Sri. Pratap Jadeja, Hyderabad vs Department Of Income Tax

These seven appeals filed by the Revenue being ITA.No.1469/Hyd/2012 to ITA.No.1475/Hyd/2012 for assessment years 2002-2003 to 2008-2009 and the cross appeal filed by the assessee for assessment year 2008-2009 being ITA.No.1702/ Hyd/2012 are directed against the common order of the Ld. CIT(A), Guntur dated 30.03.2012 for assessment years 2002-2003 to 2008-2009 and since some common and inter-linked issues are involved therein, the same 2 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

have been heard together and are being disposed of by a single consolidated order for the sake of convenience.

2. Ground Nos. 1 and 5 of the Revenue's appeals for assessment years 2002-2003, 2003-2004 and 2004-2005 and ground Nos. 1 and 10 of the Revenue's appeal for assessment years 2005-2006, 2006-2007, 2007-2008 and 2008-2009 are general, requiring no specific adjudication.

3. The common issue involved in all the seven appeals of the Revenue as raised in ground Nos. 2 and 3 relates to the deletion by the Ld. CIT(A) of the additions made by the A.O. to the total income of the assessee on account of undisclosed income arising from suppressed turnover.

4. The assessee in the present case is an individual who is engaged in the business of catering contractor in the name and style of his proprietary concern M/s. Niyantran Caterers. Search and seizure action under section 132 of the Act was conducted in his case on 12.12.2007. Consequently, notices under section 153A were issued by the A.O. on 26.08.2010 in response to which, the returns of income for A.Ys. 2002-2003 to 2007-2008 were filed by the assessee on 31.12.2008. The return of income for A.Y. 2008-2009 was also separately filed by the assessee on 15.10.2008. In the said returns, income declared by the assessee was as under :

A.Y. Returned Income 2002-03 1,83,705 2003-04 4,17,748 2004-05 4,70,556 2005-06 7,65,321 2006-07 12,95,523 2007-08 32,78,109 2008-09 72,50,860 3 ITA.No.1469 to 1475/Hyd/2012 &

ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

5. During the course of search, certain documentary evidence was found showing suppression of receipts of his catering business by the assessee. Such documents identified as page Nos. 15 to 16 and 92 to 94 of Annexure-A/BJ/01 contained entries showing undisclosed receipts of catering business by the assessee aggregating to Rs.56,17,750 during the previous year relevant to A.Y. 2008-2009. By applying the average gross profit rate of 52.58% as declared by the assessee from his catering business for A.Ys. 2003-2004 to 2007-2008, the undisclosed income of the assessee from suppression of catering receipts was worked out by the A.O. at Rs.29,53,813 and the said amount was added by him to the total income of the assessee for A.Y. 2008-2009. Although, there was nothing found during the course of search to show any suppressed receipts of catering business by the assessee for A.Ys. 2002- 2003 to 2007-2008, the A.O. estimated the suppressed sales of the assessee for the said year by adopting the ratio of suppression of receipts to the turnover disclosed by the assessee as found for A.Y. 2008-2009 and estimated the income of the assessee from such alleged suppressed catering receipts on similar line and applying the same formula as under :

A.Y. The The The G.P. as a The estimated turnover estimated percentage of undisclosed shown in suppression turnover as income from the trading after shown in the catering & P & L a/c applying the P & L a/c business attached rate of attached with arrived at by with the 206.45% the ROI applying the ROI found in G.P. rate of the respect of respective suppressed financial year. receipts for the F.Y. 2007-2008 4 ITA.No.1469 to 1475/Hyd/2012 &

ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

2007-2008 52,51,993 1,08,42,740 54.67 59,27,726 2006-2007 20,46,975 42,25,980 54.99 23,23,866 2005-2006 15,26,802 31,52,083 54.99 17,33,330 2004-2005 15,19,249 31,36,490 50 15,68,245 2003-2004 18,13,321 37,43,601 48.23 16,07,411 2002-2003 12,61,879 26,05,149 52.58 13,7,082 Total 1,47,37,660

5.1. Accordingly, additions were made by the A.O. to the total income of the assessee for A.Ys. 2002-2003 to 2007- 2008 on account of estimated undisclosed income of the assessee from the alleged suppressed catering receipts as above.

6. The additions made by the A.O. on account of undisclosed income from the suppressed catering receipts in all the seven years under consideration were disputed by the assessee in the appeals filed before the Ld. CIT(A). During the course of appeal proceedings before the Ld. CIT(A), it was pointed out by the assessee that evidence found during the course of search was sufficient only to show the suppression of catering receipts to the extent of Rs.56,17,750 for A.Y. 2008- 2009 and since income of Rs.50 lakhs was already offered by the assessee to tax as surrendered during the course of search to cover-up the income from suppressed catering receipts as well as other adverse findings, if any, of the search there was no justification in the action of the A.O. to make a separate addition of Rs.29,53,813 on account of undisclosed income of the assessee from the suppressed catering receipts. It was also submitted by the assessee that other than the five instances of unrecorded catering receipts found during the course of search amounting to Rs.56,17,750 for A.Y. 2008-2009, there was no material found during the course of search to show any other instance of suppression of catering receipts by the assessee. It 5 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

was contended that the A.O. however presumed the suppression of catering receipts for A.Ys. 2002-2003 to 2007- 2008 in the same ratio as that of A.Y. 2008-2009 and estimated the undisclosed income of the assessee on similar line without there being any evidence to support and substantiate the same. It was contended that making such additions by the A.O. without any evidence was totally erroneous and deserved to be deleted.

7. Ld. CIT(A) found merit in the submissions made by the assessee on this issue and deleted the entire additions made by the A.O. to the total income of the assessee on account of undisclosed income from the suppressed catering receipts for all the seven years under consideration for the following reasons given in para Nos. 7.3, 7.4 and 7.5 of his impugned order.

"7.3. I have considered the submissions made by the appellant, gone through the order of the A.O. and heard the A.R. in person and perused all other material on record, besides going through various case laws relied on by the appellant on the subject. It may be noted here that in course of the action under section 132(1), the department has come across unrecorded receipts on five papers, in all amounting to Rs.56,17,750/- and upon confrontation, the appellant has disclosed an income of Rs.50,00,000/- for the A.Y. 2008-09 and another amount of Rs.5,00,000/- for the A.Y. 2007-08 to cover all the deficiencies for the year under consideration, it may be noted here that the appellant has not gone back on declaration and as such the impugned declaration for the relevant assessment years is valid and accepted by the department on which there is no dispute. The dispute in this regard is as under:

7.4. In course of the assessment proceedings, it appears that the A.O. has found that the G.P. rate for the A.Y. 2008-09 was at 52.58%, and accordingly determined the element of income at Rs.29,53,813/- from the unrecorded 6 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

sales of Rs.56,17,750/- and added the same to the total income declared by the appellant, which is under challenge, it may however be noted here that the undisclosed income declared by the appellant for the impugned assessment year was at Rs.50,00,000/- including all other deficiencies including the unrecorded sales detected during the course of action under section 132(1). Thus, for this assessment year of 2008-09, making an addition from G.P. rate on unrecorded sales detected is not warranted. For other years, as the extrapolated turnovers were not as a result of material found during the course of action under section 132(1), such additions are also not sustained and the A.O. is directed accordingly.

7.5. In as much as the declaration made by the appellant for this assessment is concerned, it is seen that the appellant has made a declaration for Rs.50,00,000/-, but whereas actual amount shown in the computation of income was Rs.30,00,000/- only. When this was pointed out to the A.R. he has said that he would come back with proper explanation, which was not to be. In the circumstances, the A.O. is directed to add the remaining amount of Rs.20,00,000/- for this A.Y. 2008-09, while giving effect to this order. it may however be noted that as far as the A.Y. 2007-08 is concerned, the appellant has honored the declaration of Rs.5,00,000/- by including the same in the computation statement. Thus, the first ground of appeal is allowed for all the assessment years, with a direction to the A.O. for the assessment year 2008-09 as spell out herein above."

8. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. The Ld. Counsel for the assessee has supported the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue for A.Ys. 2002-2003 to 2007-2008 by relying on the decision of Special Bench of ITAT in the case of All Cargo Global Logistics vs. DCIT 137 ITD 287 (Mum.) (SB) wherein it was held that where the proceedings have reached finality before the date of search and where no incriminating material has been found 7 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

indicating undisclosed income, the A.O. would not be justified to make the additions by making the disallowances.

9. Learned D.R. on the other hand has relied on the decision of Hon'ble A.P. High Court in the case of Gopallal Bhadruka vs. DCIT 346 ITR 106 wherein it was held that for the purpose of section 153A/153C of the Act, the A.O. can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee. As pointed out by the Ld. Counsel for the assessee in this regard, the said decision of Hon'ble jurisdictional High Court in the case of Gopallal Bhadruka (supra) has already been considered by the Coordinate Bench of this Tribunal in the case of ACIT vs. Srinivasa Rao (ITA.No.1767 & 1768/Hyd/2011 dated 08.11.2013) and the same has been found to be distinguishable on facts as in the said case, the partners of the assessee firm had confirmed the receipt of on money in other years which was relied upon for making the assessment of the undisclosed income of the assessee firm. Since in the case of B. Srinivasa Rao (supra), there was no such admission by the assessee, the Tribunal held by relying inter alia on decision of Hon'ble Delhi High Court in the case of CIT vs. Anil Bhalla 322 ITR 19 (Del.), Allahabad High Court in the case of CIT vs. RML Mahapatra 320 ITR 403 (All) and Hon'ble Supreme Court decision in the case of Commissioner of Sales Tax vs. H.M. Esufali H.M. Abdulali 90 ITR 271 (SC) that undisclosed income cannot be estimated for the assessment year in question on the basis of seized material relating to some other assessment years.

8 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

10. The Coordinate Bench of this Tribunal in the case of Mr. B. Srinivas (supra) thus followed the proposition laid down by the Special Bench of this ITAT in the case of All Cargo Global Logistics Ltd., (supra) wherein it was held that the A.O. as per the scheme of the Act and as per section 153A of the Act, no doubt, shall initiate the assessments for all the six years prior to the assessment year in which the search had taken place, but he will get the free hand only in respect of those assessments which had not attained finality on the date of search. It was held that the pending assessments in such cases will abate and the A.O. while framing the assessment under section 153A/153C of the Act will get free hand through abatement and will frame the assessment afresh. It was held that where proceedings have reached finality, the assessment under section 153A read with 143(3) however has to be made as was originally made/assessed and further addition should be restricted only to the extent they are supported/justified by any material found during the course of search.

11. In this context, when it was pointed out to the Ld. Counsel for the assessee at the time of hearing that the search having been conducted in the case of the assessee on 12.12.2007, the assessment proceedings only up to A.Y. 2006- 2007 had become final and the assessment proceedings for A.Y. 2007-2008 being pending on the date of search, the scope of assessment for A.Y. 2007-2008 was wide akin to the regular assessment, he has not disputed this position. We, therefore, uphold the impugned order of the Ld. CIT(A) deleting the addition made by the A.O. on account of undisclosed income from the alleged suppression of catering receipts for A.Ys. 2002-2003 to 2006-2007 as there was no material found 9 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

during the course of search to support and substantiate the said addition and this position has not been disputed even by the learned D.R. We however, do not find ourselves in agreement with the Ld. CIT(A) giving similar relief to the assessee for A.Y. 2007-2008 as the assessment for that year was pending as on the date of search and the scope of the said assessment therefore was wide and not restricted to make addition only on the basis of material found during the course of search. We, therefore, uphold the impugned order of the Ld. CIT(A) on this issue for A.Y. 2002-2003 to A.Y. 2006-2007, but set aside the same for A.Y. 2007-2008 restoring the matter back to A.O. with a direction to decide the same afresh after giving an opportunity of being heard to the assessee.

12. In so far as A.Y. 2008-2009 is concerned, there is no dispute that relevant material found during the course of search revealed the fact that catering receipts to the extent of Rs.56,17,750 were suppressed by the assessee. On such receipts, the A.O. estimated the undisclosed income of the assessee by applying the average G.P. rate of 52.58% at Rs.29,53,813 and made the addition to that extent ignoring completely that income of Rs.50 lakhs surrendered during the course of search on account of suppression of catering receipts etc., was claimed to be offered by the assessee in the return of income filed for A.Y. 2008-2009. The Ld. CIT(A) however, rightly took note of this additional income declared by the assessee on account of suppression of catering receipts etc., and held that the addition of Rs.29,53,813 separately made by the A.O. was not sustainable. Having regard to all the facts and circumstances of the case including the additional income declared by the assessee, we find no infirmity in the impugned 10 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

order of the Ld. CIT(A) deleting the addition made by the A.O. on account of undisclosed income from suppression of catering receipts for A.Y. 2008-2009. Accordingly, the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue for A.Y. 2002-2003 to 2006-2007 and 2008-2009 is upheld while the same is set aside for A.Y. 2007-08. The relevant ground of the Revenue appeal i.e., ground Nos. 2 and 3 for A.Y. 2002- 2003 to 2006-2007 and 2008-2009 are dismissed while ground Nos. 2 and 3 of Revenue's appeal for A.Y. 2007-2008 are treated as allowed for statistical purposes.

13. The next common issue raised in ground Nos. 4 and 5 of the Revenue's appeal for all the years under consideration relates to the deletion by the Ld. CIT(A) of the addition made by the A.O. towards inflation of expenditure.

14. Along with the search action, survey under section 133A was simultaneously carried out on 12.12.2007 at the business premises of Hotel Tourist Plaza, Kachiguda where assessee was the Managing Director. During the course of said survey, debit vouchers of M/s. Niyantran Caterers were found and impounded as per pages 184 to 341 of Annexure- A/NTH/2007. These vouchers written by the same person were found to be without any supporting bills or vouchers. Most of the vouchers were not even signed by the receivers and the payments under said vouchers were also found to be made in cash. The expenses claimed under the said vouchers were mainly on account of labour, repairing charges, decoration, salary, petrol, diesel etc., and the total of such expenses was Rs.3,92,141 for A.Y. 2007-2008 and Rs.1,80,014 for A.Y. 2008-2009. Since the assessee could not give any satisfactory explanation regarding the lack of supporting bills or the 11 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

unsigned vouchers, the expenses of Rs.3,92,141 and Rs.1,80,040 claimed under the said vouchers were treated by the A.O. as the expenses inflated by the assessee and additions to that extent were made to the total income of the assessee for A.Ys. 2007-2008 and 2008-2009. The A.O. also noted that the inflated expenditure pertaining to A.Y. 2007-2008 amounting to Rs.3,92,141 was 9.04% of the total expenses claimed by the assessee. Applying the same percentage for the other years i.e., A.Y. 2002-03 to 2006-07, he estimated quantum of expenditure inflated by the assessee as under :

A.Y. Amount (Rs.) 2002-03 1,43,055 2003-04 1,39,315 2004-05 1,28,508 2005-06 1,36,965 2006-07 1,67,433

15. The additions made by the A.O. on account of the alleged inflated expenses were challenged by the assessee in the appeals filed before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), it was explained by the assessee in respect of each and every item of expenditure that the same was incurred during the ordinary course of assessee's catering business and having regard to the nature of such expenditure, it was not possible to support the same with some bills or any other external evidence. It was also submitted by the assessee that going by the nature of his business, the conclusion drawn by the A.O. that the relevant expenditure was inflated for want of supporting bills was completely erroneous. It was also pointed out by the assessee that the additional income declared by him for A.Ys. 2007- 2008 and 2008-2009 was completely ignored by the A.O. while making addition on account of alleged inflated expenditure for 12 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

the said two years. Reliance was also placed by the assessee in support of his case on this issue on the decision of Coordinate Bench of this Tribunal in the case of Hyderabad House P. Ltd., rendered vide its order dated 29.12.2012 wherein a similar addition made in the identical facts and circumstances was restricted by the Tribunal to 5% for the involvement of unverifiable elements.

16. The Ld. CIT(A) found merit in the submissions made by the assessee on this issue and directed the A.O. to restrict the addition made on this issue to 5% of the relevant expenses after certain verification or clarification by observing as under :

"8.3.5. Having regard to the facts and circumstances of the case with particular reference to the case of Hyderabad House P. Ltd., where similar operations took place, even though no incriminating documents were found, on expenditure incurred in cash, due to involvement of factors like self made vouchers, not producing bills and vouchers fully, non production of books, purchases from unorganized sectors etc., 15% disallowance made by the A.O. was reduced to 7% by CIT(A) and which was further reduced to 5% by the Tribunal. The case in hand of the appellant stands on a better foundation than the case of the Hyderabad House P. Ltd., where the material found in the action under section 132(1) like most of the payments were made in cash, vouchers were not signed by the recipients, purpose of payments were not mentioned and in most of the papers found dates were not mentioned, as culled out from page No.184 to page No.341 of annexure A/NTH/07. On the basis of such annexure, the A.O. has found unaccounted expenditure to the tune of Rs.3,92,141/- which is 9.04% debited to the profit and loss account for the A.Y. 2007-08 (for the months of April 2007 to November 2007) and based on this ratio, the A.O. has worked out disallowance of expenditure, which cannot be approved. But due to limitations on both sides of the appellant and the department, i.e., on the part of the 13 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

appellant limitations like cash payments, self made vouchers, payment vouchers not signed by recipients, absence of purpose of payments etc., limitations on the part of the department like evidences for inflation only for the assessment year 2007-08, that too for months from April 2007 to November 2007, the A.O. has to make some guess work from the trends available. Thus, rightly, the A.O. has extended the trend of inflation of expenditure found in the A.Y. 2007-08 to other assessment years. Such additions in 153A assessments have been adjudicated by the jurisdictional Hyderabad Tribunal in a no. of 153A assessments and in the case of Hyderabad House P. Ltd., such an issue was adjudicated directing the A.O. to restrict such disallowance to 5% of cash expenditure, other than the payments made through banking channels and other expenditure like payments to government agencies and the payments covered by ESI, P.F. and TDS. As seen from the records, since the cash expenditure other than the payments made to government agencies and payments covered by ESI, P.F. and TDS is not available, the A.O. is directed to find out such cash payments for every assessment year of the block period and restrict the impugned disallowance to 5% to meet the ends of justice, if necessary, the A.O. is directed to get the reconciliation from the appellant and also obtain necessary clarifications, if any, as may be deeming fit and re-compute the disallowance as directed herein above. In light of the above, this ground of appeal for all the impugned assessment years is treated as partly allowed."

17. We have heard the arguments of both the sides on this issue and also perused relevant material on record. As rightly submitted on behalf of the assessee before us as well as before the authorities below, it was not a case of any expenditure inflated by the assessee as alleged by the A.O. as the expenditure in question was in the nature of regular expenditure that is required to be incurred in the ordinary course of assessee's catering business. The defects/ deficiencies pointed out by the A.O. in the relevant vouchers were sufficient to show that the expenditure claimed by the 14 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

assessee was not fully verifiable, but there was no reason for the A.O. to allege that the same represented expenditure inflated by the assessee. Having regard to all these facts and circumstances of the case, we are of the view that the Ld. CIT(A) was fully justified in directing the A.O. to restrict the disallowance made on this issue to the extent of 5% of the relevant expenses for unverifiable element involved therein and his impugned order on this issue, in our opinion, does not call for any interference. It is pertinent to note here that the addition made on this issue although was supported by the evidence found during the course of survey for A.Ys. 2007- 2008 and 2008-2009, there was no such evidence to support this addition for A.Ys. 2002-2003 to 2006-2007. The assessee however, has not filed any appeal or cross objection disputing the disallowance confirmed by the Ld. CIT(A) to the extent of 5% of the relevant expenditure in these years apparently because of the smallness of the amounts involved. Ground Nos. 4 and 5 of the Revenue's appeal for all the seven years under consideration are accordingly dismissed.

18. The next common issue as raised in ground Nos. 6 to 9 of the Revenue's appeal for A.Ys. 2005-2006, 2006-2007, 2007-2008 and 2008-2009 relates to the deletion by the Ld. CIT(A) of the addition made by the A.O. on account of expenditure incurred by the assessee on foreign trips.

19. The documentary evidence found at Annexure- A/PJ/1 revealed that the assessee had undertaken foreign trips during the previous years relevant to A.Ys. 2005-2006, 2006-2007, 2007-2008 and 2008-2009. It was also found that the expenditure incurred for purchase of air tickets for the said trips was borne by M/s. Legend Estate P. Ltd. According to 15 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

the A.O. it was in the nature of benefits given by the said company to the assessee in view of his marketing services and hence, the amount of Rs. 1 lakh was added by him to the total income of the assessee as his undisclosed income for A.Ys. 2004-2005, 2005-2006, 2006-2007 and 2007-2008. He also held that the assessee must have incurred expenditure during all these foreign trips and estimating the same at Rs. 1 lakh, he made a further addition of Rs.1 lakh in all the four years on account of unexplained expenditure incurred by the assessee during the course of foreign trip.

19.1. The addition made by the A.O. on this issue amounting to Rs.2 lakh in each of the relevant four years i.e., A.Ys. 2005-2006, 2006-2007, 2007-2008 and 2008-2009 was challenged by the assessee in the appeals filed before the Ld. CIT(A) and the following submissions were made on his behalf before the Ld. CIT(A) to contend that the additions made by the A.O. on this issue were not sustainable.

9.2. "During the years under consideration I have travelled overseas with my family. The travel fare was borne by Legend Estates P. Ltd., This fact was admitted by legend Estates P. Ltd., The A.O. mentioned the same in the assessment order as well. This is an undisputed fact. The A.O. considers the same as my undisclosed income received in kind and estimates the same at Rs.1,00,000/- each for A.Ys. 2005-06 to 2008-09. Such a treatment is based on presumptions and not on facts. Thus, the addition is bad in law and deserves to be deleted.

The A.O. also made an addition of Rs.1,00,000/- each for A.Ys. 2005-06 to 2008-09 towards estimated unexplained expenditure for boarding, lodging etc., related to the foreign travel. In this regard, I would like to state that for meeting these expenses, I purchased foreign currency equivalent to Indian rupees from the following organisations as mentioned hereunder :

16 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

A.Y. Name of the organisation Amount 2005-06 Sambtek Forex Ltd., 66,600 2006-07 Sambtek Forex Ltd., 1,37,250 2007-08 Sambtek Forex Ltd., 1,79,000 2008-09 Sambtek Forex Ltd., 2,78,700

As per my instructions payment was made from Nimantran Caterers for the A.Ys. 2005-06, 2006-07 and 2007-08, my proprietary concern and debited to my Capital account. In respect of A.Y. 2008-09, the payment was made from Tourist India Convention and Hotels Pvt. Ltd., paid on my behalf by debiting my loan a/c. In this regard, I submit herewith copy of bank statement for the relevant periods for your records. The A.O. overlooked these facts all together. Out of the total foreign currency purchased for the A.Y. 2008-09, foreign currency equivalent to Rs.193575/- was expended. Since, I met expenditure on foreign travel, out of my own explained sources, the additions made by the A.O. are totally uncalled for. Therefore, I request you to delete the same."

19.2. The Ld. CIT(A) found merit in the submissions made by the assessee on this issue and deleted the addition made by the A.O. for all the relevant four years for the following reasons given para 9.3.1 and 9.3.2 of his impugned order.

"9.3.1. I have considered the submissions made by the appellant, gone through the order of the A.O. and heard the A.R. in person, besides perusing the material on record. It is true that the appellant was proprietor of M/s. Jadeja Finance through which real estate finance business was conducted, where Legend Estates Pvt. Ltd., was one of the parties availed financial facilities extended by the appellant through his finance proprietary concern. Probably due to business relations, the appellant and his family was given air tickets for foreign trips during the impugned assessment years. During such trips the appellant has spent monies for stay, food, entertainment and things like that from out of his business activities. The A.O. was of the view that the appellant has received benefits in lieu of his marketing services and of the view that as on lines of perquisites such value of tickets were taxable. At the same time the A.O. was also of the view 17 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

that the expenses incurred by the appellant during foreign tour were also taxable and such expenses were estimated by him. It may however be noted here that out of such expenses, the A.O. has disallowed only a part, may be because the appellant was accompanied by his family. Here, it has to be presumed that the A.O. has allowed proportionate expenditure incurred with respect to appellant, but not on other family members accompanied, may be such expenditure had to business nexus. But, having said this, whether such addition or disallowance of expenditure is required to be sustained ? The answer is as below.

9.3.2. It may be noted here that the A.O. has found from Legend Estates Pvt. Ltd that it has founded the air tickets for the appellant and hence the amount was not spent by the appellant and as such no addition is called for, for the simple reason that the source stands explained. Regarding, funding for other family members, it is true that no business nexus was there, but the A.O. could view in such a way in a regular assessment but not in 153A assessments, as the material found during the search action is the basis for such an addition here. Thus, both the air fares and expenditure incurred by the appellant stands explained as sources for air tickets was explained and the expenditure spent during such tours was met out of the business activities of the appellant. Another, question that might have bothered the A.O. must be that the appellant spent expenses during foreign tours, which was not proper for the reason that such expenses also could have been borne by Legend Estates Pvt. Ltd, who has sponsored the foreign tour as there was a nexus between the foreign tour and the business of Legend Estates Pvt. Ltd. The A.O. was perfectly right in his analysis, but as mentioned already, such analysis fits into grew when the assessment was made as a scrutiny case or in a reopened proceedings, but not in search assessments. Here, the material found during the course of action under section 132(1) is important, which is not the case here. In the alternative, as in the Hyderabad Tribunal's case like the Hyderabad Hotels Pvt. Ltd, vis-à- vis cash expenditure incurred which could not be explained to the A.O. properly and the facts and circumstances point out to inflation, a degree of disallowance was felt proper even in case of a search assessments, but, no such sanction by any of the 18 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

appellate authorities is available as on the impugned subject as on date. In view of this action of the A.O. is not approved and he is directed to nullify the additions made by him for all the assessment years under challenge."

20. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the additions made by the A.O. in the relevant four years i.e., A.Ys. 2005-2006, 2006-2007, 2007-2008 and 2008-2009 on account of expenses incurred on the foreign travels of the assessee are deleted by the Ld. CIT(A) inter alia on the ground that there was no material found during the course of search to support and substantiate the same. As already held by us in this context, the assessments for A.Ys. 2005-2006 and 2006- 2007 having been already completed on the date of search, the addition, if any, can be made to the total income of the assessee for the said years only on the basis of material found during the course of search. Since there was no such material found during the course of search, we uphold the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue for A.Ys. 2005-2006 and 2006-2007. As regards A.Ys. 2007- 2008 and 2008-2009, the position, however, is different inasmuch as the scope of the assessments made under section 147(3) read with section 153A is wide and akin to a regular assessment. In these two years, the claim of the assessee as made before the Ld. CIT(A) relying on the additional evidence filed before him for the first time in the form of copies of bank statements, loan account of M/s. Nimantran Caterers etc., was that the expenditure incurred on account of expenses during the foreign trips was out of explained source. It appears from the impugned order of the Ld. CIT(A) that this claim made by the assessee was accepted by him relying on the additional evidence filed by the assessee without giving any opportunity 19 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

to the A.O. to verify the same. We, therefore, find merit in the contention of the learned D.R. that this issue for A.Ys. 2007- 2008 and 2008-2009 should be restored to the file of A.O. for giving him an opportunity to verify the said additional evidence. Accordingly, we set aside the impugned order of Ld. CIT(A) on this issue for A.Ys. 2007-2008 and 2008-2009 and restore the matter to the file of the A.O. for deciding the same afresh in the light of additional evidence filed by the assessee before the Ld. CIT(A) after giving the assessee an opportunity of being heard. Ground Nos. 6 to 9 of Revenue's appeals for A.Ys. 2005-2006 and 2006-2007 are dismissed and for A.Ys. 2007- 2008 and 2008-2009 are treated as allowed for statistical purposes.

21. Now, we take-up the appeal of the assessee for A.Y. 2008-2009 being ITA.No.1702/Hyd/2012 which involves a solitary issue relating to the direction given by the Ld. CIT(A) to the A.O. to make the addition of Rs. 20 lakhs on account of income surrendered by the assessee during the course of search.

22. During the course of search, a declaration was made by the assessee surrendering Rs. 50 lakhs as additional income for A.Y. 2008-2009 on account of suppression of catering receipts etc., as found during the course of search. On perusal of the computation of total income filed by the assessee, the Ld. CIT(A), however, found that sum of Rs. 30 lakhs only was declared by the assessee as additional income surrendered during the course of search. Since the assessee could not offer any explanation in respect of the balance amount of Rs. 20 lakhs inspite of opportunity given in this regard, the Ld. CIT(A) directed the A.O. to add the balance 20 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

amount of Rs. 20 lakhs to the total income of the assessee for A.Y. 2008-2009. Aggrieved by this direction of the Ld. CIT(A), assessee has preferred this appeal before the Tribunal.

23. We have heard the arguments of both the sides and also perused the material on record. As noted at the outset, there is a delay of 56 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, the assessee has filed an application seeking condonation of the said delay and keeping in view the reasons given therein, we are satisfied that there was a sufficient cause for the delay on the part of the assessee in filing this appeal before the Tribunal belatedly. We, therefore, condone the said delay and proceed to dispose of the appeal of the assessee on merit.

24. At the time of hearing before us, the Ld. Counsel for the assessee has invited our attention to the copy of computation of total income placed at page-3 of the paper book as well as copy of Trading and Profit and Loss Account placed at page-4 of the paper book and submitted that although additional income of Rs. 30 lakhs only was offered in the computation of total income, the sum of Rs. 20 lakhs was separately offered by crediting the same as other income to the P & L Account. As rightly contended by the learned D.R. in this regard, this explanation was not offered by the assessee during the course of appellate proceedings before the Ld. CIT(A) in spite of specific opportunity afforded in this regard. She has contended that an opportunity may therefore be given to the A.O. to verify the explanation of the assessee. We find merit in this contention of the D.R. Accordingly, the impugned order of the Ld. CIT(A) on this issue is set aside and the matter is restored to the file of the A.O. with a direction to decide the 21 ITA.No.1469 to 1475/Hyd/2012 & ITA.No.1702/Hyd/2012 Mr. Pratap Jadeja, Hyderabad.

same after verifying the claim of the assessee that the amount of Rs. 20 lakhs credited to P & L account as other income represented the part amount of Rs. 50 lakhs surrendered during the course of search. The A.O. shall decide this issue after giving the assessee proper and sufficient opportunity of being heard. The appeal of the assessee is treated as allowed for statistical purposes.

25. In the result, appeals of the Revenue for A.Ys. 2002-2003, 2003-2004, 2004-2005, 2005-2006 and 2006- 2007 are dismissed while the Revenue's appeal for A.Ys. 2007- 2008 and 2008-2009 are treated as partly allowed for statistical purposes and the assessee's appeal for A.Y. 2008- 2009 is treated as allowed for statistical purposes.

Order pronounced in the open Court on 27.03.2015.

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 27th March, 2015

VBP/-

Copy to

1. Asst. Commissioner of Income Tax, Central Circle-2, 7th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.

2. Mr. Pratap Jadeja, 4-1-882/18 & 19, RBVR Reddy Complex, Tilak Road, Hyderabad.

3. CIT(A), Guntur

4. CIT-(Central), Hyderabad

5. D.R. I.T.A.T. "A" Bench, Hyderabad.

6. Guard File