TMI Blog2014 (9) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... al - addition is more on presumption than on evidence - addition made is not sustainable - decided in favour of assessee. Addition of undisclosed income – Held that:- Assessee had purchased three DDs totaling to ₹ 1 lakh in the name of his sister Smt. Suchitra Krishnamurthy on 03/11/1999 - assessee is not consistent with his explanation in respect of the source of DDs purchased - the purchase of DD has not been reflected in the books of account of the company either on the date of purchase or subsequent thereto - cash flow statement of the assessee, as found by the learned CIT(A), does not show out flow of cash towards purchase of DDs - assessee's explanation that it was out of cash available with him and the company is devoid of merit and cannot be accepted - assessee has not been able to explain the source of purchase of DDs with cogent evidence – the order of the CIT(A) is upheld - Decided against assessee. Implant receipts as undisclosed income – Held that:- The register was seized from the possession of the company M/s Andromeda Foundation (India) Pvt. Ltd. - assessment if any in reference to the seized material should have been made in case of the company and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 04/11/1999. Pursuant to the search and seizure operation notice u/s 158BC was issued to the assessee on 20/09/2000 calling for return of income for the block period. In response to the said notice assessee filed his return of income for the block period on 17/01/2001 declaring 'Nil' undisclosed income. During the assessment proceeding, the AO noticed that page no. 34 of the seized material A/SK/6 contained recordings of expenses incurred for civil construction work for a flat purchased. Further, AO noted that at the time of search, while explaining notings in the seized material assessee had stated that he had spent ₹ 2,50,000/- for interior works for his premises at Topaz Building but no reference was given to what these figures relate. In response to query raised by the AO proposing to treat the amount of ₹ 5,20,000/- mentioned in the seized material as investment made in flat, the assessee explained that the notings in the seized material is only an estimate in his wife's handwriting but actually amounts were not spent. However, the AO was not convinced with the explanation of the assessee and was of the view that assessee has incurred these expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been incurred in AY 1996-97. It is highly improbable that an expenditure incurred in FY 1995-96 will be noted in February 1998. For this reason alone the addition made by the AO cannot be sustained. That apart, it is a fact on record that besides the seized material i.e. page no. 34, there are no other evidence or material on record to show that the assessee has actually incurred the expenditures noted in the seized material. Further, a reference to the seized material will show that though there are twenty seven items of expenditure, however, all of them are in round figures only. This, in our view gives credence to the fact that the seized material is only an estimate. If at all it is to be believed that assessee has actually incurred all these expenditures, it is not at all possible that the department did not come across any bill, voucher or any other material to show incurring of expenditure even in case of a single item mentioned in the seized material. On a perusal of the assessment order and order of CIT(A) it becomes clear that addition is more on presumption than on evidence. In aforesaid view of the matter, we hold that addition made of ₹ 2,60,000/- is not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, in statement dated 31/12/2001, it was stated by the assessee that demand drafts were purchased by him out of cash available from his own income as well as advance payments made by patients for procurement of materials. Again in response to query made by the AO, assessee in his letter dated 31/01/2005 stated that DDs were purchased out of cash available with himself, his wife and the company wherein both he and his wife are Directors. From the above, it is clear that assessee is not consistent with his explanation in respect of the source of DDs purchased. It is a fact on record that the purchase of DD has not been reflected in the books of account of the company either on the date of purchase or subsequent thereto. Similarly cash flow statement of the assessee, as found by the learned CIT(A), does not show out flow of cash towards purchase of DDs. In these circumstances, assessee's explanation that it was out of cash available with him and the company is devoid of merit and cannot be accepted. It is clear from the facts on record that assessee has not been able to explain the source of purchase of DDs with cogent evidence. In the aforesaid circumstances, the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppressed income of the assessee who is the director of the company. Accordingly, he treated the amount of ₹ 1,48,000, ₹ 7,81,150/- ₹ 3,14,850/- as undisclosed income of the assessee for the AYs 1995-96, 1996-97 and 1997-98 respectively. 17. Being aggrieved of such additions, assessee challenged the same before the CIT(A). The CIT(A) also upheld the additions made by the AO except granting partial relief by reducing the addition for the AY 1996-97 by an amount of ₹ 5,849/-. 18. The learned AR, at the outset, submitted before us since the AO admits that the seized material i.e. register was found from the possession of company, any addition in reference to the seized material if at all in any assessment has to be made in case of the company and not in case of assessee. Further, the learned AR submitted that the assessee had explained from the very beginning that the receipts from implant devices for the FY 1994-95 were by the partnership firm Virility Systems and for FY 1995-96, the receipts were shown by the assessee in his individual hands and income was offered to tax. In FY 1996-97, the business was taken over by the company and the receipts refl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en reflected in the books of account of the company and forms part of the P L account. The department has not brought any material on record to controvert these facts. That being the case, receipts from implant devices as found noted in the seized material cannot be considered as undisclosed income of the assessee. Further, as can be seen, AO has treated the entire receipts as income of the assessee in stead of considering the profit element. In view of the aforesaid fact, we hold that the implant receipts as found in the register seized from the possession of the company cannot be treated as undisclosed income of the assessee. Accordingly, we direct the AO to delete the same. 21. In the result, assessee's appeal is partly allowed. IT(SS)A No. 5/Hyd/2012 - revenue appeal 22. The only issue in the aforesaid appeal of the department is in respect of CIT(A) deleting addition of ₹ 21,00,125/-. 23. Briefly the facts are, during the search and seizure operation in the residential premises of the assessee, a register was found and seized wherein certain credits, deposits in the bank account of the assessee in FY 1993-94 to 1999-2000 in respect of two savings bank acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of appeal before the Tribunal In view of the above, I am constrained to hold that the addition of ₹ 21,00,125/- made by the AO on account of unexplained deposits in the bank account is beyond the scope of the remand proceedings and therefore, the addition cannot be sustained. However, the issue has been examined even on merits. The AO has worked out the addition of ₹ 23,88,062/- as below:- The chart given by the AO shows bank deposits in two bank accounts, viz., A/c No. 4061 and A/c No. 56230. But, from the records, it seen that the bank account No. 56230 belongs to his wife, Dr. Kiran Krishnamurthy and her deposits and the income thereon has been considered in her assessment proceedings by the same AO. When the deposits in Dr. Kiran's account, i.e. A.c No. 56230 belongs to her, it cannot be again considered in the assessee's hands. That leaves the bank deposits appearing in A/c No. 4061 which stands at ₹ 14,74,130/-. The AO, while computing the difference between the deposits and the income admitted, has arrived at ₹ 6,38,354/- (Rs. 14,74,130- 8,35,776). This amount has been explained as borrowals taken from friends and relatives whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceeding on being remanded by the Tribunal the AO cannot consider a issue which was not a subject matter of appeal before the Tribunal. In this regard we refer to the decision of Hon'ble M.P. High Court in case of CIT Vs. Late Jawaharlal Nagpal, 171 ITR 136 and Hon'ble Allahabad High court in case of S.P. Kochhar Vs. ITO, 145 ITR 255. The Hon'ble Allahabad High court in the cited case has held as under: What thus comes out is that the powers of the AAC are wider than those of the Tribunal. The AAC while hearing an appeal under s. 251 of the Act can examine all matters covered by the assessment order and correct the assessment in respect of all such matters even to the prejudice of the assessee. He may remand the case to the ITO for enquiring into the items which were not the subject-matter of appeal also. If he sets aside an assessment and remands the case to the ITO for making a fresh assessment, the powers of the ITO while making the fresh assessment are the same as if he were making an original assessment under s. 143(3) of the Act. The AAC can, however, limit the powers of the ITO by giving suitable directions in regard to the scope of enquiry by th ..... 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