DCIT, Kanpur v. Satish Chandra Pandey, Kanpur

ITA 525/LKW/2010 | 2001-2002
Pronouncement Date: 30-03-2011 | Result: Dismissed

Appeal Details

RSA Number 52523714 RSA 2010
Bench Lucknow
Appeal Number ITA 525/LKW/2010
Duration Of Justice 7 month(s) 21 day(s)
Appellant DCIT, Kanpur
Respondent Satish Chandra Pandey, Kanpur
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-03-2011
Date Of Final Hearing 29-03-2011
Next Hearing Date 29-03-2011
Assessment Year 2001-2002
Appeal Filed On 09-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B BB B LUCKNOW LUCKNOW LUCKNOW LUCKNOW BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI ITA NO.525/LKW/2010 ASSESSMENT YEAR:2001-02 DY. CIT CENTRAL CIRCLE 1 KANPUR V. SHRI SATISH CHANDRA PANDEY 133/88-M BLOCK KIDWAI NAGAR KANPUR PAN:ACJPP7982K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIVEK MISHRA D.R. RESPONDENT BY: SHRI AMIT SHUKLA ADVOCATE O R D E R PER N.K. SAINI: THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE CIT(A)-I KANPUR DATED 25.5.2010 FOR ASSESSMENT YEAR 2001-02. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. THE CIT(A) ERRED IN LAW IN DELETING THE ADDITION OF $ 16 42 480 MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT U/S. 6 8 OF THE ACT ON A WRONG APPRECIATION OF LAW AND WITHOUT ANY BASIS DESPITE T HE CLEAR FINDING TO THIS EFFECT BY THE ASSESSING OFFICER THAT THE ASSESSEE H AS NOT DISCHARGED ITS ONUS AS PROVIDED U/S. 68 OF THE ACT. 2. THE CIT(A) ERRED IN DELETING THE ADDITION BY HOLDIN G THAT ASSESSING OFFICER HAS NOT QUESTIONED THE BROUGHT FORWARD CASH BALANCE. T HE CIT(A) HAS THUS IGNORED THE BASIC PROVISIONS OF SECTION 68 OF THE A CT WHICH CASTS THE ONUS ON THE ASSESSEE TO PRODUCE EVIDENCE TO THE SATISFACTIO N OF THE ASSESSING OFFICER AND WHICH WAS NOT DONE BY THE ASSESSEE. 3. THE CIT(A) HAS ERRED IN LAW IN ALLOWING LOSS OF $ 1 26 820 DESPITE THE FACT THAT NO DOCUMENTARY EVIDENCES REGARDING THE LOSS FROM M/ S AROHI INTERNATIONAL WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. :-2-: 4. THAT THE ORDER OF THE LD. CIT(A) BEING ERRONEOUS AN D ON FACTS BE VACATED AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO AMEND ANYONE OR MORE OF THE GROUNDS OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOI NG SO MAY ARISE. 6. THE FIRST ISSUE VIDE GROUNDS NO.1 AND 2 RELATES TO THE DELETION OF ADDITION OF $ 16 42 480 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT. 7. THE FACTS OF THE CASE IN BRIEF ARE THAT A SEARCH AN D SEIZURE OPERATION U/S. 132 OF THE INCOME-TAX ACT 1961 WAS CARRIED OUT IN PANDEY GROUP OF CASES ON 19.4.2006. IN THE SAID OPERATION RESIDENTIAL PREMISES OF THE ASS ESSEE AT 133/88-M BLOCK KIDWAI NAGAR KANPUR WAS COVERED. DURING THE COURSE OF SE ARCH AND SEIZURE OPERATION CASH JEWELLERY VALUABLES VARIOUS BOOKS OF ACCOUNT DOC UMENTS AND LOOSE PAPERS RELATED TO THE ASSESSEE WERE FOUND AND SEIZED. CONSEQUENT UPO N SEARCH NOTICE U/S. 153A OF THE ACT WAS ISSUED REQUIRING THE ASSESSEE TO FILE HIS R ETURN OF INCOME. THE ASSESSEE STATED THAT THE RETURN FILED ON 21.1.2002 DECLARING TOTAL INCOME AT $ 3 52 701 MAY BE TREATED AS RETURN IN RESPONSE TO THE SAID NOTICE. IN THE ORIG INAL RETURN THE ASSESSEE DECLARED INCOME AS UNDER:- INCOME FROM BUSINESS : (-) $ 1 26 820 INCOME FROM OTHER SOURCES : $ 4 91 521 $ 3 64 701 LESS: EXEMPT U/S. 80L : $ 12 000 TOTAL INCOME $ 3 52 701 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER POINTED OUT THAT THE ASSESSEE HAD FILED BALANCE SHEET AND PROFI T AND LOSS ACCOUNT FOR THE YEAR ENDING ON 31.3.2001. HOWEVER THE ASSESSEE HAS NOT FILED THE CAPITAL ACCOUNT PROFIT AND LOSS ACCOUNT AS WELL AS THE BALANCE SHEET OF THE BUSINES S CONCERN M/S AROHI INTERNATIONAL AND IT IS NOT KNOW WHAT ARE THE ASSETS AND LIABILIT IES OF THE ABOVE CONCERN. THE ASSESSING OFFICER POINTED OUT THAT THE CASH FLOW ST ATEMENT WAS FILED BY THE ASSESSEE WHEREIN OPENING CASH BALANCE HAD BEEN SHOWN AT $ 16 42 486. ACCORDING TO THE ASSESSING OFFICER THERE WAS NO BASIS AND EVIDENCE FOR THE ABOVE CASH BALANCE. HE :-3-: POINTED OUT THAT EVERY PENNY WITH THE ASSESSEE IS F OUND DEPOSITED IN THE FDRS AND/OR ARE IN THE BANK ACCOUNTS AND THE ASSESSEE HAD CLAIM ED THAT THE DRAWINGS FOR HOUSEHOLD EXPENSES PPF PURCHASE OF ARMS AND CASH DEPOSITED IN PUNJAB NATIONAL BANK ACCOUNT TOTALING TO $ 2 46 605 HAD BEEN SPENT FROM OPENING BALANCE ONLY. THE ASSESSING OFFICER ALSO POINTED OUT THAT THE ASSESSEE HAD SHOWN LIABIL ITY OF $ 1 89 514 TOWARDS BANK O.D. ACCOUNT AND HAD THE ASSESSEE $ 16.42 LAKHS IN CASH WITH HIM HE WOULD NOT HAVE KEP T THE O.D. BALANCE PENDING. THE ASSESSING OFFICER ALSO P OINTED OUT THAT THE ASSESSEE HAD SHOWN TO HAVE TAKEN LOANS FROM DIFFERENT PERSONS IN DIFFERENT YEARS AS UNDER:- A.Y. LOAN TAKEN FROM AMOUNT 2002-03 BABU LAL RS.35 000/- 2003-04 AKASH DEEP ASSOCIATES RS.40 000/- -DO- DINESH SHUKLA RS.1 00 000/- -DO- GAURI PANDEY RS.11 000/- -DO- HARI SHANKER PANDEY RS.40 000/- 2004-05 AKASHDEEP ASSOCIATES RS.25 000/- -DO- DINESH CHANDRA RS.66 000/- -DO- DINESH SHUKLA RS.20 000/- -DO- GAURI PANDEY RS.17 000/- -DO- HARI SHANKER PANDEY RS.20 000/- -DO- KISHAN CHAND GUPTA RS.45 000/- -DO- MAHESH PRASAD RS.45 000/- -DO- P.N. BAIPAI RS.20 000/- -DO- PANKAI GUPTA RS.45 000/- -DO- R.S. TIWARI RS.20 000/- :-4-: -DO- RAMESH ARORA RS.45 000/- -DO- USHA RS.45 000/- -DO- VISHWA NATH GUPTA RS.45 000/- 2005-06 SANTOSH TRIPATHI RS.27 000/- 2006-07 ANIL CHAND TRIPATHI RS.25 000/- -DO- WMESH CHAND SAXENA RS.38 000/- 2007 -08 RAM GOPAL TIWARI RS.70 000/- 9. ON THE BASIS OF THE ABOVE FACTS THE ASSESSING OFFI CER WAS OF THE VIEW THAT THE ASSESSEE DID NOT HAVE THE CASH BALANCE OF $ 16 42 480 AS ON 1.4.2001 AS CLAIMED. HE THEREFORE HELD THAT THE CASH HAS BEEN INTRODUCED B Y THE ASSESSEE ONLY TO EXPLAIN THE INVESTMENT OF EXPENSES IN THE SUBSEQUENT YEARS. HE ACCORDINGLY ADDED A SUM OF $ 16 42 480 TO THE INCOME OF THE ASSESSEE. 10. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) A ND THE SUBMISSIONS MADE BY THE ASSESSEE AS MENTIONED IN PARA 11 OF THE ORDER O F THE LD. CIT(A) READ AS UNDER:- 'THE LD. A.O. ARBITRARILY AND WITHOUT ASSIGNING ANY COGENT REASON AND WITHOUT BRINGING ANY EVIDENCE ON RECORD TREATED THE OPENING BALANCE OF RS.16 42 480/- AS ON 01.04.2000 OF CASH IN HAND TO BE THAT OF UNEXPLAINED NATURE AND ADDED IT BACK TO THE INCOME OF THE APPEL LANT. BUT NATURALLY THE OPENING BALANCE WOULD HAVE BEEN THE CLOSING BALANCE AS ON 31.03.2000 RELATING TO THE PREVIOUS YEAR RELEVANT TO THE A.Y 2 000-01 AND ACCORDINGLY THERE WAS NO REASON TO TREAT THE SAME AS UNEXPLAINE D WHEREAS IT WAS BROUGHT FORWARD BALANCE OF THE PERIOD BEYOND THE SC OPE OF ASSESSMENT VIDE PROVISION OF SECTION 153A OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. A.O DID NOT CONFRONT THE APPELLANT ON THIS ISSUE. HE HAS ALLEGED THAT TH ERE IS NO BASIS AND EVIDENCE FOR OPENING CASH BALANCE SHOWN IN THE CASH FLOW STATEMENT WHICH IS SUBMITTED IN PAPER BOOK. THE SAID FACT IS VEHEMENTLY OBJECTED FOR :-5-: THE REASON THAT THE APPELLANT WAS NEVER ASKED FOR A NY FURTHER EVIDENCE TO SUBSTANTIATE THE OPENING BALANCE OF CASH IN HAND AS CAN BE SEEN FROM HIS ASSESSMENT RECORDS. THE ASSESSEE HAD BEEN FILING TH E FUND FLOW STATEMENT ALL ALONG WITH HIS RETURN OF INCOME. THE RETURN FOR THE YEAR UNDER CONSIDERATION CAME INTO THE POSSESSION OF THE LD. A O BY TRANSFER OF THE RETURN FROM JCIT RANGE-3 KANPUR AFTER ALMOST 7 YE ARS AS ADMITTED BY THE LD AO. IT IS QUITE POSSIBLE THAT THE CASH FLOW/FUND /FLOW STATEMENT COULD HAVE GOT DETACHED DUE TO HANDLING AND FILING OR WEE DING OUT IN THE ERSTWHILE WARD AS WAS THE FATE OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF M/S AROHI INTERNATIONAL. IT WOULD NOT BE OUT OF PLACE TO REFER TO THE SUBMISSIONS MADE HEREIN ABOVE THAT THE LD. AO COULD NOT PRODUCE THE FINANCIAL STATEMENTS OF THE FIRM M/S AROHI INTERNAT IONAL WHICH WERE DEEMED TO BE ON HIS RECORD FOR THE YEAR UNDER CONSI DERATION. THE APPELLANT HAS BEEN ASSESSED TO TAX FOR PAST MORE TH AN 20 YEARS IS SUBSTANTIATED FROM THE ACKNOWLEDGMENTS AND NOTICE O F DEMANDS OF A. Y 1983-84 1984-85 1985-86 SUBMITTED IN THE PAPER BO OK. IT IS SUBMITTED BEFORE YOUR HONOUR THAT THE MAJOR P ART OF THE CASH BOUGHT FORWARD PERTAINS TO CASH WITHDRAWAL MADE BY THE APP ELLANT FROM PUNJAB NATIONAL BANK M-BLOCK. KIDWAI NAGAR. KANPUR WHICH IS A DISCLOSED ACCOUNT OUT OF THE PROCEEDS OF SALE OF JEWELLERY SILVER CO INS & UTENSILS AND GOLD GINNIES ETC. THAT THE APPELLANT HAD AVAILED THE VDI S' 97 SCHEME IN WHICH THE AFORESAID ITEMS AMOUNTING TO RS.1.98 390/- WERE DECLARED AS PER THE VDIS CERTIFICATE DATED 12-2-1998 ENCLOSED IN THE P APER BOOK AS WERE SUBMITTED BEFORE THE LD. AO. ENTIRE JEWELLERY SIL VER COINS & UTENSILS AND GOLD GINNIES ETC. SO DISCLOSED WERE LATER SOLD OFF FOR RS.24 55 010/- TO M/S PANNA LAL MAHESH CHAND JEWELLERS. M/S N.B. IMPEX AN D M/S P.B. SOCIETY JEWELERS AS PER THEIR PURCHASE MEMOS ENCLOSED IN TH E PAPER BOOK AS WERE SUBMITTED BEFORE THE LD. AO. THE APPELLANT HAD PART LY UTILIZED THE MONEY BY INVESTING IN FDR'S AND BALANCE AMOUNT IT HELD AS CASH IN HAND WHICH HAS CONTINUED SINCE THEN. THE LD. AO HAS FORMED HIS BELIEF ABOUT NON AVAILABI LITY OF CASH IN HAND :-6-: WITH THE APPELLANT MAINLY DUE TO THE REASON THAT T HE APPELLANT HAS TAKEN LOANS/OVERDRAFTS FACILITIES FROM VARIOUS PERSONS AN D INSTITUTIONS DURING VARIOUS ASSESSMENT YEARS AND NO WEALTH TAX RETURNS HAVE BEEN FILED. THESE OBSERVATIONS MADE BY THE LD. AO ARE OF LITTLE CONSEQUENCE BECAUSE BUSINESS DEALINGS CAN NOT BE MERGED WITH PERSONAL A SSETS. THE LD. AO HAS SIMPLY PRESUMED AND DOUBTED ABOUT THE EXISTENCE OF THE OPENING CASH BALANCE. IT IS SETTLED PRINCIPLE THAT PRESUMPTION H OWSOEVER STRONG CAN NOT TAKE PLACE OF A LEGAL PROOF. THE LD. AO COULD HAVE EXAMINED THE AVAILABILITY OF CASH BALANCE AS ON 01.04.2000 FROM THE RETURN FO R A.Y 2000-01 INSTEAD OF ADDING THE OPENING BALANCE OF CASH AS UNEXPLAINE D. THE LD AO HAD FAILED TO TAKE COGNIZANCE OF THE RETURN FOR A.Y 200 0-01 WHICH WAS ON HIS RECORDS WHILE DECIDING THE ISSUE OF A.Y 2001-02. EV EN OTHERWISE OPENING BALANCE CAN NOT BE A SUBJECT MATTER OF ADDITION U/S 68 (SIC 69) OF THE ACT AS SECTION 68 (SIC 69) WOULD ASSUME APPLICATION VIZ -A-VIZ A FRESH CREDIT ENTRY OF THE PREVIOUS YEAR UNDER CONSIDERATION AND THUS THE APPELLANT ESCAPED ADDITION U/S. 68 (SIC 69) OF THE ACT. IF TH E LD. AO DOUBTED THE AVAILABILITY OF PHYSICAL CASH BALANCE IT COULD GO T O CONCERNED ASSESSMENT YEAR I.E. 2000-01 AND TREAT IT AS UNEXPLAINED INCOM E BUT IN NO CASE HE COULD TREAT THE OPENING BALANCE IN A.Y 2001-02 AS U NEXPLAINED VIDE ACIT V. N. SASIKALA (2006) 151 TAXMAN-ITAT 42 & 43 (ITAT CHENNAI BENCH 'A'). IT WAS NOT CONTROVERTED THAT VERY AMOUNT WAS REFLEC TED IN HIS RETURN OF PRECEDING YEAR. ASSTT. CIT V. SHIVALIK LOHA MILLS (P.) LTD. (CHD -TRIB.) (2003) 126 TAXMAN 101 (MAG.]. THE DELHI HIGH COURT IN CIT VS. USHA STUD AGRICULTURAL FARMS LTD. (2009) 183 TAXMAN 277 HELD THAT THE CREDIT BALANCE APPEARING IN THE ACCOUNTS OF THE ASSESSEE W HICH DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION CANNOT BE A SUBJEC T MATTER OF ADDITION UNDER SECTION 68. IN ANY CASE IN AN ASSESSMENT U/S. 153A OF THE ACT ADDITION CAN BE MADE ONLY ON THE BASIS OF MATERIAL FOUND AS A RESULT OF SEARCH VIDE ANIL KHIMANI VS DCIT 2010 TIOL 177 (MUM BAI-TRIB) SOURCE (2010) 42A BCAJ PAGE 20 AND ANIL KUMAR BHATIA VS AC IT (DELHI-TRIB). THE ADDITION MADE IS ARBITRARY BASELESS AND UNWARR ANTED AND NEEDS TO BE DELETED BY OUR HONOUR. :-7-: 11. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER ADMITTED THAT $ 16 42 480 WAS BROUGHT FORWARD CASH BALANCE IN THAT CASE THE NATURAL COURSE WAS TO LOOK INTO THE CLOSING BALANCE AS ON 31.3.2000 RELATING TO THE PREVIOUS YEAR PARTICULARLY SO WHEN THE ASSESSEE WAS AN EXISTING OLD ASSESSEE. HE HOWEVER OBSERVED THAT THE ASSESSEE HAD FILED COPY OF THE INCOME-TAX RETURNS ACKNOWLEDGEMENTS AND NOTICES OF DEMAND FOR ASSESSMENT YEARS 1983-84 TO 1985-86 AND 2000-01 WHICH REVEALED THAT THE ASSESSE E HAD BEEN FILING RETURN AS PER THE ACKNOWLEDGEMENT DATED 16.1.2001 IN THE OFFICE OF TH E ACIT CIRCLE 1(3) KANPUR BEARING SL.NO.9116. ACCORDING TO THE LD. CIT(A) THE ASSES SING OFFICER HAD NOT QUESTIONED THE BROUGHT FORWARD CASH BALANCE SO IT WAS NOT JUSTIFI ED TO TREAT THE OPENING BALANCE AS UNEXPLAINED. HE ALSO POINTED OUT THAT IT WAS ON RE CORD THAT THE BUSINESS OF THE ASSESSEE WAS EXISTING AND CONTINUING EVEN BEFORE THE ASSESSM ENT YEAR UNDER CONSIDERATION THEREFORE THE BROUGHT FORWARD BALANCE WAS SUB-MATT ER OF VERIFICATION IN THE PRECEDING YEAR. ACCORDING TO THE LD. CIT(A) THE ASSESSING O FFICER IGNORED THE RECORD AND DOCUMENTS OF THE ASSESSEE AVAILABLE WITH THE DEPART MENT AND THE CAPITAL OF $ 16 42 480 OF THE ASSESSEE WAS PROVED AS PER DOCUMENTS FILED W ITH THE DEPARTMENT NAMELY RETURN OF INCOME VDIS CERTIFICATE AND BALANCE SHEETS OF T HE EARLIER YEARS. HE THEREFORE DELETED THE ADDITION OF $ 16 42 480 MADE BY THE ASSESSING OFFICER. 12. NOW THE DEPARTMENT IS IN APPEAL. 13. THE LD. D.R. STRONGLY SUPPORTED THE ORDER OF THE AS SESSING OFFICER AND REITERATED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN P ARAS 7 TO 7.4 OF THE ASSESSMENT ORDER DATED 31.12.2008 14. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S TRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S. 1 32 OF THE ACT AT THE RESIDENTIAL PREMISES OF THE ASSESSEE. THE ASSESSING OFFICER HA S NOT POINTED OUT THAT ANY INCRIMINATING DOCUMENT WAS FOUND TO SUBSTANTIATE TH AT THE ASSESSEE INVESTED A SUM OF :-8-: $ 16 42 480. THE ASSESSING OFFICER ALSO NOT POINTED OUT THAT THE CASH TO THE ABOVE EXTENT WAS FOUND AVAILABLE WITH THE ASSESSEE OR ANY ASSET WAS PURCHASED BY THE ASSESSEE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE IS REGULARLY FIL ING HIS RETURNS OF INCOME FOR THE PRECEDING ASSESSMENT YEARS AND FURNISHED DOCUMENTS IN SUPPORT OF HIS CLAIM THAT HIS INCOME WAS ASSESSED REGULARLY IN THE EARLIER YEARS. THE LD. CIT(A) HAS CATEGORICALLY STATED THAT THE DOCUMENTS RELATING TO THE RETURNS O F INCOME VDIS CERTIFICATE AND BALANCE SHEETS OF EARLIER YEARS HAD BEEN FILED BY T HE ASSESSEE. IT IS WELL SETTLED THAT IN AN ASSESSMENT U/S. 153A OF THE ACT ADDITIONS CAN B E MADE ONLY ON THE BASIS OF MATERIAL FOUND AS A RESULT OF SEARCH BUT IN THE INSTANT CAS E NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT ANY MATERIAL WAS FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE EITHER PURCHASED ASSETS OR INCURRED EXPENSES TO THE EXTENT OF $ 16 42 480 FOR THE YEAR UNDER CONSIDERATION. EVEN THE ASSESSING OFFICER HI MSELF ADMITTED THAT THE SAID AMOUNT WAS SHOWN IN THE CASH FLOW STATEMENT AS OPENING BAL ANCE SO IT CANNOT BE SAID THAT THE ASSESSEE EARNED INCOME TO THE ABOVE EXTENT DURING T HE YEAR UNDER CONSIDERATION AS THE AMOUNT IN QUESTION DOES NOT PERTAIN TO THE YEAR UND ER CONSIDERATION THEREFORE IT CANNOT BE A SUBJECT MATTER OF ADDITION U/S. 68 OF THE ACT. THE ABOVE VIEW IS FORTIFIED AS PER THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. USHA STUD AGRICULTURAL FARMS LTD. [2009] 183 TAXMAN 277. CON SIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE WE DO NOT SEE ANY VALID GROU ND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY GROUNDS NO.1 AND 2 AR E DISMISSED. 16. ANOTHER ISSUE AS AGITATED BY THE DEPARTMENT VIDE GR OUND NO. 3 RELATES TO THE DIRECTION OF THE LD. CIT(A) IN ALLOWING LOSS OF $ 1 26 820 RELATING TO M/S AROHI INTERNATIONAL. 17. THE FACTS RELATED TO THE ISSUE IN BRIEF ARE THAT TH E ASSESSING OFFICER WHILE DISALLOWING THE LOSS OF $ 1 26 820 OBSERVED AS UNDER:- THE ASSESSEE VIDE NOTICE U/S. 153A WAS REQUIRED TO FILE HIS RETURN OF INCOME BUT HE FILED THE PHOTOCOPY OF ACKNOWLEDGMENT OF RETURN OF INCOME WITHOUT ANY COMPUTATION AND ANNEXURE BUT IT IS STAT ED THAT RETURN FILED ON 21.01.02 MAY BE TREATED AS RETURN FILED IN COMPLIAN CE OF NOTICE U/S. 153A. FROM THE PERUSAL OF THE COPY OF THE ACKNOWLEDGMENT OF THE RETURN IT IS :-9-: NOTICED THAT THE ASSESSEE HAS CLAIMED THE LOSS OF R S.1 26 820/- FROM M/S AROHI INTERNATIONAL. THE DETAILS OF BUSINESS FINAL ACCOUNT HAVE NOT BEEN FILED. THE ASSESSEE HAS THUS NOT BEEN ABLE TO PROVE LOSS. IN VIEW OF THE ABOVE FACTS THE LOSS WILL NOT BE ALLOWED TO REDUCE FROM INCOME FROM OTHER SOURCES AND BUSINESS LOSS IS BEING TREATED AS NIL.' 18. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) A ND THE SUBMISSIONS MADE BEFORE HIM AS MENTIONED IN PARA 7 OF THE IMPUGNED O RDER ARE REPRODUCED VERBATIM AS UNDER:- 'THE ASSESSEE WAS PROPRIETOR OF THE FIRM M/S AROHI INTERNATIONAL ENGAGED IN THE BUSINESS OF TRADING IN KIRANA GOODS WHICH WAS STARTED IN THE YEAR UNDER CONSIDERATION. IT IS SUBMITTED BEFORE YOUR HO NOUR THAT IN FEBRUARY 2005 THE BAG CONTAINING THE WHOLE SET OF BOOKS OF ACCOUNTS VOUCHERS FILES ETC. OF M/S AROHI INTERNATIONAL WAS LOST IN TRANSIT AND CONSTRAINING THE ASSESSEE TO PRODUCE THE RECORDS DURING THE ASSESSME NT PROCEEDINGS FACT WHICH WAS APPRISED TO THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. COPY OF INTIMATING THE PS BABU PURWA ABOUT THE INCIDENCE IS SUBMITTED IN PAPER BOOK. BUT TO FACILITATE THE ASSE SSMENT PROCEEDINGS THE APPELLANT SUBMITTED COPIES OF ASSESSMENT ORDERS OF THE SALES TAX DEPARTMENT IN ORDER TO SUBSTANTIATE THE EXISTENCE O F BOOKS OF ACCOUNTS AND RELEVANT DETAILS WITH REGARD TO OPENING STOCK PURC HASES SALES AND CLOSING STOCK OF GOODS TRADED. THE LD. AO HAS DISALLOWED TH E BUSINESS LOSS OF RS.1 26 820/- FROM A PROPRIETORSHIP FIRM OF THE ASS ESSEE M/S AROHI INTERNATIONAL ON THE GROUND THAT THE FINAL ACCOUNTS OF THE BUSINESS HAVING NOT BEEN FILED. THE ASSESSEE HAD FILED COMPLETE SET OF FINAL ACCOUNTS ALONG WITH THE ORIGINAL RETURN FILED ON 21.01.2002 AND TH E SAME WERE ALREADY ON RECORD WITH THE DEPARTMENT. THE LD. AO HAS ACKNOWLE DGED IN ITS ORDER THAT THE ASSESSEE HAS ATTACHED PROFIT & LOSS AND BALANCE SHEET WITH THE REGULAR RETURN OF INCOME FILED ON 21.01.2002. HOWEVER UNDE R THE CIRCUMSTANCES IF THE ASSESSEE WAS UNABLE TO PRODUCE THE RECORDS AND FINANCIAL STATEMENTS THEN THE DEPARTMENT COULD HAVE UTILIZED THE SET OF BALANCE SHEET AND PROFIT :-10-: & LOSS ACCOUNT WHICH WAS ON ITS RECORD TO ARRIVE A T ANY CONCLUSION. THE ASSESSEE HAD SUBMITTED THE SALES TAX ASSESSMENT ORD ER SUBMITTED IN PAPER BOOK BEFORE THE LD. AO. IN ANY CASE IN AN ASSESSM ENT U/S. 153A OF THE ACT ADDITION CAN BE MADE ONLY ON THE BASIS OF MATERIAL FOUND AS A RESULT OF SEARCH VIDE ANIL KHIMANI VS DCIT 2010 TIOL 177 (MUM BAI-TRIB) SOURCE (2010) 42A BCAJ PAGE 20 AND ANIL KUMAR BHATIA VS AC IT (DELHI-TRIB). THE LD. AO HAS NOT APPRECIATED THE FACTS OF THE CAS E BUT HAS DISALLOWED THE NET LOSS FROM BUSINESS CLAIMED BY THE APPELLANT AND ALSO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE ADDITION MADE IS ARBITRARY AND UNWARRANTED AND NEEDS TO BE DELETED BY YOUR HONOUR. ' 19. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE FINAL ACCOUNTS BEING THE BALANCE SHEET AND PROF IT AND LOSS ACCOUNT HAD BEEN FILED WITH THE ORIGINAL RETURN AND WERE DEEMED TO BE ON R ECORD OF THE ASSESSING OFFICER FROM WHICH HE COULD HAVE EXAMINED THE DETAILS OF THE BUS INESS. HE FURTHER OBSERVED THAT THE POWERS GIVEN TO THE ASSESSING OFFICER WERE CONFINED TO ASSESS THE UNDISCLOSED INCOME UNEARTHED DURING THE COURSE OF SEARCH AND THE ASSES SING OFFICER COULD NOT HAVE INCLUDED ITEMS WHICH WERE DISCLOSED IN THE ORIGINAL ASSESSME NT PROCEEDINGS. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CAS E OF ANIL KHIMANI V. DCIT 2010 TIOL 177. 20. NOW THE DEPARTMENT IS IN APPEAL. 21. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ES AND THE MATERIALS AVAILABLE ON RECORD IT APPEARS THAT THE ASSESSING OFFICER DI SALLOWED THE BUSINESS LOSS OF $ 1 26 820 WHILE FRAMING THE ASSESSMENT U/S. 153A OF THE ACT O N THE GROUND THAT THE FINAL ACCOUNTS OF THE BUSINESS RELATING TO M/S AROHI INTERNATIONAL HAVE NOT BEEN FILED BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT HE HAD FILED COM PLETE SET OF FINAL ACCOUNTS ALONG WITH THE ORIGINAL RETURN FILED ON 21.1.2002 AND THE SAME WERE ALREADY ON RECORD WITH THE DEPARTMENT. IN THE INSTANT CASE THE ASSESSING OFF ICER ACKNOWLEDGE IN HIS ASSESSMENT ORDER THAT THE ASSESSEE ATTACHED PROFIT AND LOSS AC COUNT AND BALANCE SHEET WITH THE REGULAR RETURN OF INCOME FILED ON 21.1.2002 THEREF ORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE WHEN THE ASSES SEE HAD ALREADY DISCLOSED THE :-11-: RELEVANT DOCUMENTS IN THE ORIGINAL RETURN OF INCOME THEREFORE THE ASSESSING OFFICER COULD NOT HAVE CONSIDERED THE IMPUGNED LOSS IN THE PROCEEDINGS U/S. 153A OF THE ACT PARTICULARLY WHEN NOTHING CONTRARY WAS UNEARTHED DU RING THE COURSE OF SEARCH. WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS DO NOT SEEN ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. HENCE GROUND NO.3 OF THE APP EAL IS DISMISSED. 22. GROUNDS NO.4 AND 5 ARE GENERAL IN NATURE SO DO NOT REQUIRE ANY SPECIFIC COMMENTS ON OUR PART. 23. IN THE RESULT APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 30.3.2011) SD/- SD/- [H. L. KARWA] [ N. K. SAINI] VICE PRESIDENT ACCOUNTANT MEMBER DATED:30.3.2011 JJ:2903 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR