M/s Naga Hanuman Solvent Oils Pvt. Ltd., Visakhapatnam v. The DCIT, Central Circle-2, Visakhapatnam

ITA 89/VIZ/2011 | 2008-2009
Pronouncement Date: 23-09-2011 | Result: Allowed

Appeal Details

RSA Number 8925314 RSA 2011
Assessee PAN AAQPN1119F
Bench Visakhapatnam
Appeal Number ITA 89/VIZ/2011
Duration Of Justice 6 month(s) 17 day(s)
Appellant M/s Naga Hanuman Solvent Oils Pvt. Ltd., Visakhapatnam
Respondent The DCIT, Central Circle-2, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 23-09-2011
Assessment Year 2008-2009
Appeal Filed On 07-03-2011
Judgment Text
ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 1 OF 28 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.53 TO 58 & 158/VIZAG/2011 ASSESSMENT YEARS: 2002-03 TO 2008-09 NUKALA RAMA KRISHNA S/O RANGAIAH ELURU VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) PAN NO:AAQPN 1119 F (RESPONDENT) ITA NOS.61 TO 66/VIZAG/2011 ASSESSMENT YEARS: 2002-03 TO 2007-08 DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM VS. NUKALA RAMA KRISHNA S/O RANGAIAH ELURU (APPELLANT) (RESPONDENT) PAN NO:AAQPN 1119 F ITA NOS.87 TO 89/VIZAG/2011 ASSESSMENT YEARS: 2006-07 TO 2008-09 NAGA HANUMAN SOLVENT OILS PVT. LTD. VISAKHAPATNAM VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) PAN NO.AACCN 1547 J (RESPONDENT) APPELLANT BY: SHRI P.GOPI KRISHNA & Y. SURYA CHANDRA RAO CAS RESPONDENT BY: SHRI TH. LUCAS PETER CIT (DR) DATE OF HEARING: 20/07/2011 DATE OF PRONOUNCEMENT: 23/09/2011 ORDER PER BENCH: THESE APPEALS FILED BY THE RESPECTIVE ASSESSEES AND ALSO BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY L EARNED CIT(A)-I HYDERABAD IN THE RESPECTIVE HANDS OF THE ASSESSEES CITED ABOVE. SINCE THE ISSUES URGED IN THESE APPEALS ARE INTER-CONNECTED A ND IDENTICAL THESE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 2 OF 28 APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE ASSESSING OFFICER ESTIMATED THE INCOME FROM REARING AND TRADING OF FISH IN THE HANDS OF SHRI NUKALA RAMA KRISHNA IN ALL THE YEARS UNDER CONSIDERATION. IN THE APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) REDUCED THE QUANTUM OF INCOME SO ESTIMATED. STILL A GGRIEVED THE SAID ASSESSEE IS IN APPEAL BEFORE US AND THE REVENUE IN ITS APPEALS IS ASSAILING THE SAID REDUCTION. BESIDES THE ABOVE BOTH SHRI N UKALA RAMAKRISHNA (IN THE ADDITIONAL GROUND FILED BY HIM) AND M/S NAGA HA NUMAN OILS (P) LTD (HEREINAFTER THE COMPANY) ARE CONTESTING THE DECI SION OF LEARNED CIT(A) IN CONFIRMING THE ASSESSMENT OF SAME INCOME BOTH IN THE HANDS SHRI NUKALA RAMAKRISHNA AND THE COMPANY. 3. THE FACTS RELATING TO THE CASES ARE STATED IN BR IEF. SHRI NUKALA RAMA KRISHNA IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F REARING AND TRADING OF FISH. HE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT FOR THE SAID BUSINESS. THE COMPANY M/S NAGA HANUMAN SOLVENT OILS (P) LTD I S ENGAGED IN MANUFACTURE AND SALE OF SOLVENT OILS AND DE-OILED B RAND. THE SHARE HOLDERS AND DIRECTORS OF THE SAID COMPANY ARE SHRI NUKALA R AMA KRISHNA REFERRED ABOVE AND HIS SON SHRI NUKALA BALAJI. THE DEPARTMEN T CARRIED OUT SEARCH & SEIZURE OPERATION IN THE HANDS OF THE ASSESSEES HER EIN UNDER SECTION 132 OF THE INCOME-TAX ACT ON 16-11-2007. DURING THE COURS E OF SEARCH THE DEPARTMENT UNEARTHED THE DETAILS OF INVESTMENTS MAD E IN THE PURCHASE OF IMMOVABLE PROPERTIES STANDING IN THE NAME OF SHRI N UKALA RAMAKRISHNA HIS FAMILY MEMBERS BUSINESS CONCERNS AND ALSO M/S NAGA HANUMAN SOLVENT OILS (P) LTD. THE ASSESSEE SHRI NUKALA RAMAKRISHNA WAS EXAMINED U/S 132(4) OF THE ACT. HE ACCEPTED THAT THE ABOVE SAI D INVESTMENTS HAVE NOT BEEN ACCOUNTED FOR AND ACCORDINGLY HE CAME FORWARD TO DISCLOSE THE VALUE OF SUCH INVESTMENTS AGGREGATING TO RS.3.88 CRORES A S HIS UNDISCLOSED INCOME. HOWEVER IN THE STATEMENTS TAKEN FROM HIM O N THE SUBSEQUENT ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 3 OF 28 DATES HE AGREED TO INCREASE THE SAID OFFER TO RS.6 .00 CRORES WHICH WAS AGAIN INCREASED TO RS.7.60 CRORES. IT IS NOTICED TH AT THE ASSESSEE FOLLOWED INVESTMENT METHOD FOR THE PURPOSE OF QUANTIFYING THE UNDISCLOSED INCOME CITED ABOVE. SUBSEQUENTLY IN RESPONSE TO THE NOTICES ISSUED UNDER SECTION 153A OF THE ACT SRI NUKALA RAMAKRISHNA FIL ED RETURNS OF INCOME BY DISCLOSING ADDITIONAL INCOME ON ESTIMATED BASIS UND ER VARIOUS SOURCES OF INCOME WHICH ARE DESCRIBED BELOW: (A) INCOME FROM OWN FISH TANKS (B) INCOME FROM LEASED FISH TANKS (C) INCOME FROM TRADING OF FISH AND SALE OF DAMAG ED FISH (D) ADDITIONAL INCOME WITHOUT REFERENCE TO ANY SO URCE. (E) INCOME FROM SOLVENT OIL FACTORY THE AGGREGATE AMOUNT OF ADDITIONAL INCOME SO OFFERE D BY SHRI NUKALA RAMA KRISHNA WAS EQUIVALENT TO THE AMOUNT OF RS.7.60 CRO RES THAT WAS OFFERED DURING THE COURSE OF SEARCH PROCEEDINGS IN THE STAT EMENT TAKEN U/S 132(4) OF THE ACT. 4. THE ASSESSING OFFICER HOWEVER PROCEEDED TO ESTIMATE THE INCOME FROM REARING AND TRADING OF FISH IN THE HANDS OF SH RI NUKALA RAMAKRISHNA ON THE BASIS OF MATERIALS FOUND DURING THE COURSE OF S EARCH AND ALSO ON THE BASIS OF INFORMATION COLLECTED FROM FISHERIES DEPAR TMENT. THE INCOME FROM FISH BUSINESS DETERMINED BY THE ASSESSING OFFICER W AS MORE THAN THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. THE DETA ILS OF INCOME SO ESTIMATED BY THE ASSESSING OFFICER THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE AND THE DIFFERENCE BETWEEN THE TWO ARE TAB ULATED BY THE LEARNED CIT (A) AS UNDER: ASSESSMENT YEAR INCOME ESTIMATED BY ASSESSING OFFICER INCOME ALREADY DISCLOSED UNDISCLOSED INCOME (RS.) 2002-03 64 59 476 9 57 904 55 01 572 2003-04 74 97 476 14 21 552 60 75 924 2004-05 72 87 476 6 35 552 66 51 924 2005-06 2 29 84 456 39 12 708 1 90 71 748 2006-07 2 16 16 816 65 90 308 +1 69 000 1 48 57 508 2007-08 2 99 56 396 91 37 808+1 20 00 000 88 18 588 ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 4 OF 28 IN THE ASSESSMENT YEAR 2008-09 SHRI NUKALA RAMAKRIS HNA HAD ADMITTED A TOTAL INCOME OF RS.4 10 32 920/- IN HIS RETURN OF I NCOME WHICH INCLUDED ADDITIONAL INCOME OF RS.3.95 CRORES (INCLUDING THE INCOME PERTAINING TO THE SOLVENT OIL COMPANY). THE ASSESSING OFFICER ESTIMAT ED THE INCOME FROM REARING AND TRADING OF FISH ALONE AT RS.3.70 CRORES . SINCE THE INCOME RETURNED BY THE ASSESSEE WAS MORE THAN HIS ESTIMATE THE ASSESSING OFFICER ACCEPTED THE INCOME RETURNED BY THE ASSESSEE. 5. AS STATED EARLIER SRI NUKALA RAMAKRISHNA HAD DE CLARED ADDITIONAL INCOME IN HIS RETURNS OF INCOME TO THE EXTENT OF UN DISCLOSED INCOME ADMITTED BY HIM IN THE STATEMENT TAKEN FROM HIM U/S 132(4) OF THE ACT. THE ADDITIONAL INCOME SO OFFERED BY HIM INCLUDED FOLLOW ING AMOUNTS RELATING TO UNACCOUNTED SALES OF M/S NAGA HANUMAN SOLVENT OILS (P) LTD. ASSESSMENT YEAR 2006-07 - RS.1 69 000/- ASSESSMENT YEAR 2007-08 - RS.1 20 00 000/- ASSESSMENT YEAR 2008-09 - RS. 1 50 00 000/- THE ASSESSING OFFICER ASSESSED THE ABOVE SAID INCOM E IN THE HANDS OF THE COMPANY ALSO. THE ASSESSING OFFICER REFUSED TO DELE TE THE ABOVE SAID INCOME FROM THE TOTAL INCOME DETERMINED IN THE HAND S OF SRI NUKALA RAMAKRISHNA ON THE GROUND THAT IT WAS OFFERED BY H IM VOLUNTARILY IN THE RETURN OF INCOME. HENCE IN THE APPEAL FILED BY M/ S NAGA HANUMAN SOLVENT OILS (P) LTD. IT IS PRAYED THAT THE INCOME CITED A BOVE WHICH WAS ASSESSED IN THE HANDS OF SHRI NUKALA RAMA KRISHNA BE EXCLUDE D FROM ITS HANDS AS IT AMOUNTS TO DOUBLE TAXATION OF SAME INCOME. 6. THE ASSESSEE SHRI NUKALA RAMAKRISHNA IS ALSO HAVING A BUSINESS CONCERN NAMED M/S NAGAHANUMAN FISH PACKERS. IT WAS NOTICED THAT THE SALE OF DAMAGED FISHES EFFECTED IN THAT CONCERN IS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE SAID CONCERN. ON ENQUIRY THE ASSESSING OFFICER FOUND THAT THE DAMAGED GOODS WILL BE AROUND 1% OF T HE TOTAL TURNOVER. ACCORDINGLY THE ASSESSING OFFICER SEPARATELY ESTIM ATED THE AMOUNT OF SALE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 5 OF 28 RELATING TO THE DAMAGED GOODS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. HOWEVER AS NOTICED EARLIER THE ASS ESSEE HAD ALREADY OFFERED ADDITIONAL INCOME ON ACCOUNT OF TRADING OF FISH AND SALE OF DAMAGED FISH. THE ASSESSING OFFICER DEDUCTED THE AMOUNT SO OFFERED BY THE ASSESSEE FROM THE INCOME FROM FISH BUSINESS ESTIMAT ED BY HIM. 7. IN THE APPEAL FILED BY THE ASSESSEE SHRI NUKA LA RAMAKRISHNA THE LEARNED CIT(A) GRANTED PARTIAL RELIEF IN RESPECT OF ESTIMATION OF INCOME FROM FISH BUSINESS. WITH REGARD TO THE ADDITION ON ACCOUNT OF SALE OF DAMAGED FISHES THE LEARNED CIT(A) CONFIRMED THE SA ME AS THE ASSESSEE DID NOT PRESS THE SAME BEFORE LEARNED CIT(A). WITH REGARD TO THE OTHER TYPES OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE THE LEARNED CIT(A) HELD THAT THEY SHOULD BE ASSESSED SEPARATELY. THE OTHER TYPES OF INCOME CONSISTED OF INCOME FROM TRADING OF FISH AND SALE O F DAMAGED FISH; INCOME FROM SOLVENT OIL FACTORY AND ADDITIONAL INCOME WITH OUT REFERENCE TO ANY SOURCE. 8. NOW WE SHALL PROCEED TO CONSIDER THE APPEALS FILED BY BOTH THE REVENUE AND THE ASSESSEE SHRI NUKALA RAMAKRISHNA. T HE COMMON ISSUE IN THOSE APPEALS RELATES TO THE ESTIMATION OF INCOME F ROM FISH BUSINESS. THE ASSESSEE HAS CARRIED OUT THE SAID BUSINESS BY REARI NG FISH IN HIS OWN FISH TANKS AND ALSO IN THE TANKS TAKEN Y HIM ON LEASE. T HE ASSESSING OFFICER ESTIMATED THE INCOME FROM FISH BUSINESS PER ACRE OF LAND. THEN HE MULTIPLIED THE SAME WITH THE EXTENT OF TOTAL ACRES OF BOTH OWN FISH TANKS AND LEASED TANKS. IN RESPECT OF LEASED TANKS THE A SSESSING OFFICER DEDUCTED THE LEASE RENTALS AS ASCERTAINED BY HIM FR OM THE SEIZED RECORDS. BEFORE THE LEARNED CIT (A) THE ASSESSEE CONTENDED THAT THE EFFECTIVE UTILIZATION AREA COMMONLY CALLED WATER SPREAD AREA WILL BE IN THE RANGE OF 75% TO 80% OF THE TOTAL AREA AND ACCORDINGLY THE IN COME HAS TO BE COMPUTED WITH REFERENCE TO WATER SPREAD AREA ONLY. IN SUPPORT OF THIS ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 6 OF 28 CONTENTION THE ASSESSEE SUBMITTED A COPY OF CBDTS INSTRUCTION NO.5160 DATED 19.10.1993 BEFORE LEARNED CIT(A) WHEREIN IT IS STATED AS UNDER: TO PERSUADE THEM TO VOLUNTARILY COMPLY WITH THE IN COME- TAX LAW THE FINANCE MINISTRY HAS DECIDED TO ACCEPT THE INCOME RETURNED BY FISH FARMERS IF SUCH INCOME IS R S.4000/- PER ACRE OF WATER-SPREAD PER YEAR. THE WATER SPREAD MAY BE ESTIMATED AT 70% OF THE TOTAL LAND AREA. THE REMAIN ING 30% WILL REPRESENT THE AREA OCCUPIED BY THE TANK EMBANK MENTS. CONSEQUENTLY THE FISH FARMER WITH A WATER AREA OF 7.5 ACRES (I.E. TOTAL GROSS LAND AREA OF 10.7 ACRES) WILL BE BELOW THE TAX LIMIT. THE ASSESSEE HAS PLACED A COPY OF THE ABOVE SAID IN STRUCTION AT PAGE NO.286 OF PAPER BOOK (VOLUME 1) FILED BY HIM BEFORE US. ACCORDINGLY THE LEARNED CIT (A) ORDERED THAT THE TOTAL WATER SPREAD AREA SHOULD BE TAKEN AS 80% OF THE TOTAL LAND AREA I.E. HE GAVE A REDUCTIO N OF 20% TOWARDS TANK EMBANKMENTS AND ROADS. THE ASSESSEE ALSO SUBMITTED THAT THERE ARE MISTAKES IN THE EXTENT OF OWN LANDS AND LEASED LAND S CONSIDERED BY THE ASSESSING OFFICER IN VARIOUS YEARS. HENCE THE LEAR NED CIT (A) SET ASIDE THE SAID ISSUE OF ARRIVING AT THE ACTUAL EXTENT OF OWN TANKS AND LEASED TANKS TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRE CTIONS. BOTH THE PARTIES ARE NOT AGGRIEVED BY THE ISSUES DISCUSSED ABOVE IN THIS PARAGRAPH. IN ANY CASE THE CBDT ITSELF HAS RECOGNISED THAT THE WATER SPREA D AREA WILL BE LESS THAN THE TOTAL AREA DUE TO TANK EMBANKMENTS ROADS ETC. BY 30%. 9. HOWEVER AS STATED EARLIER BOTH THE PARTIES ARE AGGRIEVED BY THE AMOUNT OF INCOME FROM FISH BUSINESS PER ACRE DETERM INED BY LD CIT(A). WE SHALL DISCUSS IN BRIEF ABOUT THE DETAILS OF INCOME PER ACRE ESTIMATED BY THE ASSESSEE THE ASSESSING OFFICER AND THE LEARNED CIT (A). THE ASSESSEE ESTIMATED THE INCOME FROM FISH BUSINESS AT RS.18 00 0/- PER ACRE FOR OWN LAND AND AT RS.6000/- PER ACRE FOR LEASED LANDS FOR ALL THE YEARS UNDER CONSIDERATION. AS STATED EARLIER THE ASSESSING OF FICER INITIALLY PROCEEDED TO ESTIMATE THE INCOME PER ACRE ON THE BASIS OF THE SE IZED MATERIALS. THE ASSESSEE HAD STATED IN HIS SWORN STATEMENT THAT THE YIELD TAKEN FROM THE TANKS CONSISTED OF TWO VARIETIES OF FISH VIZ. ROH U AND KATLA AND 90% OF ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 7 OF 28 CATCH IS THAT OF ROHU AND THE BALANCE IS THAT OF KA TLA. THE ASSESSING OFFICER BASED ON SELLING RATE NOTED IN CERTAIN SAL ES PATTIES RELATING TO THE MONTHS OF AUGUST 2007 TO OCTOBER 2007 ARRIVED AT THE AVERAGE SELLING RATE OF ROHU VARIETY OF FISH AT RS.56.14 PER KG AND K ATLA VARIETY FISH AT RS.71.25 PER KG. BASED ON THE STATEMENT OF THE AS SESSEE REFERRED ABOVE THE ASSESSING OFFICER ASSUMED THAT EACH TONNE OF FI SH FETCHES 900KG OF ROHU VARIETY AND 100KG OF KATLA VARIETY. BY APPLYIN G THE AVERAGE SELLING PRICE ARRIVED AT BY HIM THE ASSESSING OFFICER COMP UTED THE SELLING RATE PER TONNE AT RS.57 651/-. IT IS PERTINENT TO NOTE THAT T HE ASSESSING OFFICER DID NOT ADOPT THIS FIGURE FOR THE PURPOSE OF MAKING FUR THER CALCULATION. IT IS ALSO TO BE NOTED THAT THE RATIO OF 90% AND 10% DOES NOT HAVE ANY SUPPORTING EVIDENCE EXCEPT THE STATEMENT RECORDED FROM THE ASS ESSEE. 9.1 THE ASSESSING OFFICER NOTICED THAT CERTAIN SALE S PATTIES UNEARTHED DURING THE COURSE OF SEARCH CONTAINED THE DETAILS O F QUANTITY AND SALES VALUE OF FISH. IT WAS NOTICED FROM THOSE SALES PAT TIES THAT 9681 FISH TRAYS HAVE BEEN SOLD FOR RS.1 72 28 142/-. BASED ON THIS INFORMATION THE ASSESSING OFFICER ARRIVED AT THE SELLING VALUE AT R S.50 845/- PER TONNE. IT IS TO BE NOTED HERE THAT THE ASSESSING OFFICER DID NOT DESCRIBE THE DETAILS SUCH AS VARIETY OF FISH SELLING RATE PER KG OF FISH TH E RATIO OF DIFFERENT VARIETY OF FISH ETC. FOUND IN THE SALES PATTIES REFERRED ABOVE . THERE AFTER THE ASSESSING OFFICER PROCEEDED TO ESTIMATE EXPENSES THAT WOULD B E INCURRED TOWARDS COST OF REARING COST OF PACKING OTHER PACKING TRANSPO RT CHARGES AND MARKET EXPENSES ON THE BASIS OF INFORMATION GIVEN IN THE S WORN STATEMENT AND ALSO ON THE BASIS OF INFORMATION AVAILABLE IN THE SALES PATTIES. THE ASSESSING OFFICER DEDUCTED THE AVERAGE COST OF EXPENSES PER A CRE SO ARRIVED BY HIM FROM THE SELLING RATE OF RS.50 845/- PER ACRE DETER MINED EARLIER. ACCORDINGLY HE COMPUTED THE PROFIT PER ACRE AT RS. 46 460/- OR ROUNDED TO RS.46 500/-. HOWEVER IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER CHOSE TO IGNORE THE PROFIT SO WORKED OUT BY HIM FOR THE PURPOSE OF ESTIMATING THE INCOME FROM FISH BUSINESS OF THE ASS ESSEE. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 8 OF 28 9.2 THE ASSESSING OFFICER DURING THE COURSE OF ASS ESSMENT PROCEEDINGS ADDRESSED A LETTER TO THE DISTRICT COLLECTOR KRISH NA DISTRICT REQUESTING HIM TO FURNISH THE DETAILS OF YIELD PER ACRE AND THE NET P ROFIT MARGIN PER ACRE. THE DISTRICT COLLECTOR REFERRED THE SAME TO THE DY. DIR ECTOR OF FISHERIES MACHILIPATNAM WHO FURNISHED THE DETAILS OF GROSS PR OFIT MADE AT THE FARM GATE PER ACRE NET OF LEASE RENTALS. THE ASSESSING O FFICER COLLECTED THE DETAILS OF LEASE RENTALS YEAR-WISE FROM THE SEIZED RECORD. THE SAID DETAILS ARE TABULATED AS UNDER: FINANCIAL YEAR GROSS MARGIN PER ACRE. LEASE RENTALS 2001 - 02 15 000 16 000 2002-03 21 000 16 000 2003-04 18 000 16 000 2004-05 24 000 13 000 2005-06 20 000 13 000 2006-07 20 000 20 500 2007-08 20 000 20 500 SINCE THE DY. DIRECTOR OF FISHERIES HAD REPORTED TH E GROSS MARGIN AT THE FARM GATE LEVEL THE ASSESSING OFFICER TOOK THE VIE W THAT THE PROFIT MARGIN ON TRADING OF FISH SHOULD BE ADDED SEPARATELY. FOR THIS PURPOSE HE REFERRED TO CERTAIN COMPARABLE CASES VIZ. THE RETURNS OF I NCOME FILED BY SHRI MOTURI KANAKESWARA RAO AND SHRI MOTURI RAMAPPALA GANGADHAR A RAO THE BROTHER OF FIRST MENTIONED PERSON. HE NOTICED FROM THE SAID RETURNS THAT THE AVERAGE RATE OF TRADING PROFIT WORKS OUT TO 8.4%. BY APPL YING THE SAID RATE OF PROFIT TO THE SALES VALUE NOTICED IN THE SALES PATTIES TH E ASSESSING OFFICER ARRIVED AT THE TRADING PROFIT AT RS.12 812/- PER ACRE. THE ASSESSING OFFICER THEN AGGREGATED THE PROFIT AT THE FARM GATE LEVEL AMOUN T OF LEASE RENTALS AND THE TRADING PROFIT IN ORDER TO ARRIVE AT THE TOTAL INCOME PER ACRE OF THE OWN LANDS. IN RESPECT OF LEASED LANDS THE ASSESSING O FFICER DEDUCTED THE LEASE RENTAL AMOUNT FROM THE INCOME ARRIVED FOR THE OWN L ANDS. THE INCOME PER ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 9 OF 28 ACRE AS COMPUTED BY THE ASSESSING OFFICER FOR OWN L ANDS AND LEASED LANDS ARE TABULATED AS UNDER: FINANCIAL YEAR INCOME FROM OWN TANKS INCOME FROM LEASED TANKS 2001-02 43 812 27 812 2002-03 49 812 33 812 2003-04 46 812 30 812 2004-05 49 812 36 812 2005-06 45 812 32 812 2006-07 53 312 32 812 200 7 - 08 53 312 32 812 9.3 THE LEARNED CIT (A) DID NOT AGREE WITH THE ASSE SSING OFFICER IN ESTIMATING INCOME AT TWO STAGES. THE LD CIT(A) HEL D THAT THE ESTIMATION OF INCOME AT THE FARM GATE LEVEL IS NOT CORRECT SINCE THE ASSESSEE DID NOT ACTUALLY SELL FISHES AT THE FARM GATE. THE LEARNED CIT(A) NOTICED THAT THE ASSESSEE IS ENGAGED IN REARING OF FISHES AND SELLIN G THEM OUTSIDE THE STATE. ACCORDINGLY THE LEARNED CIT (A) TOOK THE VIEW THAT THE PROFIT SHOULD BE ESTIMATED ONLY AT THE POINT WHEN THE ACTUAL SALES T AKE PLACE AND NOT AT TWO STAGES AS ASSUMED BY THE ASSESSING OFFICER ON THE R EASONING THE PROFIT CAN BE CONCEIVED ONLY WHEN A PRODUCT IS SOLD. THE LEAR NED CIT(A) ALSO DID NOT AGREE WITH THE ASSESSING OFFICER IN ADOPTING THE ES TIMATE GIVEN BY THE DY. DIRECTOR OF FISHERIES. INSTEAD HE HELD THAT THE PR OFIT PER ACRE WORKED OUT AT RS.46 460/- BY THE ASSESSING OFFICER ON THE BASIS O F SEIZED MATERIAL SHOULD BE TAKEN INTO CONSIDERATION SINCE IT HAS BEEN WORK ED OUT ON THE BASIS OF SEIZED MATERIALS AND HENCE MORE REALISTIC THAN THE ESTIMATE FURNISHED BY THE DY. DIRECTOR OF FISHERIES. 9.4 WHILE WORKING OUT THE INCOME OF RS.46 460/- PER ACRE THE ASSESSING OFFICER HAD DEDUCTED ONLY THE DIRECT EXPENSES SUCH AS COST OF REARING COST OF PACKING OTHER PACKING TRANSPORT CHARGES AND MA RKET EXPENSES. IT WAS REPRESENTED BEFORE THE LEARNED CIT(A) THAT THE ASSE SSING OFFICER DID NOT ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 10 OF 28 CONSIDER THE INDIRECT EXPENSES LIKE BANK INTEREST TRADE LOSSES ADMINISTRATIVE SALARIES TRAVELING EXPENSES ENTERT AINMENT EXPENSES BUSINESS LOSS BAD DEBTS DISCOUNT GIVEN ETC. FURT HER IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS ADOPTED THE SALES RA TE PREVAILING AT A PARTICULAR POINT OF TIME IN ORDER TO ARRIVE AT THE ENTIRE YEARS PROFIT WHILE THE FACT REMAINS THAT THE SELLING RATE FLUCTUATES MANY TIMES DURING THE COURSE OF ENTIRE YEAR. IT WAS ALSO CONTENDED THAT THE ASSESSI NG OFFICER IS NOT CORRECT IN ADOPTING THE SELLING RATE OF LATEST YEAR IN ORDER T O ARRIVE AT THE INCOME FOR ALL OTHER YEARS UNDER CONSIDERATION SINCE THE SELL ING RATE IN THE EARLIER YEARS IS BOUND TO BE LOWER. ACCORDINGLY IT WAS SUBMITTED THAT THE ASSESSING OFFICER WAS WRONG IN ADOPTING THE SAME AMOUNT OF PR OFIT FOR ALL THE YEARS UNDER CONSIDERATION ON THE BASIS OF THE SALES PATTI ES RELATING TO THE LATEST YEAR. THE LD CIT(A) FOUND FORCE IN THE ARGUMENTS O F THE ASSESSEE. ACCORDINGLY HE DIRECTED THAT THE PROFIT OF THE ALL THE YEARS UNDER CONSIDERATION SHOULD BE WORKED OUT IN THE MANNER DE SCRIBED BY HIM. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE RELEV ANT OBSERAVATIONS MADE BY LEARNED CIT(A) IN THIS REGARD. THE PROFIT PER ACRE SHOULD BE COMPUTED IN THE FOLL OWING MANNER. PROFIT PER ACRE BASED ON THE SEIZED MATERIAL AND COMPUTED BY THE ASSESSING OFFICER AS PER PARA 4.4 RS.46 460 (THIS PROFIT IS AFTER DEDUCTING COST OF REARING OF RS.85 000/- PER ACRE OTHER THAN LEASE RENTALS AS PER AO'S OBSERVATION IN PARA 4.4 AND OTHER DIRECT EXPENSES LIKE COST OF PACKING TRANSPORT ETC ). LESS: 10% ESTIMATED EXPENDITURE ON OTHER INDIRECT EXPENSES LIKE INTEREST COST DISCOUNT TRANSIT LOSS DAMAGES ETC. WHICH IS VERY MUCH INCIDENTAL TO THE BUSINESS OF THE APPELLANT. RS. 4 646 PROFIT PER ACRE RS.41 814/- ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 11 OF 28 THIS PROFIT OF RS.41 814/- IS FOR THE FINANCIAL YEA R 2007-08 SINCE THE SALE PATTLES FOUND DURING THE COURSE OF S EARCH BASED ON WHICH THE ASSESSING OFFICER HAS WORKED OUT THE P ROFIT PERTAIN TO THE FINANCIAL YEAR 2007-08. FOR THE FINA NCIAL YEAR 2006-07 AND DOWN BELOW UPTO FINANCIAL YEAR 2001-02 THE ASSESSING OFFICER IS DIRECTED TO REDUCE PROFIT PER ACRE BY 10% FOR EACH YEAR. FOR EXAMPLE THE PROFIT PER ACRE FOR 2006-07 WILL BE RS.37 633/- (41814-4181) FOR THE FINANCIAL YEAR 2005-06 IT WILL BE 33 869(37633-3763) AND SO ON. THIS WAY THE PROFIT FOR THE FINANCIAL YEAR 2001-02 PER ACRE WILL COME TO RS .22 221/- (APPROX). 04.7 .. ACCORDINGLY THE PROFIT PER ACRE AS ARRI VED AT ABOVE IS IN RESPECT OF THE OWN TANK. AS REGARDS THE LEAS ED TANKS THE AO SHOULD DEDUCT THE LEASE RENTAL ON ACTUAL FOR EAC H YEAR AS MENTIONED IN THE ASSESSMENT ORDER. 10. NOW BOTH THE PARTIES ARE IN APPEAL BEFORE US AGGRIEVED BY THE QUANTUM OF INCOME DETERMINED BY LEARNED CIT(A). WH ILE THE ASSESSEE SEEKS FURTHER RELIEF THE DEPARTMENT REQUIRES THAT THE ESTIMATE MADE BY THE ASSESSING OFFICER SHOULD BE SUSTAINED. ACCORDING T O LEARNED A.R THE INCOME DETERMINED BY LEARNED CIT(A) IS STILL ON THE HIGHER SIDE. IN SUPPORT OF HIS PLEA THE LEARNED A.R RELIED UPON FO LLOWING DOCUMENTS. (A) THE CBDT INSTRUCTION NO.5160 DATED 19-10-93 WH EREIN THE INCOME WAS ESTIMATED BY THE CBDT AT RS.4000/- PER A CRE OF WATER SPREAD PER YEAR. THE SAID INSTRUCTION WAS APPLICAB LE FOR THE ASSESSMENT YEAR 1993-94. (B) NEWS PAPER REPORTS OF APRIL 2010 WHERE IN IT IS REPORTED THAT THE GOVERNMENT IS GOING TO ANNOUNCE THAT THE INCOME FRO M FISH PONDS WILL BE TAKEN AS RS.10 000/- PER ACRE. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS ADOPTED CONVENIENTLY HIGHER SELLING RATES FOR THE PURPOSE OF MAKING CALC ULATIONS. THE SELLING RATE OF FISHES FLUCTUATES VERY FREQUENTLY DEPENDING UPON VARIOUS FACTORS AFFECTING THE MARKET CONDITIONS AND ALSO THE QUALITY OF FISH. DURING THE SAME PERIOD THERE ARE EVIDENCES IN THE SEIZED RECORD TO SHOW TH AT THE SELLING RATES ARE MUCH LOWER THAN THAT ADOPTED BY THE ASSESSING OFFIC ER. FURTHER THE IMPUGNED SELLING RATES RELATED TO THE LATEST YEAR A ND THE SAME RATES HAVE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 12 OF 28 BEEN ADOPTED FOR ESTIMATING THE INCOME OF THE EARLI ER YEARS WHICH SITUATION CAN NOT EXIST IN REALITY. HE FURTHER SUBMITTED THA T THE RATE OF TRADING PROFIT TAKEN BY THE ASSESSING OFFICER AT 8.4% IS ALSO NOT CORRECT. IN THIS REGARD HE SUBMITTED THAT THERE ARE COMPARABLE CASES COPIES O F WHICH ARE FURNISHED IN THE PAPER BOOK WHERE IN THE NET PROFIT OF AROUND 1 % WAS ALSO ACCEPTED BY THE DEPARTMENT. HE FURTHER SUBMITTED THAT THE ASSE SSING OFFICER HAS ERRED IN REFERRING TO THE CASE OF SHRI KANAKESWARA RAO A S THE SAID PERSON IS THE POND OWNER AND NOT THE TRADER. ACCORDINGLY HE CON TENDED THAT THE ASSESSEE SHOULD BE GIVEN FURTHER RELIEF. 11. ON THE OTHER HAND THE LEARNED D.R CARRIED US THROUGH THE ASSESSMENT ORDER TO DRIVE THE POINT THAT THE ASSESSING OFFICER HAS CARRIED OUT VARIOUS TYPES OF EXERCISES IN ORDER TO ARRIVE AT THE PROFIT PER ACRE THAT COULD HAVE BEEN EARNED BY THE ASSESSEE. SINCE THE ASSESSEE IS INVOLVED IN BOTH REARING AND TRADING OF FISHES AND SINCE THE DY. DIR ECTOR OF FISHERIES HAS GIVEN INFORMATION ABOUT THE PROFIT AT THE FARM GATE LEVEL THE ASSESSING OFFICER HAS CHOSEN TO ARRIVE AT THE PROFIT PER ACRE BY AGGREGATING THE PROFIT REALIZED AT THE FARM GATE LEVEL AND ALSO THE PROFIT REALISED ON TRADING OF FISHES. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. AS STATED EARLIER THOUGH THE ASSESSING OFFICER MAD E AN ATTEMPT TO WORK OUT THE PROFIT FROM FISH BUSINESS PER ACRE OF LAND ON T HE BASIS OF SEIZED MATERIALS YET HE DID NOT FOLLOW THOSE WORKINGS FOR THE PURPOSE OF ESTIMATING THE INCOME FROM FISH BUSINESS OF THE ASS ESSEE FOR VARIOUS YEARS UNDER CONSIDERATION. THE ASSESSING OFFICER HAS PRO CEEDED TO COMPUTE THE INCOME ON THE BASIS OF ESTIMATE GIVEN BY THE DY. DI RECTOR OF FISHERIES. SINCE THE SAID ESTIMATE RELATED TO THE INCOME AT FA RM GATE LEVEL THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE INCOME AT THE STAGE OF REARING AND AGAIN AT THE POINT OF ACTUAL SALES AND AGGREGAT ED BOTH THE INCOME. HOWEVER IN OUR VIEW AS OBSERVED BY LEARNED CIT(A) THE PROFIT IS REALIZED ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 13 OF 28 ONLY ON EFFECTING THE SALES AND HENCE IT WOULD NOT BE CORRECT FROM ANY POINT OF VIEW TO RECOGNIZE THE INCOME AT THE FARM GATE LE VEL WHEN THE ASSESSEE HAS NOT ACTUALLY SOLD FISHES AT THE FARM GATE. ACC ORDINGLY WE AGREE WITH THE OBSERVATIONS MADE BY LEARNED CIT(A) IN PARA 04.3 OF HIS ORDER IN THIS REGARD AND FOR THE SAKE OF CONVENIENCE WE EXTRACT THE SAME BELOW: 04.3 THE NEXT DISPUTE RELATES TO THE ESTIMATION O F THE TOTAL INCOME. THE ASSESSING OFFICER WHILE ESTIMATING THE TOTAL INCOME HAS CONSIDERED INCOME AT THE FARM GATE AND H AS ADDED TRADING PROFIT TO THAT SEPARATELY. THE APPELL ANTS CONTENTION IS THAT THIS AMOUNTS DOUBLE ESTIMATION. I FIND FORCE IN THE CONTENTION OF THE APPELLANT. IT IS NOT DISPUTED BY THE ASSESSING OFFICER THAT THE APPELLANT IS ENGAGED IN REARING OF FISH AND ALSO SELLING THE SAME OUTSIDE. A SPECIF IC QUERY WAS RAISED BEFORE THE ASSESSING OFFICER TO CLARIFY WHETHER THERE WAS ANY SPECIFIC SEIZED MATERIAL INDICATING P URCHASE OF FRESH WATER FISH/POND FISH FOR THE PURPOSE OF SELLI NG I.E. FOR THE PURPOSE OF PURE TRADING. HOWEVER THERE WAS NO SPECIFIC REPLY TO THE QUERY RAISED. FROM THE ANALYSIS MADE I N THE ASSESSMENT ORDER AND THE REFERENCE MADE TO THE SEIZ ED MATERIAL BY THE ASSESSING OFFICER INDICATES THAT TH E APPELLANT SELLS HIS OWN FISH REARED IN THE POND OUTSIDE THE STATE MEANING THEREBY THAT THE FISH IS REARED BY THE APPE LLANT AND THE SALE OF THAT FISH IS ALSO UNDERTAKEN BY THE APP ELLANT. THUS THE BUSINESS ACTIVITY OF THE APPELLANT IS A C OMPOSITE ONE RIGHT FROM REARING/PRODUCTION OF FISH AND MARKE TING THE SAME. SINCE THIS IS AN INTEGRATED ACTIVITY IN MY V IEW THE PROFIT SHOULD BE ESTIMATED ONCE AND NOT TWICE. THE ASSESSING OFFICER HAS REFERRED TO THE REPORT OF THE DY. DIRECTOR OF FISHERIES WHO HAS INDICATED THE GROSS M ARGIN AT THE FARM GATE. TAKING A CUE FROM THIS THE ASSESSING OFFICER CONSIDERED THIS GROSS MARGIN ONCE AND ALSO ADDED TH E TRADING PROFIT PERCENTAGE TO ARRIVE AT THE FINAL PR OFIT. IN ACCOUNTING PARLANCE THE ACTIVITY OF THE APPELLANT IS MORE AKIN TO A MANUFACTURING AND TRADING AND PROFIT AND LOSS ACCOUNT IN THE CASE OF A MANUFACTURING CONCERN. IN SUCH CASES WHAT IS MANUFACTURED BY THE INDUSTRY IS ALSO SOLD BY THE SAME BUSINESS CONCERN AND A CONSOLIDATED PROFIT AND LOSS ACCOUNT IS DRAWN TO ARRIVE AT THE FINAL PROFIT . THE CASE OF THE APPELLANT IS ALSO SIMILAR TO ONE OF MANUFACTURI NG AND TRADING. IT IS NOT THAT WHAT IS PRODUCED OR REARED I N THE POND IS SOLD TO SOME ONE ELSE AND PROFIT IS EARNED THERE ON AND THEREAFTER THE APPELLANT PURCHASES FISH FROM OTHERS AND THAT IS SOLD OUTSIDE. THE ASSESSMENT ORDER DOES NOT SUGG EST THAT. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 14 OF 28 IF THE FISH REARED IN THE POND BY THE APPELLANT IS S OLD OUTSIDE THE STATE BY THE APPELLANT HIMSELF THEN IT CANNOT B E SAID THAT THE APPELLANT FIRST DERIVES PROFIT AT THE FARM GATE AND DERIVES A SECOND PROFIT WHILE SELLING IT OUTSIDE THE STATE. IT WILL LEAD TO ANOMALY. PROFIT CAN BE CONCEIVED ONLY WHEN A PRO DUCT IS SOLD. IF IT IS TO BE CONSIDERED THAT THE APPELLANT I S REARING AND SELLING AT FARM GATE TO SOME ONE TO EARN PROFIT AND ALSO HAVE A TRADING PROFIT SEPARATELY THEN ONE HAS TO A SSUME THAT THE PRODUCTION OF THE POND IS SOLD TO AN OUTSI DER TO EARN PROFIT. IN THAT CASE THAT CAN ONLY BE CONSIDERED A S THE PROFIT OF THE APPELLANT SINCE THE ASSESSING OFFICER HAS NO T SPECIFICALLY POINTED OUT THAT THE APPELLANT PURCHAS ES FRESH WATER FISH FROM OUTSIDE SO AS TO DO SPECIFIC TRADIN G ACTIVITY. SINCE THE ESTIMATION OF THE INCOME HAS BEEN MADE BY THE ASSESSING OFFICER BASED ON THE YIELD PER ACRE FROM THE FISH IT IS INFERRED THAT THE ASSESSING OFFICER CONSIDERS TH E FRESH WATER FISH REARED IN THE POND IS SOLD AT OUTSIDE WH ICH IS REFLECTED IN THE SALE PATTIES FOUND DURING THE COUR SE OF SEARCH. SINCE A PERSON CANNOT SELL TO HIMSELF SO A S TO HAVE A DISTINCT TRADING ACTIVITY FROM FARM GATE ONWARD TH E QUESTION OF SECOND TRADING IN THE CASE OF THE APPELLANT WOUL D NOT ARISE. HOWEVER AS THERE HAVE BEEN SEIZURE OF DOCUM ENTS INDICATING SALE OF FRESH WATER FISH BY THE APPELLAN T HIMSELF IN MY CONSIDERED VIEW THE ASSESSING OFFICER WAS NOT J USTIFIED TO MAKE TWO SEPARATE ESTIMATION OF PROFIT ONE AT TH E FARM GATE AND THE SECOND OUT OF THE TRADING ACTIVITY. I T HEREFORE HOLD THAT THE ENTIRE ACTIVITY OF REARING OF FISH AN D ITS ULTIMATE SELLING BY THE APPELLANT IS TO BE CONSIDERED AS ONE INTEGRATED ACTIVITY AND THE PROFIT IS TO BE DRAWN ONCE CONSIDE RING ALL THE ASPECTS OF REARING AND SUBSEQUENT MARKETING. 12.1 AS STATED EARLIER THE LEARNED CIT(A) HELD THAT THE PROFIT WORKED OUT ON THE BASIS OF SEIZED MATERIAL WOULD BE MORE REALI STIC THAN THE PROFIT WORKED OUT ON THE BASIS OF ESTIMATION GIVEN BY THE DY. DIRECTOR OF FISHERIES. WE AGREE WITH THE SAID VIEW OF LEARNED CIT(A) ALSO. WHEN THE DATA REQUIRED FOR ESTIMATION OF PROFIT FROM FISH BUSINES S CARRIED ON BY THE ASSESSEE IS AVAILABLE IN THE SEIZED RECORDS IN OUR VIEW THE SAID DATA SHOULD BE PREFERRED OVER THE ESTIMATE FURNISHED BY AN EXTE RNAL AGENCY. WE ALSO STATE FEW REASONS IN SUPPORT OF THE ABOVE SAID PROP OSITION IN THE SUCCEEDING PARAGRAPH. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 15 OF 28 12.2 IT IS IN COMMON KNOWLEDGE OF EVERY BODY THA T THE PROFIT OF A PARTICULAR ENTERPRISE WOULD DEPEND UPON VARIOUS INT ERNAL AND EXTERNAL FACTORS. A PARTICULAR ENTERPRISE MAY ACHIEVE LESS OR MORE THAN THE INDUSTRY AVERAGE DEPENDING UPON SUCH FACTORS. IN THE CASE O F FISH TRADE THE SELLING RATE OF A PARTICULAR VARIETY OF FISH WOULD DEPEND U PON VARIOUS FACTORS SUCH AS SEASONAL VARIATIONS VARIETY OF FISH QUALITY OF FISH THE LEVEL OF OPERATION OF A CONCERN DEMAND AND SUPPLY POSITION TYPES OF FINANCING OWNERSHIP OF LAND EXTENT OF LEVEL OF OPERATION ETC. SOME TIMES THE SELLING RATE OF A PARTICULAR VARIETY OF FISH WOULD ALSO BE AFFECTED B Y THE DEMAND AND SUPPLY POSITION OF OTHER VARIETIES OF FISH. IN VIEW OF TH E ABOVE REASONS THE DATAS AVAILABLE IN THE SEIZED RECORDS SHOULD BE MORE APPR OPRIATE FOR THE PURPOSE OF ARRIVING AT THE PROFIT PER ACRE IN PREFERENCE TO THE ESTIMATE PREPARED BY THE EXTERNAL AGENCY ON AVERAGE BASIS. 12.3 NOW LET US DISCUSS ABOUT THE PROFIT WORKED OUT BY THE ASSESSING OFFICER ON THE BASIS OF SEIZED RECORDS. THE ASSESS ING OFFICER HAS WORKED OUT THE SELLING RATE PER TONNE ON THE BASIS OF THE SALE S PATTIES FOUND DURING THE COURSE OF SEARCH. IT WAS STATED THAT THE SAID SALES PATTIES RELATE TO THE LATEST YEAR. WE HAVE ALREADY NOTICED THAT THE ASSE SSING OFFICER DID NOT DISCUSS ABOUT THE DETAILS OF VARIETY OF FISH QUANT ITY AND SELLING RATE RATIO OF DIFFERENT VARIETY OF FISHES ETC. THAT WERE FOUND N OTED IN THE ABOVE SAID SALES PATTIES. HOWEVER IN PARAGRAPH 4.2 OF THE A SSESSMENT ORDER THE ASSESSING OFFICER HAS NOTICED THAT THE SELLING RATE OF ROHU VARIETY OF FISH WAS IN THE RANGE OF RS.50/- TO RS.65/- PER KG DURIN G THE PERIOD FROM 10.8.2007 TO 13.10.2007. THE SELLING RATE OF KATL A VARIETY OF FISH WAS IN THE RANGE OF RS.60/- TO RS.82/- PER KG DURING THE S AME PERIOD. HOWEVER THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSIN G OFFICER HAS TAKEN ONLY THE PEAK RATES FOR THE PURPOSE OF ARRIVING THE AVER AGE SELLING RATE WHERE AS EVIDENCES ARE AVAILABLE TO SHOW THAT THE SELLING RA TE WAS LOWER EVEN DURING THE VERY SAME PERIOD. IN THIS REGARD THE ASSESSEE HAS FURNISHED COPIES OF CERTAIN BILLS IN HIS PAPER BOOK (VOLUME 2). WE HAVE GONE THROUGH THE SAID ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 16 OF 28 DOCUMENTS FILED BY THE ASSESSEE. IN PAGE 336 THE SA LES PATTI DATED 1-9- 2007 GIVEN BY M/S BHOLA FISH AND COMPANY IS FURNISH ED WHERE IN THE SELLING RATE OF ROHU VARIETY IS NOTED AS RS.35/- AND RS.40/- PER KG. THUS IN THE VERY SAME BILL TWO SELLING RATES ARE AVAILAB LE FOR THE SAME VARIETY OF FISH. OTHER SALES PATTIES FURNISHED IN THE PAPER B OOK ALSO REVEAL THAT THE ASSESSEE HAS SOLD OTHER VARIETIES OF FISHES ALSO L IKE PANGAS WHOSE SELLING RATE WAS IN THE RANGE OF RS.37/- TO RS.38/- PER KG. THUS IT IS SEEN THAT THERE IS WIDE VARIATION IN THE SELLING RATE FOR THE SALES CARRIED OUT DURING THE VERY SAME PERIOD THAT WAS CONSIDERED BY THE ASSESSI NG OFFICER. IN THIS SCENARIO IT CANNOT BE SAID THAT THE ASSESSEE WOULD HAVE CARRIED OUT THE SALES FOR THE ENTIRE YEAR AT THE PEAK RATES THAT WE RE ADOPTED BY THE ASSESSING OFFICER. HENCE THERE IS BASIC FLAW IN TH E EXERCISE OF THE ASSESSING OFFICER IN TAKING THE PEAK RATE OF A PARTICULAR PER IOD FOR PROJECTING THE SALES OF THE WHOLE YEAR. ACCORDINGLY THE APPROACH OF TH E ASSESSING OFFICER CANNOT BE CONSIDERED TO BE A FOOL PROOF METHOD. BE SIDES THE ABOVE IT IS NOTICED THAT THE ASSESSING OFFICER HAS ADOPTED THE COST OF REARING AT RS.85 000/- PER ACRE ONLY ON THE BASIS OF SWORN ST ATEMENT GIVEN BY THE ASSESSEE. THE SAID STATEMENT OF THE ASSESSEE HAS N OT BEEN CORROBORATED WITH ANY OTHER EVIDENCE. FURTHER THE ASSESSING OFF ICER HAS FAILED TO DEDUCT THE INDIRECT EXPENSES LIKE BANK INTEREST BAD DEBT S ADMINISTRATIVE EXPENSES SALARIES TRAVELING EXPENSES BUSINESS LO SSES DISCOUNT TELEPHONE EXPENSES ETC. THOUGH THE LEARNED CIT(A) HAS GIVEN A REDUCTION OF 10% TOWARDS THE ESTIMATED INDIRECT EXPENSES YET WE NOT ICE THAT THE LEARNED CIT(A) HAS NOT FACTORED THE EFFECT OF SELLING RATE VARIATIONS IN THE ESTIMATE DETERMINED BY HIM. BESIDES THE ABOVE THE CONTENTI ON OF THE LD A.R IS THAT THE DEDUCTION OF 10% TOWARDS THE INDIRECT EXPENSES IS ON THE LOWER SIDE. 12.4 WITH REGARD TO THE INDIRECT EXPENSES IT I S A COMMON FACT THAT A FARMER HAVING LARGE SCALE OF OPERATION WOULD HAVE T O INCUR HIGHER INDIRECT EXPENSES SINCE HE IS CONSTRAINED TO MAINTAIN COMPAR ATIVELY HUGE ESTABLISHMENT. IN THE CASE OF LARGE SCALE OF OPERA TION A BUSINESS MAN ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 17 OF 28 WOULD NORMALLY TRY TO OPTIMIZE HIS PROFIT BY SELLIN G HIS GOODS AT COMPARATIVELY LOWER PRICE SINCE HE IS REQUIRED TO D ISPOSE OF HIGHER QUANTITY. HENCE THE LARGE FARMER VIS--VIS SMALL FARMER WILL EARN MORE PROFIT IN ABSOLUTE TERMS BUT THE PROFIT RATIO/PER CAPITA INC OME OF A LARGER FARMER WOULD BE LOWER. WE HAVE ALREADY NOTED THAT THE SEL LING RATE OF FISHES WILL NOT BE UNIFORM THROUGH OUT THE YEAR AND IT IS SUBJE CT TO FLUCTUATIONS DUE TO VARIOUS REASONS. CONSIDERING ALL THESE ASPECTS WE ARE OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE RATE OF DEDUC TION TOWARDS INDIRECT EXPENSES GIVEN BY LD CIT(A) AT 10% IS INCREASED TO 15% IN ORDER TO TAKE CARE OF EFFECT OF SELLING RATE VARIATIONS AND ALSO THE EFFECT OF HIGHER INDIRECT EXPENSES. WE ORDER ACCORDINGLY. ACCORDINGLY THE P ROFIT PER ACRE FOR OWN LANDS IN THE FINANCIAL YEAR 2007-08 WOULD WORK OUT TO RS.39 491/- FOR OWN TANKS. 12.5 THE LEARNED CIT(A) HAS DIRECTED THE ASSESS ING OFFICER TO ARRIVE AT THE PROFIT PER ACRE FOR THE YEARS PRIOR TO THE FINA NCIAL YEAR 2007-08 BY REDUCING 10% PROGRESSIVELY IN EVERY YEAR. CONSIDER ING THE LEVEL OF INFLATION AND PRICE FLUCTUATIONS WE DO NOT FIND ANY INFIRMIT Y IN THE SAID DIRECTION. ACCORDINGLY WE ALSO DIRECT THAT THE PROFIT OF THE YEARS EARLIER TO THE FINANCIAL YEAR 2007-08 SHOULD BE ASCERTAINED IN THE SAME MANN ER AS DIRECTED BY LEARNED CIT(A). HOWEVER IF THE PROFIT SO ARRIVED AT WORKS OUT TO LESS THAN THAT DISCLOSED BY THE ASSESSEE THEN THE PROFIT PER ACRE AS DECLARED BY THE ASSESSEE FOR THAT PARTICULAR YEAR SHOULD BE ADOPTED . WITH REGARD TO THE LEASE RENTALS TO BE DEDUCTED FOR THE LEASED LAND T HE LEARNED CIT(A) HAS UPHELD THE AMOUNT OF LEASE RENT DETERMINED BY THE A SSESSING OFFICER FOR EVERY YEAR. WE FIND THE SAID DIRECTION TO BE REASO NABLE AS THE ASSESSING OFFICER HAS ASCERTAINED THE AMOUNT OF LEASE RENTAL FROM THE SEIZED RECORDS AND ACCORDINGLY WE APPROVE THE SAME. ACCORDINGLY W E DIRECT THE ASSESSING OFFICER TO WORK OUT THE INCOME FROM OWN FISH TANKS AND LEASED FISH TANKS IN THE MANNER DISCUSSED ABOVE. THE ORDER OF LEARNED CI T(A) STANDS MODIFIED IN TERMS OF DISCUSSIONS MADE ABOVE. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 18 OF 28 13 THE ASSESSEE HAD DECLARED ADDITIONAL INCOME ON ACCOUNT OF TRADING OF FISH AND SALE OF DAMAGED FISH IN HIS RETURN OF INCO ME IN EVERY YEAR. HOWEVER THE ASSESSING OFFICER ESTIMATED THE AMOUNT OF SALE OF DAMAGED FISH SEPARATELY AND ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE SEPARATELY. HENCE THE ASSESSING OFFICER HAS ALLOW ED SET OFF OF THE INCOME SO DECLARED BY THE ASSESSEE ON THIS ACCOUNT AGAINST THE INCOME FROM FISH BUSINESS ESTIMATED BY HIM. BEFORE THE LEARNED CIT( A) THE ASSESSEE DID NOT PRESS THE GROUND RELATING TO THE ESTIMATION OF INCOME ON SALE OF DAMAGED FISH AND ACCORDINGLY THE SAID ADDITION WAS CONFIRMED BY LEARNED CIT(A). HOWEVER THE LEARNED CIT(A) ALSO DIRECTED THE ASSESSING TO ADD THE INCOME FROM TRADING OF FISH AND SALE OF DAMAGED FISH WHICH WAS OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME ALS O. THE CONTENTION OF THE ASSESSEE IS THAT HE HAS OFFERED THE ADDITIONAL INCO ME ON SALE OF DAMAGED FISH ON THE BASIS OF VERY SAME SEIZED MATERIALS WHI CH WERE RELIED UPON BY THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES THE DECISION OF LEARNED CIT(A) IN CONFIRMING THE ADDITION MADE BY THE ASSES SING OFFICER AND ALSO THAT OFFERED BY THE ASSESSEE LEADS TO DOUBLE ASSESS MENT OF SAME INCOME. ACCORDINGLY WE MODIFY THE ORDER OF LEARNED CIT(A) RELATING TO THE SALE OF DAMAGED FISH AND DIRECT THE ASSESSING OFFICER TO SE T OFF THE INCOME RELATING TO SALE OF DAMAGED FISH DECLARED BY THE ASSESSEE AG AINST THE INCOME FROM THAT SOURCE ESTIMATED BY HIM. IN CASE THE INCOME E STIMATED BY THE ASSESSING OFFICER IS MORE THAN THE INCOME DECLARED BY THE ASSESSEE THEN THE HIGHER OF THE TWO SHOULD BE TAKEN. 14 THE NEXT ISSUE WHICH IS COMMON IN THE APPEAL O F THE NUKALA RAMAKRISHNA AND M/S NAGA HANUMAN SOLVENT OILS (P) L TD RELATES TO THE ASSESSMENT OF INCOME OF UNACCOUNTED SALES OF SOLVEN T OILS FACTORY. AS STATED EARLIER THE ASSESSEE SHRI NUKALA RAMAKRISHN A OFFERED A SUM OF RS.2 71 69 000/- AS ADDITIONAL INCOME IN HIS HANDS IN THE ASSESSMENT YEARS 2006-07 TO 2008-09 AS PER THE DETAILS GIVEN IN PARA GRAPH 5 SUPRA. IN THE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 19 OF 28 ASSESSMENT PROCEEDINGS OF SHRI NUKALA RAMAKRISHNA R ELATING TO THE ASSESSMENT YEARS 2006-07 AND 2007-08 THE ASSESSING OFFICER DEDUCTED THE INCOME CITED ABOVE THAT WAS OFFERED AGAINST THE INC OME FROM FISH BUSINESS ESTIMATED BY HIM IN ORDER TO ARRIVE AT THE NET ADDI TION TO BE MADE. HOWEVER IN THE ASSESSMENT YEAR THE ASSESSING OFFI CER ACCEPTED THE RETURN OF INCOME FILED BY SHRI NUKALA RAMAKRISHNA FOR THE REASONS STATED IN PARAGRAPH 4 (SUPRA). 14.1 IN THE ASSESSMENT PROCEEDING RELATING TO M/S NAGA HANUMAN SOLVENT OILS P LTD THE ASSESSING OFFICER INDEPENDENTLY ARR IVED AT THE QUANTUM OF UNACCOUNTED AND SHORT ACCOUNTED SALES AS DETAILED B ELOW AND ADDED THEM IN THE HANDS OF THE COMPANY : ASST. YEAR AMOUNT 2006 07 RS.4 68 749 2007 08 RS.3 89 99 071/- 2008 09 RS.2 23 41 268/- BEFORE THE ASSESSING OFFICER THE ASSESSEE CLAIMED THAT THE INCOME FROM SOLVENT OILS FACTORY HAS ALREADY BEEN DECLARED IN T HE INDIVIDUAL HANDS OF SHRI NUKALA RAMAKRISHNA. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE SAID CLAIM FOR THE FOLLOWING REASONS STATED IN THE ASSES SMENT ORDER: 1. AFFIDAVIT IS VERY CLEAR ON THE AMOUNT AND TO WHICH NAME IT IS DECLARED. 2. INCOME FROM M/S NAGA HANUMAN SOLVENT OILS PVT LTD IS NOT A PART OF DECLARATION UNDER SECTION 132(4). 3. IN FACT OUT OF RS.7.60 CRORES DECLARATION RS.98.51 LAKHS WORTH OF AGRICULTURAL LAND IS IN THE NAME OF M/S NAGAHANU MAN SOLVENT OILS PVT. LTD IS INCLUDED. 4. HENCE RS.2.71 CRORE UNACCOUNTED INCOME IN M/S NAGAHANUMAN SOLVENT OILS PVT LTD AS CLAIMED BY THE ASSESSEES AR AS INCOME OF SRI NUKALA RAMAKRISHNA I NCLUDED IN RS.7.60 CRORES IS NOT ACCEPTABLE. 14.2 DURING THE COURSE OF APPELLATE PROCEEDING THE LEARNED CIT(A) AFTER CONSIDERING THE RECONCILIATION STATEMENTS FILED BEF ORE THE ASSESSING OFFICER AND ALSO AFTER CONSIDERING THE DETAILS OF DISCUSSIO NS THAT HAVE TAKEN PLACE BETWEEN THE ASSESSING OFFICER AND THE INVESTIGATION WING DETERMINED THE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 20 OF 28 TOTAL AMOUNT OF UNACCOUNTED SALES AT RS.2 79 27 695 /-. BEFORE PROCEEDING FURTHER IT IS PERTINENT TO TAKE NOTE OF FOLLOWING OBSERVATIONS MADE BY LEARNED CIT(A) IN THIS REGARD IN PARA 3 OF HIS ORDE R PASSED IN THE HANDS OF THE COMPANY. IN SEARCH PROCEEDING THE SRI NUKALA RAMAKRISHNA H AD GIVEN A DECLARATION FOR RS.7.60 CRORES AS UNDISCLOSED INCOM E AND THE ABOVE AMOUNT IS ALSO A PART OF THE SAME. MORE OVER THE APPELLANTS HAVE ACCEPTED THAT THE ENTIRE MISSING SA LES AS ABOVE AS UNDISCLOSED INCOME WITHOUT CLAIMING DEDUCT ION FOR THE RELEVANT PURCHASES. NORMALLY IF THE TOTAL SAL ES ARE MISSING ONLY THE GROSS PROFIT PERCENTAGE THEREON SHOULD BE TAKEN AS INCOME AND NOT THE ENTIRE SALES. BUT TO COOPERATE WITH THE DEPARTMENT IN SEARCH PROCEEDINGS AS WELL AS IN THE ASSESSMENT PROCEEDING THE APPELLANT AGREED FOR THE ADDITION O F ENTIRE MISSING SALES AS UNDISCLOSED INCOME. HAVING OBSERVED IN THE ABOVE SAID LINES THE LEARNE D CIT(A) HOWEVER REJECTED THE CLAIM OF THE ASSESSEES FOR EXCLUDING T HE INCOME OFFERED BY SHRI NUKALA RAMAKRISHNA FROM THE HANDS OF THE COMPANY WI TH THE REASONING THAT THE SAID SHRI NUKALA RAMAKRISHNA HAS VOLUNTARI LY OFFERED THE SAME IN HIS INDIVIDUAL HANDS. AGGRIEVED BY THE SAID DECISI ON OF LEARNED CIT(A) THE COMPANY IS IN APPEALS BEFORE US IN ALL THE THREE YE ARS WITH THE PLEA THAT THE INCOME OFFERED BY SHRI NUKALA RAMAKRISHNA SHOULD BE EXCLUDED FROM ITS HAND. 14.3 WE HAVE HEARD THE RIVAL CONTENTIONS ON THI S ISSUE. WE SHALL DISCUSS IN BRIEF ABOUT THE FACTS RELATING TO THIS ADDITION. WHILE FILING THE RETURN OF INCOME SHRI NUKALA RAMA KRISHNA HAS ATTACHED CERTA IN NOTES IN ORDER TO EXPLAIN THE BASIS/REASONS FOR OFFERING VARIOUS TYPE S OF ADDITIONAL INCOME IN HIS HANDS. THE FOLLOWING POINTS INCLUDED IN THE SAI D NOTES ARE RELEVANT TO THE ISSUE UNDER CONSIDERATION: 1. ADDITIONAL INCOME IS CONSIDERED ON THE BASIS O F ESTIMATION 2. THE BASIS OF ESTIMATION IS TAKEN BY CONSIDERING INVESTMENTS IN THE NAMES OF ALL FAMILY MEMBERS IN EACH YEAR. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 21 OF 28 3. INCOME IN THE NAME OF FAMILY MEMBERS/PURCHASE OF ASSETS IS CONSIDERED IN THE HANDS OF SRI NOOKALA RAMA KRIS HNA ONLY. . 9. ADDITIONAL INCOME FROM NAGA HANUMAN SOLVENT OILS (P) LTD IS CONSIDERED IN THE HANDS OF SRI N.R.K. ONLY LIKE OTHER FAMILY MEMBERS AS HE IS HOLDING 95% OF THE SHARES A ND REMAINING SHARE HELD BY HIS SON SRI NUKALA BALAJI. IF THIS ADDITIONAL INCOME IS TO BE CONSIDERED IN THE HANDS OF PRIVATE LTD THE SAME IS DEDUCTED FROM THE INCOME OF SRI N.R . 10. IN THE BOOKS OF N H S O (P) LTD IT IS OBSERVED T HAT THE ONE OF THE D.O.B TRANSFERS TO NUKALA RAMA KRISHNA A RE NOT RECORDED. BUT IT IS RECONCILED THAT SUCH SALES ARE RECORDED IN THE NAMES OF OTHER MEMBERS. IN THIS ACCOUNT THE NET DIFFERENCE IS CONSIDERED AS INCOME OF N.R.K. 14.4 BEFORE THE LEARNED CIT (A) THE ASSESSEE SHRI N UKALA RAMAKRISHNA HAS ADVANCED FOLLOWING ARGUMENTS IN THE WRITTEN SUB MISSIONS SUBMITTED BY HIM (PAGE 262 OF PAPER BOOK (VOLUME 1): IN PARA-11 OF THE ASSESSMENT ORDER WAS TELESCOPING THAT THE ASSESSEE FILED RETURN OF INCOME FOR ALL THE SEA RCH PERIOD OFFERING INCOME OF RS.4.72 CRORES ONLY AND SUBSEQUE NTLY THE ASSESSEE FILED REVISED RETURN OF INCOME OFFERING AD DITIONAL INCOME OF RS.2.71 CRORES MAKING THE TOTAL INCOME OF THE ASSESSEE AND ITS GROUP FOR THE TOTAL SEARCH PERIOD STARTING FROM ASSESSMENT YEAR 2002-03 TO 2008-09 AT RS.7.61 CRORES. THE ASSESSING OFFICER HAS NOT ACCEPTED THIS FOR THE REASON THAT DISCLOSURE OF ASSETS GIVEN BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY ONLY. WHILE FILING THE REVISED RETURNS THE ASSESSEE HAS D ISCLOSED INCOME EARNED BY THE ASSESSEE ON ACCOUNT OF SALE OF D.O.B. IN THE HANDS OF M/S NAGA HANUMAN SOLVENT OILS PVT. LTD. AT THIS JUNCTURE APPELLANT FIRST WANTED TO DISCLOS E THIS RS.7.6 CRORES INCOME IN THE HANDS OF BOTH MR. RAMA KRISHNA AND M/S NAGA HANUMAN SOLVENT OILS PVT. LTD. AT RS.4.72 CRORES AND RS.2.71 CRORES SEPARATELY. THESE FIGURES WERE A RRIVED BY TAKING THE TOTAL UN-ACCOUNTED INVESTMENTS IN THE NA ME OF MR. RAMA KRISHNA AND HIS FAMILY MEMBERS AND IN CASE OF PRIVATE LIMITED COMPANY THE UN-ACCOUNTED AND UNDER ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 22 OF 28 ACCOUNTED SALES. BUT WHILE FILING THE REVISED RETUR N OF INCOME THE ASSESSEE PREFERRED TO DISCLOSE THE ENTIRE RS.7. 61 CRORES IN HIS INDIVIDUAL CAPACITY LEAVING THE PRIVATE LIMI TED COMPANY CLEAN FOR THE FOLLOWING REASONS. 1. THIS PRIVATE LIMITED COMPANY IS OWNED BY MR. NUKALA RAMA KRISHNA AND HIS SON MR. BALA BALAJI AS TWO SHA RE HOLDERS ONLY. 2. FOR ALL PRACTICAL PURPOSES THIS IS ONLY A PROPRIETO R FIRM AND ONLY FOR BANK LIMITS PRIVATE LIMITED COMPANY IS FORMED. 3. THE TOTAL MANAGEMENT IS CONTROLLED BY MR. NUKALA RAMA KRISHNA ONLY AND THERE IS NO BOARD OF DIRECTOR S OR ANYBODY TO INTERFERE. 4. THE TOTAL DETAILS FOR UN-ACCOUNTED OR UNDER-ACCOUNT ED SALES WERE DECIDED BY MR. NUKALA RAMA KRISHNA ONLY. 5. THE D.O.B. THAT WAS PRODUCED IN PRIVATE LIMITED COMPANY WAS MOSTLY USED IN THE FISH PONDS BELONGING TO MR. RAMA KRISHNA ONLY. 6. IN THE ABSENCE OF BOOKS OF ACCOUNTS THERE WERE NO PROPER RECORDS IN INDIVIDUAL CAPACITY. 7. THE BALANCE SHEET OF PRIVATE LIMITED COMPANY WAS ALREADY FINALIZED AND IT CANNOT BE DISTURBED WITHOU T THE PERMISSION OF COMPANY LAW BOARD. 8. THE REAL BENEFICIAL OWNER FOR THE UN-ACCOUNTED SALE OF D.O.B WAS MR. NUKALA RAMA KRISHNA ONLY BUT NOT PRIVATE LIMITED COMPANY. 9. THUS A DETAILED EXPLANATION WAS SUBMITTED TO THE ASSESSING OFFICER TO NOT TO CONSIDER THE EXTRA INCO ME IN THE HANDS OF PRIVATE LIMITED COMPANY BUT TO ACCE PT THE SAME IN THE HANDS OF MR. NUKALA RAMA KRISHNA. 10. THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND WANTED TO MAKE AN ADDITION OF THIS UN-ACCOUNTED SAL E IN THE HANDS OF PRIVATE LIMITED COMPANY BUT DID NOT GIVE ANY DEDUCTION FOR THE SAME INCOME THAT WAS OFFERED BY THE APPELLANT IN INDIVIDUAL CAPACITY. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 23 OF 28 14.5 A CAREFUL PERUSAL OF THE CONTENTIONS OF TH E ASSESSEE VIS--VIS THE VIEWS OF THE TAX AUTHORITIES SHOW THAT THERE IS A D IFFERENCE IN THE BASIC APPROACH FOLLOWED BY EACH OF THEM FOR THE PURPOSE O F ARRIVING AT THE QUANTUM OF UNDISCLOSED INCOME. WE HAVE ALREADY NOT ICED THAT THE ASSESSEE HAD FOLLOWED THE INVESTMENT METHOD IN OR DER TO QUANTIFY THE AMOUNT OF UNDISCLOSED INCOME IN THE STATEMENTS RECO RDED FROM HIM U/S 132(4) OF THE ACT I.E. THE ASSESSEE HAS TAKEN THE VALUE OF ALL THE INVESTMENTS MADE IN HIS NAME IN THE NAME OF THE FA MILY MEMBERS IN THE NAME OF BUSINESS CONCERNS INCLUDING THE PRIVATE LIM ITED COMPANIES. THE DETAILS OF THE ASSETS SO ADMITTED ARE PLACED IN PAG E 205 OF THE ASSESSEES PAPER BOOK (VOLUME 2). THE LIST OF SUCH ASSETS ALSO INCLUDE THE ASSETS STANDING IN THE NAME OF M/S NAGA HANUMAN SOLVENT OI LS P LTD TO THE TUNE OF RS.1 36 02 135/- (RS.1 23 65 578/- PLUS 10% STAM P DUTY). SIMILARLY IT ALSO INCLUDES ASSETS OF ANOTHER PRIVATE LIMITED COM PANY NAMED M/S NAGA HANUMAN SPINTEX P LTD TO THE EXTENT OF RS.27 69 690 /-. THUS IT IS CLEAR THAT THE ASSESSEE SHRI NUKALA RAMAKRISHNA HAS CONSI DERED ALL THE UNACCOUNTED ASSETS AS HIS OWN ASSETS WHETHER THEY ARE STANDING IN HIS NAME OR IN ANY OTHER FAMILY MEMBERS NAME OR IN THE NAME OF PRIVATE LIMITED COMPANY. ACCORDINGLY HE HAS PREFERRED TO O FFER THE ENTIRE AMOUNT OF UNDISCLOSED INCOME IN HIS HANDS. THE INITIAL OF FER OF RS.3.88 CRORES WAS INCREASED TO RS.7.60 CRORES DURING THE COURSE OF ST ATEMENTS RECORDED FROM HIM SUBSEQUENT TO THE DATE OF SEARCH. THIS IS THE MAIN BONE OF CONTENTION OF LD A.R I.E. THE OFFER SO HIKED BY THE ASSESSEE IS NOT CORROBORATED BY THE AVAILABILITY OF CORRESPONDING ASSET. 14.6 WHILE FILING THE RETURN OF INCOME AS WELL AS IN THE ARGUMENTS ADVANCED BEFORE THE TAX AUTHORITIES THE ASSESSEE S HRI NUKALA RAMAKRISHNA HAS TIME AND AGAIN REITERATED THAT THE UNACCOUNTED SALES HAS BEEN EFFECTED BY HIM AND HE ONLY IS THE BENEFICIARY OF ALL SUCH T RANSACTIONS AND HENCE HE HAS OFFERED THE ADDITIONAL INCOME IN HIS HANDS. IT APPEARS THAT THE PLEA/CONFESSION OF THE ASSESSEE IS THAT HE HAS USED THE COMPANY AS THE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 24 OF 28 FACE FOR SUCH ACTIVITIES. ACCORDINGLY HE HAS OFFERE D ADDITIONAL INCOME AGGREGATING TO RS.2.76 CRORES AS THE INCOME FROM SO LVENT OILS FACTORY IN THE ASSESSMENT YEARS 2006-07 TO 2008-09. 14.7 THOUGH THE ASSESSING OFFICER HAS STATED TH AT THE INCOME FROM M/S NAGA HANUMAN SOLVENT OILS PVT LTD IS NOT A PART OF DECLARATION U/S 132(4) OF THE ACT THE FACT REMAINS THAT THERE WERE NO EVI DENCE TO SHOW THAT THE DIFFERENCE BETWEEN THE FINAL OFFER OF RS.7.60 CRORE S AND THE INITIAL OFFER OF RS.3.88 CRORES IS CORROBORATED BY THE AVAILABILITY OF ASSETS/EXPENDITURE OF EQUAL AMOUNT. THE DIFFERENCE TO THE TUNE OF RS.4.0 0 CRORES WAS TENTATIVELY TAKEN AS BUSINESS STOCK. HOWEVER IT IS PERTINEN T TO NOTE THAT THE ASSESSING OFFICER DID NOT ASSESS THE SAID DIFFERENC E OF ABOUT RS.4.00 CRORES IN THE HANDS OF SHRI NUKALA RAMAKRISHNA. ON THE O THER HAND WHILE FILING THE RETURN OF INCOME THE ASSESSEE HAS CORROBORATED THE AMOUNT OF RS.7.60 CRORES WITH THE CORRECT VALUES OF THE UNACCOUNTED A SSETS AND ALSO THE AGGREGATE AMOUNT OF UNACCOUNTED SALES OF SOLVENT OI L FACTORY. HENCE IN OUR VIEW IT IS NOT CORRECT ON THE PART OF THE ASSE SSING OFFICER TO TAKE SUPPORT OF BIFURCATION TENTATIVELY GIVEN IN THE AFF IDAVIT/ STATEMENT GIVEN U/S 132(4) TO REJECT THE IMPUGNED CLAIM OF THE ASSESSEE S HEREIN. AT THE COST OF REPETITION WE MAY STATE THAT THE ASSESSMENT IS NOT BASED ON THE ABOVE SAID 132(4) STATEMENT AND THE QUANTIFICATION DONE IN THE SAID STATEMENT IS ONLY TO ARRIVE AT THE TOTAL AMOUNT OF UNACCOUNTED INCOME THE SOURCES OF WHICH MAY TAKE ANY FORM. 14.8 THE LD CIT(A) HAS SPECIFICALLY NOTICED THAT THE UNACCOUNTED SALES OF SOLVENT OILS FACTORY WAS PART OF THE TOTAL DISCLOSU RE OF RS.7.60 CRORES. HE HAS FURTHER NOTICED THAT THE ASSESSEE HAS OFFERED T HE ENTIRE AMOUNT OF SALES AS HIS UNACCOUNTED INCOME INSTEAD OF THE GROSS PROF IT ARISING ON IT. HAVING OBSERVED SO HE HAS CONFIRMED THE ACTION OF THE ASS ESSING OFFICER IN ASSESSING THE SAME INCOME TWICE I.E. IN THE HANDS OF THE COMPANY AS WELL AS IN THE HANDS OF THE ASSESSEE SHRI NUKALA RAMAKRI SHNA. HOWEVER THE ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 25 OF 28 FACT REMAINS THAT THE ASSESSEE SHRI NUKALA RAMAKRIS HNA HAS OFFERED THE ENTIRE AMOUNT OF UNACCOUNTED SALES AS HIS UNACCOUNT ED INCOME INSTEAD OF THE GROSS PROFIT ARISING OUT OF IT. THUS THE VOLUN TARY OFFER ON THIS COUNT IS FAR IN EXCESS OF THE REAL INCOME. 14.9 A VERY IMPORTANT FEATURE OF IMPUGNED ASSES SMENTS IS THAT THEY ARE ASSESSMENTS MADE U/S 153A OF THE ACT AFTER THE SEAR CH AND SEIZURE PROCEEDINGS. IN ALMOST ALL THE CASES WHERE SEARCH A ND SEIZURE PROCEEDING ARE CARRIED OUT THE FINAL RESULT NORMALLY WOULD BE THAT THE CONCERNED ASSESSEE SHALL BE CONSTRAINED TO DECLARE ALL THE UN ACCOUNTED INCOME THAT WERE DETECTED AND PAY TAX ON IT. IT CAN NOT BE DEN IED THAT THE NORMAL PROCEDURES GENERALLY FOLLOWED FOR DETERMINING THE S OURCES OF INCOME OR IDENTIFYING THE SAID SOURCE WITH A PARTICULAR ASSES SEE MIGHT BE DEVIATED WHILE COMPLETING THE ASSESSMENT AFTER THE SEARCH PR OCEEDINGS OF COURSE DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. FOR EXAMPLE THE INVESTMENT STANDING IN THE NAME OF SAY MR. A SH ALL BE ASSESSED NORMALLY IN HIS HANDS ONLY. HOWEVER IN THE SEARCH AND SEIZURE PROCEEDING IT MAY COME TO LIGHT THAT THE SOURCE FOR MAKING THE SAID INVESTMENT MIGHT HAVE COME FROM THE UNACCOUNTED INCOME OF MR. B OR I T MAY COME TO LIGHT THAT MR. A IS THE BENAMIDAR OF MR. B. IN THAT KIND OF SITUATION THE DEPARTMENT MAY PREFER TO ASSESS THE SAID UNACCOUNTE D INCOME IN THE HANDS OF MR. B THOUGH APPARENTLY MR. A IS THE OWNER OF T HE SAID INVESTMENT. IN THE INSTANT CASE THE ASSESSEE SHRI NUKALA RAMAKRIS HNA HAS DECLARED THE VALUE OF VARIOUS ASSETS STANDING IN THE NAME OF THE FAMILY MEMBERS BUSINESS CONCERNS AND PRIVATE LIMITED COMPANIES IN HIS HANDS AND ACCORDINGLY THE DEPARTMENT HAS NOT INITIATED ACTION AGAINST SUCH OTHER PERSONS. THUS THERE IS DEVIATION FROM THE NORMAL P ROCEDURE IN THE INSTANT CASE ALSO. LET US TAKE ANOTHER EXAMPLE. IT MAY COM E TO LIGHT DURING THE COURSE OF SEARCH THAT A PARTNERSHIP CONCERN HITHER TO ASSESSED AS PARTNERSHIP FIRM IS REALLY A PROPRIETARY CONCERN O F THE PERSON SEARCHED. IN THAT KIND OF SITUATION THE DEPARTMENT MAY CHOOSE T O DISREGARD THE STATUS OF ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 26 OF 28 PARTNERSHIP FIRM AND ASSESS THE ENTIRE UNACCOUNTED INCOME IN THE INDIVIDUAL HANDS. THUS IT IS SEEN THAT THE NORMAL PROCEDURE OF ASSESSING INCOME IN THE HANDS OF THE PERSON IN WHOSE NAME IT IS FOUND M AY BE DISREGARDED DURING THE COURSE OF ASSESSMENT CARRIED OUT AFTER T HE SEARCH AND SEIZURE PROCEEDING SINCE THE OBJECT OF SEARCH AND SEIZURE PROCEEDING IS TO UNEARTH THE UNACCOUNTED INCOME AND THEN SET THE GOING SMOOT H THERE AFTER FOR THE PERSON WHO HAS BEEN SEARCHED. 14.10 THERE CANNOT BE ANY DISPUTE WITH REGARD T O THE FACT THAT THE INCOME TAX ACT DOES NOT ENVISAGE ASSESSMENT OF SAME INCOME IN THE HANDS OF TWO ASSESSEES I.E. THE CONCEPT OF DOUBLE ASSESS MENT OF SAME INCOME IS NOT PERMITTED UNDER THE INCOME TAX ACT UNLESS IT IS SPECIFICALLY PROVIDED SO. IT CANNOT ALSO BE DENIED THAT THE TAX AUTHORITIES HA VE ALSO GOT A DUTY TO CARRY OUT THE ASSESSMENT IN A FAIR MANNER SO THAT D OUBLE TAXATION OF THE SAME INCOME IS AVOIDED. 14.11 IN THE INSTANT CASE IT IS ALREADY SEEN T HAT THE ASSESSEE SHRI NUKALA RAMAKRISHNA HIMSELF HAS OFFERED THE INCOME FROM SOL VENT OILS FACTORY TO THE TUNE OF ABOUT RS.2.76 CRORES IN HIS HAND. HE HAS A LSO CHOSEN TO OFFER THE ENTIRE UNACCOUNTED SALES AS HIS UNACCOUNTED INCOME INSTEAD OF THE GROSS PROFIT ON IT. HE HAS TIME AND AGAIN STATED THAT IT IS HE WHO HAS CARRIED OUT ALL THE UNACCOUNTED TRANSACTION IN THE NAME OF THE COMPANY AS HE TREATED THE SAID COMPANY AS HIS PROPRIETARY CONCERN. HOWEV ER THE TAX AUTHORITIES HAS CHOSEN TO ASSESS THE SAID UNACCOUNTED SALES IN THE HANDS OF THE COMPANY SINCE IT WAS CARRIED IN THE NAME OF THE COM PANY WHILE THE CLAIM OF THE ASSESSEE SHRI NUKALA RAMAKRISHNA IS THAT HE HAS ONLY CARRIED THOSE TRANSACTIONS AND ALSO BENEFITED OUT OF IT. IN THIS PROCESS THE TAX AUTHORITIES HAVE ALSO REFUSED TO GIVE SET OFF OF THE IMPUGNED I NCOME TO THE TUNE OF RS.2.76 CRORES OFFERED BY SHRI NUKALA RAMAKRISHAN A GAINST THE INCOME ASSESSED IN THE HANDS OF THE COMPANY. THEY HAVE AL SO REFUSED TO DELETE THE SAME FROM THE ASSESSMENT OF SHRI NUKALA RAMAKRI SHNA ON THE PLEA THAT ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 27 OF 28 HE HAS OFFERED THE SAME VOLUNTARILY. IN THE RESULT THE ACTION OF THE TAX AUTHORITIES HAS RESULTED IN DOUBLE TAXATION OF THE SAME INCOME. THE REASONS WHICH ARE EXTRACTED IN PARAGRAPH 14.1 SUPR A CITED BY THE ASSESSING OFFICER IN THIS REGARD AND APPROVED BY LD CIT(A) ARE VAGUE AND NOT CONVINCING TO US. 14.12 WE HAVE ALREADY NOTED THAT THE METHOD OF D ETERMINATION OF INCOME FOLLOWED IN THE SEARCH ASSESSMENTS MAY BE DIFFERENT FROM THAT FOLLOWED IN THE CASE OF NORMAL ASSESSMENTS. THIS IS FOR THE REA SON THAT THE SEARCH PROCEEDING MAY GIVE RISE TO CERTAIN COMPLEX ISSUES. THE PURPOSE OF ANY ASSESSMENT IS TO MONITOR WHETHER THE TAX DUE TO THE REVENUE IS COLLECTED PROPERLY. HENCE IN ORDER TO SETTLE THE COMPLEX IS SUES AND KEEPING THE BROADER OBJECTIVE OF COLLECTING DUE AMOUNT OF TAX ONE MAY BE CONSTRAINED TO DEVIATE FROM THE PROCEDURES NORMALLY FOLLOWED. ACCORDINGLY KEEPING IN VIEW VARIOUS PROPOSITIONS DISCUSSED IN THE PRECEDIN G PARAGRAPHS WE ARE OF THE VIEW THAT THE INCOME FROM SOLVENT OIL FACTORY T HAT WAS DECLARED BY SHRI NUKALA RAMAKRISHNA SHOULD BE ASSESSED IN HIS HANDS ONLY AS THERE IS NO MATERIAL WITH THE DEPARTMENT TO REJECT THE CLAIM MA DE BY SHRI NUKALA RAMAKRISHNA THAT HE ONLY HAS EARNED THAT INCOME AND CONSEQUENTLY THE INCOME SO ASSESSED IN HIS HANDS HAS TO BE EXCLUDED FROM THE ASSESSMENT OF THE COMPANY M/S NAGA HANUMAN SOLVENT OILS P LTD. A CCORDINGLY WE SET ASIDE THE ORDERS OF LD CIT(A) ON THIS ISSUE IN THE HANDS OF THE COMPANY AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFIC ER WITH A DIRECTION TO VERIFY THE DETAILS OF INCOME RELATING TO THE NAGA H ANUMAN SOLVENT OILS P LTD THAT WAS OFFERED BY SHRI NUKALA RAMAKRISHNA IN THE ASSESSMENT YEARS 2006- 07 TO 2008-09 AND EXCLUDE THE SAME FROM THE INCOME OF THE COMPANY. 15. IN THE RESULT ALL THE APPEALS FILED BY THE ASSESSEE SHRI NUKALA RAMAKRISHNA ARE PARTLY ALLOWED. ALL THE APPEALS OF THE REVENUE ARE DISMISSED. THE APPEALS FILED BY M/S NAGA HANUMAN O IL P LTD ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS 53 TO 66 OF 2011 NUKALA RAMA KRISHNA ELURU & ITA 87 TO 89 OF 2011 NAGA HANUMAN SOLVENT OILS VI ZAG PAGE 28 OF 28 PRONOUNCED IN THE OPEN COURT ON 23/09/2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:23 RD SEPTEMBER 2011 COPY TO 1 SRI NUKALA RAMA KRISHNA S/O RANGAIAH D.NO.7B-15 -45 UPPU VARI LANE EASTERN STREET ELURU 2 NAGA HANUMAN SOLVENT OILS PVT. LTD. FLAT NO.2 2 ND FLOOR SRI BALAJI RESUDENCY BESIDES SOCIAL WELFARE OFFICE MVP COLON Y VISAKHAPATNAM 3 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM 4 5 THE CIT CENTRAL HYDERABAD THE CIT(A)-I HYDERABAD 6 THE DR ITAT VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM