBMITTED THAT T HE PAYMENTS / EXPENSES MENTIONED IN T HE SCRIBBLING PAD WERE NOT RELATED TO THE ASSESSEES BUSINESS THEREFORE THE SAID PAYMENTS / EXPENDITURE MENTIONED IN THE DIARY SHOULD NOT BE ALLOWED AS DEDUCTION. THE LD.DR SUBMITTED THAT THE ENTIRE GROSS RECEIPTS INCLUDING THE COMMISSION / DESIGNING CH ARGES STATED TO BE DEDUCTED BY PHOTOGRAPHERS / AGENTS REQUIRED TO BE BROUGHT TO TAX. THUS T HE LD.DR ARGUED THAT THE AO RIGHTLY CONSIDERED THE GROSS AMOUNTS AS NET PROFIT OF THE ASSESSEE SINCE THE ASSESSEE FAILED TO PROVE THAT THE EXPENDITURE INCURRED WAS FOR THE PURPOSE OF BUSINESS. T HE LD.DR ARGUED 13 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM THAT SI NCE THE MATERIAL WAS FOUND IN THE PREMISES OF ASSESSEE COMPANYS DIRECTOR IT IS THE MANDATORY OBLIGATION OF THE DIRECTOR TO EXPLAIN AND ESTABLISH THE CONTENTS WITH CORROBORATIVE EVIDENCE. THE FIND ING OF THE LD.CIT(A) THAT THE ENTIRE RECEIPTS WAS ACCOUNTED IN THE BOOKS OF ACCOUNTS WAS ERRONEOUS AND INCORRECT SINCE THE ASSESSEE HAS NOT EXPLAINED THE SAME WITH MATCHING ENTRIES. THUS THE LD.DR ARGUED THAT THERE IS NO JUSTIFICATION TO DELETE THE ADD ITION MADE BY THE AO HENCE REQUESTED TO SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE ASSESSMENT ORDER. 5 . ON THE OTHER HAND THE L D.AR RELIED ON THE ORDER OF THE LD.CIT(A) AND ARGUED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS SHRI B.V.DEMULLU HAS EXPLAINED THE SCRIBBLING PAD DETAILS AS THE AMOUNTS RECEIVED FROM THE CUSTOMERS AFTER REDUCING THE 37% COMMISSION / DESIGNING CHARGE S RELATED TO THE PHOTOGRAPHER OR AGENTS COMMISSION. THE LD.AR SUBMITTED THAT T HE ASSESSEE ENGAGES THE PHOTOGRAPHERS AGENTS WHO RECEIVE THE GROSS AMOUNTS AND REDUCE THEIR DESIGNING CHARGES AND THE BALANCE I S REMITTED TO THE COMPANY . SHRI B.V.DEMULLU WAS H ANDLING THE CASH HENCE HE MAINTAINED THE DIARY FOR RECORD PURPOSE. THE DESIGNING CHARGES WERE THE AMOUNT S PAID TO THE PHOTOGRAPHER APPROXIMATELY RANGING FROM 34% TO 37%. FOR EXAMPLE IF THE PHOTOGRAPHERS RECEIVES RS.100 AFTER REDUCING RS.37 THE BALANC E 14 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM AMOUNT OF RS.63 / - WAS REMITTED TO THE ASSESSEE COMPANY WHICH WAS RECORDED AS 63% OF 100. THUS SUBMITTED THAT THE ASSESSEE HAS RIGHTLY EXPLAINED THE NATURE OF RECEIPT AND THE AMOUNT OF RECEIPT DURING THE COURSE OF RECORDING THE STATEMENT U/S 131 OF THE A CT AND SUBSEQUENTLY IN HIS REPLY . THEREFORE THE LD.AR ARGUED THAT IT IS INCORRECT FOR THE AO TO ASSUME THA T THE ENTIRE GROSS AMOUNT IS PROFIT OF THE COMPANY. THE AMOUNTS MENTIONED IN THE SCRIBBLING PAD REPRESENTS THE RECEIPTS AND THE PAYMENTS MADE FOR BUSINESS OF THE ASSESSEE EITHER FOR EXPENSES / ADVANCES . ULTIMATELY THE ENTIRE RECEIPTS RECORDED IN THE SCRIBBLING PAD WAS ADMITTED IN THE BOOKS OF ACCOUNTS OF THE COMPANY AS SALES AND DECLARED TRUE AND CORRECT INCOME. APART FROM THE EXPENDITURE INCURRED BY SHRI B.V.DEMULLU EXPENDITURE WAS INCURRED BY THE COMPANY BY VARIOUS SECTIONS VARIOUS DEPARTMENTS THE OTHER DIRECTORS AND THE EMPLOYEES WHICH WAS ACCOUNTED IN THE BOOKS OF ACCOUNTS. SIMILARLY FOR DAY TO DAY RUNNING OF BUSINESS THE ASSESSEE HAS TO GIVE ADVANCES TO EMPLOYEES TO THE CUSTOMERS SUPPLIERS AND ALSO THE DEBTOR / CREDITORS WHICH W ERE NOTED IN THE SCRIBBLING PAD. THE LD.AR ARGUED THAT THE ENTIRE RECEIPTS AND PAYMENTS MENTIONED IN THE SCRIBBLING PAD WERE DULY ACCOUNTED IN THE BOOKS OF ACCOU NTS AND THE GROSS TURNOVER DECLARED BY THE ASSESSEE WAS MORE THAN THE AMOUNT MENTIONED IN THE SCRIBBLING PAD THEREFORE SUBMITTED THAT THERE IS NO REASON TO ASSESS THE 15 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM UNDISCLOSED INCOME. THOUGH SEARCH WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSE E NO OTHER EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH EITHER IN THE BUSINESS PREMISES OR IN THE RESIDENTIAL PREMISES OF THE DIRECTORS INDICATING SUPPRESSED TURNOVER UNACCOUNTED BILLS UNACCOUNTED ASSETS LOANS ETC AND THERE WAS NO UN ACCOUNTED EXPENDITURE FOUND DURING THE COURSE OF SEARCH THEREFORE SUBMITTED THAT THE AO MADE THE ADDITIONS MERE LY ON ASSUMPTIONS AND PRESUMPTIONS WITHOUT ANY CORROBORATIVE EVIDENCE . T HOUGH THE ASSESSEE HA S CLEARLY EXPLAINED THE CONTENTS THE AO BRUSHED A SIDE THE EXPLANATION WITHOUT HAVING ANY CORROBORATIVE EVIDENCE. SINCE THE ENTIRE RECEIPTS WERE ACCOUNTED IT IS UNJUSTIFIED TO MAKE THE ADDITION IN THE HANDS OF THE ASSESSEE THEREFORE ARGUED THAT THE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION HENCE S UBMITTED THAT THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE AO MADE THE ADDITION OF RS.2 08 80 000/ - FOR THE A.Y. 2015 - 16 AND THE SUM OF RS.2 06 50 076/ - FOR THE A.Y.2016 - 17. THE SOLE BASIS FOR MAKING ADDITION IS NOTING MADE IN SCRIBBLING PAD FOUND AND SEIZED AS ANNEXURE A/ BVS/02 DATED 12.04.2017. WHAT WAS STATED TO BE WRITTEN IN THE SCRIBBLING PAD WAS THE GROSS CASH RECEIPTS (CASH FLOW ) OF EACH MONTH 16 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM AFTER DEDUCTING THE DESIGNING CHARGES AND COMMISSION BY THE AGENTS FROM DIFFERENT PLACES. THE NOTING WAS MADE FOR 5 MONTHS FOR THE FINANCIAL YEAR 2014 - 15 AND FOR 11 MONTHS FOR THE FINANCIAL YEAR 2015 - 16. THE AO EXTRAPOLATED THE 5 MONTHS INFORMATION TO TH E WHOLE YEAR I.E. 12 MONTHS TAKING AVERAGE RECEIPTS OF 5 MONTHS FOR THE F.Y.2014 - 15 AND 11 MONTHS INFORMATION THAT WAS AVAILABLE FOR F.Y.2015 - 16 WAS EXTRAPOLATED TO 12 MONTHS ON AVERAGE BASIS AND DETERMINED THE UNDISCLOSED INCOME. FURTHER THE AO ALSO ENHANCED THE RECEIPTS NOTED IN THE DIARY BY INCLUDING THE AGENTS COMMISSION DESIGNING CHARGES WHICH WAS STATED TO BE DEDUCTED BY THE AGENTS AT SOURCE THUS MADE THE ADDITION OF SUCH INCREASED AMOUNT . THE AO ALSO VIEWED THAT THE ENTIRE RECEIPTS DULY ENHANCED AND EXTRAPOLATED REQUIRED TO BE BROUGHT TO TAX WITHOUT ALLOWING ANY EXPENDITURE. H OWEVER WHILE TAXING THE ENTIRE RECEIPTS AS UNDISCLOSED INCOME THE AO HAS NOT INVOKED ANY SECTION OF I NCOME T AX A CT I.E. SECTION 68 69 OR 69C . DURING THE COURS E OF ASSESSME NT PROCEEDINGS ONE OF THE DIRECTORS SHRI B.V.DEMULU HAS EXPLAINED THE CONTENTS OF THE DIARY STATING THAT IT WAS THE GROSS RECEIPTS AFTER DEDUCTING THE AGENTS COMMISSION WHICH WA S RANGING FROM 33% TO 37% AND THE SAME WAS NOTED AS THE NET RECEIPTS IN THE SCRIBBLING PAD @63% . I T WAS ALSO EXPLAINED THAT THE AMOUNTS MENTIONED IN THE SCRIBBLING PAD REPRESENT GROSS RECEIPTS WHICH WERE DULY ACCOUNTED IN THE BOOKS OF 17 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM ACCOUNTS. THE DIARY WAS MAINTAINED FOR THE PURPOSE OF INFORMATION AND TO EXPLAIN TO OTHER DIRECT ORS. FURTHER THE DIRECTOR EXPLAINED THAT THE PAYMENTS MENTIONED IN THE SCRIBBLING PAD REPRESENT EITHER ADVANCES OR THE EXPENSES MET BY SHRI DEMUL L U FOR THE PURPOSE OF BUSINESS. IT WAS ALSO SUBMITTED THAT THE GROSS TURNOVER DECLARED BY THE ASSESSEE WAS MOR E THAN THE TURNOVER NOTED IN THE SCRIBBLING PAD. THOUGH THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS CASH BOOK AND ALL OTHER RELEVANT INFORMATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS NO DEFECTS WERE NOTICED IN THE BOOKS OF ACCOUNTS. THE AO DID NOT FIND ANY DEFECTS IN THE BOOKS OF ACCOUNTS BY MAKING CROSS VERIFICATION OF ENTRIES OF THE DIARY WITH THE REGULAR BOOKS OF ACCOUNTS ALSO. A SEARCH U/S 132 WAS CONDUCTED IN THE RESIDENCE OF ALL THE DIRECTORS AS WELL AS BUSINESS PREMISES OF THE ASSESSEE COMPANY NO OTHER EVIDENCE WAS FOUND BY THE DEPARTMENT TO SHOW THE UNACCOUNTED ASSETS INVESTMENTS OR THE EXPENDITURE. THE DIRECTOR NEVER ACC EPTED DURING THE COURSE OF SEARCH OR SUBSEQUENT TO SEARCH THAT THE RECEIPTS REPRESENT THE UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. SINCE THE ASSESSEE CONSISTENTLY TAKEN THE STAND THAT THE CONTENTS OF THE DIARY AS THE GROSS RECEIPTS WHICH WAS DULY ACCO UNTED IN THE BOOKS OF ACCOUNTS AND THE TURNOVER DECLARED BY THE ASSESSEE WAS MORE THA N THE TURNOVER NOTED IN THE DIARY THE BURDEN OF PROOF SHIFTS TO THE DEPARTMENT TO DISPROVE THE 18 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM CONTENTION S OF THE ASSESSEE. THE AO DID NOT BRING ANY EVIDENCE TO SHOW THAT THE NOTINGS REPRESENT THE UNDISCLOSED INCOME OF THE ASSESSEE. AS DISCUSSED EARLIER NO OTHER CORROBORATIVE EVIDENCE WAS ALSO FOUND DURING THE COURSE OF SEARCH TO HOLD THAT THE JOTTINGS NOTED IN THE SCRIBBLING PAD REPRESENT THE UNDISCLOSED INCOME OF THE ASS ESSEE. WITHOUT HAVING CORROBORATIVE EVIDENCE ONCE THE ASSESSEE CLEARLY EXPLAIN ED THE NOTINGS THE AO CANNOT MAKE THE ADDITION ON PRESUMPTIONS AND ASSUMPTIONS. IN THE INSTANT CASE THE AO HAS NEITHER INVOKED ANY SECTION OF THE INCOME TAX ACT NOR MATCHED THE JOTTINGS OR NOTINGS MADE IN THE DIARY WITH THE BOOKS OF ACCOUNTS. HENCE THE AO FAILED TO DISCHARGE THE ONUS CAST UP ON HIM. THE LEGAL VALIDITY OF EVIDENTIARY VALUE OF NOTINGS OF LOOSE SHEETS IN THE DIARY WAS EXAMINED BY THE COORDINATE BENCH OF ITAT AMRIT SAR IN 124 TAXMANN.COM 68 (AMRIT - TRIB) IN THE CASE OF SMT.HARMOHINDER KAUR VS. DCIT CENTRAL CIRCLE - II JALANDHAR AND CONSIDERED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CBI VS. V.C.SHUKLA 199 TAXMAN.COM 2155 AND THE DECISION OF COMMON CAUSE (REGISTERED SOCIETY) VS. UNION OF INDIA 77 TAXMAN.COM 245 AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRAVEEN JONES IN ITA NO.57/2017 DT.14.07.2017 AND HELD THAT WITHOUT CORROBORATIVE EVIDENCE TO PROVE THE AUTHENTICITY OF DIA RY SEIZED DURING THE COURSE OF SEARCH THE AO CANNO T MAKE THE ADDITION IN ASSESSEES INCOME ON 19 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM THE BASIS OF NOTINGS IN THE DIARY OF THIRD PARTY BY MAKING PRESUMPTIONS AS PER SECTION 292C. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT PARA NO. 12 AND 13 OF THE ORDER WHICH READS AS UNDER : 12. THE APEX COURT IN THE CASES OF V.C. SHUKLA (SUPRA) AND COMMON CAUSE (A REGISTERED SOCIETY) (SUPRA) ANALYZED THE POSITION OF LAW WITH REGARD TO THE LOOSE SHEETS/DIARY IN WHICH SOME NOTING HAS BEEN MADE BY THE PERS ON OTHER THAN THE PERSONS SEARCHED AND CLEARLY HELD THAT THE SAID DOCUMENT DO NOT HAVE ANY VALUE IN THE EYES OF LAW. FURTHER ENTRIES IN THE DIARIES NOTE BOOKS AND FILE CONTAINING LOOSE SHEETS PAPER NOT IN THE FORM OF 'BOOKS OF ACCOUNTS' AND HAS HELD THAT SUCH ENTRIES IN LOOSE PAPERS/SHEETS ARE NOT RELEVANT AND NOT ADMISSIBLE U/S 34 OF THE EVIDENCE ACT. FURTHER AS TO VALUE OF THE ENTRIES IN THE BOOKS OF ACCOUNT THAT SUCH STATEMENT SHALL NOT ALONE BE SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY EVEN IF THEY ARE RELEVANT AND ADMISSIBLE AND THAT THEY ARE ONLY CORROBORATIVE EVIDENCE. EVEN THEN INDEPENDENT EVIDENCE IS NECESSARY AS TO TRUSTWORTHINESS OF THOSE ENTRIES WHICH IS A REQUIREMENT TO FASTEN THE LIABILITY. 13. ON THE BASIS OF THE AFORESAID JUD GMENTS WE ARE OF THE VIEW DIARY SEIZED DURING THE SURVEY/SEARCH OPERATION WITHOUT CORROBORATION HAVE NO AUTHENTICITY AND THEREFORE CANNOT BE RELIED UPON. EVEN ENTRY RECORDED IN THE DIARY QUA AMOUNT OF SALE WAS NOT CONFIRMED FROM THE BUYERS OF THE PROP ERTY AND WITHOUT CONFIRMATION QUESTION OF ANY ASSUMPTION OR BELIEF THAT THE ENTRY BELONGS TO THE ASSESSEE DID NOT ARISE AND HENCE ENTRY FOUND IN DIARY WITHOUT ANY CORROBORATIVE EVIDENCE CANNOT BE MADE BASIS OF ADDITION. THE AUTHORITIES BELOW IN THE INSTA NT CASE MADE THE ADDITION ONLY ON THE BASIS OF SURMISES SUSPICION AND GUESS WORK. HENCE RESPECTIVELY FOLLOWING THE JUDGMENTS REFERRED ABOVE WE ARE UNABLE TO SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER AND AFFIRMED BY THE LD. CIT(A). CONSEQUENTLY WE ARE INCLINED TO DELETE THE SAME RESULTANTLY THE APPEAL OF THE ASSESSEE IS LIABLE TO BE ALLOWED. 6 .1 . ON SIMILAR FACTS I N THE CASE OF COMMISSIONER OF INCOME - TAX. V. C.J. SHAH & CO. [2001] 117 T AXMAN 577 (BOM.) HONBLE BOMBAY HIGH COURT HELD THAT HAVING FOUND NO MATERIAL TO SHOW TURNOVER DURING BLOCK PERIOD ON THE BASIS OF LOOSE SHEETS WHICH INDICATED FIGURES OF ONLY INCOMING AND OUTGOING CASH TRANSACTIONS ADDITION MADE WAS ARBITRARY . FOR THE SAKE OF 20 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM CLARITY WE EXTRACT RELEVANT PARAGRAPH OF THE ORDER OF HOBLE BOMBAY HIGH COURT WHICH READS ASUNDER: 3. IT IS WELL - SETTLED THAT IN CASES WHERE MATERIAL IS DETECTED AFTER SEARCH AND SEIZURE OPERATIONS ARE CARRIED OUT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE UNDISCLOSED INCOME. IN SUCH CASE S ADDITIONS ARE GENERALLY BASED ON ESTIMATES. IN MATTERS OF ESTIMATION SOME AMOUNT OF LATITUDE IS REQUIRED TO BE SHOWN TO THE ASSESSING OFFICER PARTICULARLY WHEN RELEVANT DOCUMENTS ARE NOT FORTHCOMING. HOWEVER IT DOES NOT MEAN THAT THE ASSESSING OFFICER CAN ARRIVE AT ANY FIGURE WITHOUT ANY BASIS BY ADOPTING AN ARBITRARY METHOD OF CALCULATION. IN THE PRESENT MATTER A3 A4 AND A6 NOWHERE RECORDS THE TURNOVER OF THE ASSESSEE AS FOUND BY THE TRIBUNAL AND YET ON THE WRONG BASIS OF THE INCOMING AND OUTGOING CA SH TRANSACTIONS THE ASSESSING OFFICER HAS ARRIVED AT THE TURNOVER. MOREOVER THE PEAK INVESTMENT WAS RS. 40 14 806 FOR THREE MONTHS. HOWEVER THERE IS NO MATERIAL SEIZED TO JUSTIFY ANY FIGURE TO BE INCLUDED FOR A PERIOD EARLIER TO THE SAID PERIOD OF THREE MONTHS. IN THE CIRCUMSTANCES THE TRIBUNAL HAS RECORDED A FINDING OF FACT AND HAS HELD THAT THE ADDITION OF RS. 3.40 CRORES WAS TOTALLY UNJUSTIFIED. THE ENTIRE FINDING OF THE TRIBUNAL IS BASED ON THE FACTS. NO SUBSTANTIAL QUESTION OF LAW ARISES. HENCE TH E APPEAL IS DISMISSED. 6 . 2 . S IMILAR LY THE COORDINATE BENCH OF ITAT PUNE IN S.P. GOYAL V. DEPUTY COMMISSIONER OF INCOME - TAX [2002] 82 ITD 85 (MUMBAI) (TM)/[2002] 77 TTJ 1 (MUMBAI) (T ) ON REFERENCE THIRD MEMBER AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER AND HELD THAT LOOSE SHEET ITSELF HAS NO INTRINSIC VALUE UNLESS IT IS SUPPORTED BY THE CORROBORATIVE EVIDENCE. FOR THE SAKE OF CLARITY WE EXTRACT THE VIEW OF THE HONBLE THIRD MEMBER WHICH READS AS UNDER: 15. LASTLY THE HONBLE VICE - P RESIDENT (JUDICIAL MEMBER) ALSO CITED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHUHARMAL (SUPRA) FOR THE PROPOSITION THAT WHEN A PERSON IS FOUND IN POSSESSION OF ANYTHING THE ONUS OF PROVING THAT HE WAS NOT ITS OWNER WAS ON THAT PERSON. TH E ABOVE RATIO WILL NOT HAVE APPLICATION TO THE FACTS OF THE PRESENT CASE. IN THE CASE OF CHUHARMAL (SUPRA) THE POSSESSION WAS IN REGARD TO VALUABLE ARTICLES IN THE 21 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM FORM OF WRIST WATCHES OF FOREIGN MAKE. THE OWNERSHIP OF SUCH VALUABLE ARTICLES HAVE TO BE D EFINITELY PROVED AND IF THE PERSON IN WHOSE POSSESSION THE SAID VALUABLE ARTICLE WAS FOUND CLAIMED THAT THE SAME DID NOT BELONG TO HIM THE ONUS OF PROVING THAT HE WAS NOT ITS OWNER WAS ON THAT PERSON. IN THE PRESENT CASE HERE IT IS A MERE LOOSE SHEET IN W HICH THE ASSESSEE CONFIRMED THAT THE ENTRY WAS IN HIS OWN HANDWRITING. THE LOOSE PAPER IN ITSELF HAS GOT NO INTRINSIC VALUE. IT DOES NOT REPRESENT NEGOTIABLE INSTRUMENT WHICH CAN BE EXCHANGED FOR A SUM OF RS. 60 LACS. THEREFORE THE ABOVE DECISION DOES NOT HAVE DIRECT APPLICABLE TO THE FACTS OF THE PRESENT CASE. WHEN IT IS A MERE ENTRY ON A LOOSE SHEET OF PAPER AND IF THE ASSESSEE CLAIMS THAT IT WAS ONLY A PLANNING NOT SUPPORTED BY ACTUAL CASH THEN THERE HAS TO BE CIRCUMSTANTIAL EVIDENCES TO SUPPORT THAT THIS ENTRY REALLY REPRESENT CASH OF RS. 60 LACS. THERE IS NO SUCH EVIDENCE FOUND BY THE REVENUE IN THE FORM OF EXTRA CASH JEWELLERY OR INVESTMENT OUTSIDE THE BOOKS. IN SUCH A CASE THE EXPLANATION OFFERED BY THE ASSESSEE CANNOT BE REJECTED. IN THAT VIEW O F THE MATTER I CONCUR WITH THE VIEW TAKEN BY THE LEARNED ACCOUNTANT MEMBER. 6 .3 . HONBLE ITAT PUNE BENCH IN THE CASE OF CHANDRA MOHAN MEHTA VS. ACIT ( 1999 ) 71 ITD 245 HELD THAT LOOSE PAPERS WERE MAINTAINED AND KEPT BY THE ASSESSEE FOR PRIVATE KNOWLEDGE AND INFORMATION BUT NOT MEANT FOR DISCLOSING TO THE DEPARTMENT. IF THE STATEMENT OF THE ASSESSEE HAS TO BE REJECTED IN TOTO THEN NO ADDITION WOULD BE MADE ON THE BASIS OF LOOSE PAPERS SINCE THOSE L OOS E PAPERS WOULD BE DUMB PAPERS. IF THE STATEMENT OF THE ASSESSEE WAS TO BE ACCEPTED IN TOTO THEN THE CONTENTS OF THE STATEMENTS WERE TO BE ACCEPTED AND BORROWINGS MENTIONED IN THE LOOSE PAPERS HAS TO BE ACCE PTED AS GENUINE. WE EXTRACT RELEVANT PART OF THE ORDER OF THE TRIBUNAL WHICH READS AS UNDER: 9. IN VIEW OF THE ABOVE IT IS HELD THAT THE ENTIRE STATEMENT OF THE ASSESSEE HAS TO BE ACCEPTED. IF THAT IS SO NO ADDITION CAN BE SUSTAINED ON THE BASIS OF THE MATERIALS MENTIONED ABOVE. THE LOOSE PAPERS WERE MAINTAINED AND KEPT BY THE ASSESSEE FOR HIS PRIVATE KNOWLEDGE AND INFORMATION AND NOT MEANT FOR DISCLOSING TO THE DEPARTMENT. IF THE STATEMENT OF THE ASSESSEE IS TO BE REJECTED IN 22 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM TOTO THEN NO ADDITION CAN BE MADE ON THE BASIS OF LOOSE PAPERS SINCE THOSE WOULD BE DUMP PAPERS AS DISCUSSED IN THE EARLIER PART OF OUR ORDER. IF THE STATEMENT OF THE ASSESSEE IS ACCEPTED IN TOTO THEN CONTENTS OF THE STATEMENT ARE TO BE ACCEPTED AND THE BORROWINGS MENTIONED IN THESE LOOSE PAPERS HAVE TO BE ACCEPTED AS GENUINE. IN EITHER CASE NO ADDITION IS CALLED FOR. NO DOUBT THE PRESUMPTION TO THE CORRECTNESS OF THE DOCUMENTS CAN BE REBUTTED BY THE DEPARTMENT BUT THE REVENUE HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON THE R ECORD FOR REBUTTAL. THEREFORE WE ARE OF CONSIDERED VIEW THAT NO ADDITION CAN BE SUSTAINED ON THE BASIS OF THESE MATERIALS. 6 .4 . IN THE INSTANT CASE THE AO HAS COMPLETELY BRUSHED ASIDE THE EXPLANATION OF THE ASSESSEE ON THE CONTENTS OF THE DIARY . THE AO HAS NOT TAKEN INTO ACCOUNT THE CONTENTS OF THE SCRIBBLING PAD AND THE EXPLANATION OF THE ASSESSEE TOGETHER WHILE MAKING THE ASSESSMENT. THE AO HAS NOT EVEN CONSIDERED THE GROSS AMOUNTS MENTIONED IN THE DIARY. HE HAS ENHANCED THE GROSS RECEIPTS WITH DESI GNING CHARGES / COMMISSION WHICH WAS DEDUCTED AT SOURCE . THE AO OUGHT TO HAVE CONSIDERED THE ENTIRE MATERIAL AVAILABLE IN THE DIARY IN TOTO TOGETHER WITH THE EXPLANATION OFFERED BY THE ASSESSEE. IF THE AO HAD CONSIDERED ENTIRE MATERIAL I.E. DIARY ALONG WI TH THE EXPLANATION OFFERED BY THE ASSESSEE THERE IS NO CASE FOR MAKING THE ADDITION IN THE INSTANT CASE. THUS THE CASE LAWS ABOVE ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE. 6.5. THE AO IN PARA NO.18 OF THE ASSESSMENT ORDER FOR THE A.Y. 2016 - 17 GIVEN A FINDING THAT NOTING IS NOTHING BUT UNACCOUNTED PROFIT EARNED FROM VARIOUS BUSINESS ES RUN BY B.VENKATESWARLU AND HIS TWO SONS AND OBSERVED 23 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM THAT O UT OF THIS UNACCOUNTED PROFIT THEY WE RE USING THE UNACCOUNTED PROFIT FOR MONEY LENDING BUSINESS PERSON AL DRAWINGS AND UNACCOUNTED RESERVE. FROM READING OF PARA NO.18 OF THE ASSESSMENT ORDER IT IS CLEAR THAT THE AO HIMSELF HAS ACCEPTED THAT THE NOTINGS MENTIONED IN THE DIARY DOES NOT PERTAIN TO THE ASSESSEE COMPANY HENCE THE AO DID NOT MAKE OUT A CASE T HAT THE NOTINGS MADE IN THE DIARY WAS RELATED TO THE ASSESSEE COMPANY . 7 . IN VIEW OF THE ABOVE FACTS AND THE CASE LAWS DISCUSSED ABOVE THE ADDITION MADE BY THE AO IN THE HANDS OF THE COMPANY IS UNSUSTAINABLE HENCE WE UPHOLD THE ORDER OF THE LD.CIT(A) A ND DISMISS THE APPEAL OF THE REVENUE. 8 . THE ASSESSEE FILED CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD.CIT(A). SINCE THE APPEALS OF THE REVENUE ARE DISMISSED THE CROSS OBJECTIONS FILED BY THE ASSESSEE BECOME INFRUCTUOUS HENCE DISMISSED. 9 . IN THE RESULT APPEAL S FILED BY THE REVENUE AS WELL AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED . 24 I.T.A. NO . 04 & 05/VIZ/2021 AND CO NO.03 & 04/VIZ/2021 A.Y.20 1 5 - 16 & 2016 - 17 M/S PHO Z O DIGITAL PRESS PVT LTD. VISAKHAPATNAM ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY 2021. SD/ - SD/ - ( ) ( . . ) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED : 24 .0 5 .2021 L.RAMA SPS / COPY OF THE ORDER FORWARDED TO : - 1 . / THE ASSESSEE - M/S PHOZO DIGITAL PRESS PVT. LTD. D.NO.48 - 13 - 18 BHAGAVAN CASTLE SRI JANAKIRAMA STREET SRI NAGAR VISAKHAPATNAM 2 . / THE REVENUE ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 1 VISAKHAPATNAM 3. THE PR.COMMISSIONER OF INCOME TAX (CENTRAL) VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 VISAKHAPATNAM 5 . / DR ITAT VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT VISAKHAPATNAM