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2020 (10) TMI 752 - AT - Income TaxBlock assessment order on the issue of limitation - Time limit for completion of block assessment - special audit u/s.142(2A) - time limit available for completing assessment in terms of proviso to Explanation 1 to section 158BE - AR contended that the Hon’ble Bombay High Court did not render any specific adjudication on the validity of second order u/s.142(2A) in its interim order dated 3.6.2008 and hence the period of limitation should not considered with reference to such date - HELD THAT:- There remains no iota of doubt on this position, when we observe that the writ petition filed against the second order u/s 142(2A) was eventually withdrawn by the assessee. We hold that the block assessment order passed by the AO on 26.6.2008 is within the limitation period seen in the light of clause (ii) of Explanation 1 to section 158BE read with the proviso. Ex consequenti, these grounds are dismissed. Unexplained investment in Sai Farm House and Cattle Shed - HELD THAT:- Despite the fact that the amount of investment in Cattle Shed as per the seized material was ₹ 2,77,727/-, the AO preferred to go with the higher value, on the basis of Registered valuer’s report, at the time of determining total undisclosed income towards the investment in Cattle Shed. While considering undisclosed investment in Sai Farm House, the AO adopted the value as per the seized material, which was more than the amount determined by the Registered Valuer at ₹ 37,05,500/- and the DVO at ₹ 49,76,921/-. However, while finding out unexplained investment in Cattle Shed, the AO chose to go with the higher value given by the Registered Valuer in preference to the amount as appearing in the seized material. Such approach, in our considered opinion, is not correct. The AO was supposed to determine the extent of undisclosed income towards undisclosed investment in Sai Farm House and Cattle shed on the basis of seized material. The total amount which called for the addition comes to ₹ 57,66,245/- (₹ 54,88,518 + ₹ 2,77,727). As against this, the assessee voluntarily declared undisclosed income of ₹ 53,91,887/-. This shows that further addition on this score is called for at ₹ 3,74,358/-. We, therefore, restrict the addition made and sustained in the first appeal at ₹ 13,34,231/- to ₹ 3,74,358/-. This sub-ground is partly allowed. Disallowance of Bad Debts in relation to Vaishnavi Petrol Pump - HELD THAT:- We are concerned with the sale of petrol and diesel etc. outside the books of account, which runs on thin margin. Once there is a cycle of making purchase of petrol and diesel etc. outside and books of account and its later sale, the AO should have considered the profit element from such sale and the initial investment. As against the total sale outside the books of account at ₹ 1.59 crore, the assessee itself offered undisclosed income of ₹ 68.69 lakh. It is duty of the authorities to guide the assessee, if there is some excess offering of income on a misconception and then correct it. Attempt should be to determine correct income and not to take undue advantage of the assessee’s ignorance. Since the suo motu offering of income by the assessee on this count is much more than the income that ought to have been offered, if properly instructed, we order to delete the addition of ₹ 90.51 lakh. Disallowance of Bad Debts relating to M. S. Swami Petrol Pump - HELD THAT:- The combined position of both the petrol pumps on this score is that there were gross sales outside the books of account at ₹ 2.28 crore (₹ 1.59 crore plus ₹ 68.57 lakh). Combined amount of bad debts is ₹ 1.01 crore (₹ 80.51 lakh plus ₹ 20.86 lakh). Combined net good sales made outside the books of account come to ₹ 1.27 crore (₹ 2.28 crore minus ₹ 1.01 crore). As against this, the combined amount offered by the assessee is ₹ 73.73 lakh (₹ 68.69 lakh plus ₹ 5.04 lakh). This gives income at the rate of 58% of the net sales made outside the books of account. When we consider the lower level of profit on the sale of petrol and diesel etc., this amount turns out to be much more than the normal initial investment in such type of business and the profit thereon. Addition u/s 40A(3) could not be made in the computation of undisclosed income u/s.158BC - See DHANVARSHA BUILDERS AND DEVELOPERS (P.) LIMITED. [2005 (10) TMI 276 - ITAT PUNE-A]
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