TMI Blog2021 (11) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record to show that these debts are good so as to recovery from those persons. More so, there was no proper addresses available on record of these debtors so as to contact them for recovery. In this situation, we are of the opinion that these amounts are irrecoverable and the advances made during the course of business activity of the assessee has to be allowed as bad debts (business loss) and on recovery the same has to be taxed. The assessee has confirmed in his sworn statement recorded u/s. 132(4) on 13.10.2000 that 60% of advances made to Canoe and Porceine boat owners are bad debts. With these observations, we allow the grounds raised in appeal by the assessee and dismiss the relevant grounds in the revenue s appeal on this issue. Estimation of net income - HELD THAT:- There is a bank balance of ₹ 26,07,363 and physical cash of ₹ 26,970 totalling to ₹ 26,34,333. It is an admitted fact that it is generated from sale transaction of fish. In our opinion, it is fair to estimate only net income at 5% of the deposit by placing reliance on the order of the Tribunal in the case of M.A. Siddique v. DCIT [ 2020 (8) TMI 835 - ITAT BANGALORE] . C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the case of Smt. Daya Bai [ 1985 (1) TMI 39 - MADHYA PRADESH HIGH COURT] wherein it was held that under the Income-tax Act, levy of tax twice on the same income is not permissible. In the present case, since the advances made to boat owners was subject to tax out of which fish was supplied and Same was sold and the sale proceeds was shown as receivables from debtors. Allowing relief to the assessee as bad debts / business loss out of advances given to the boat owners is a separate issue. It is because of certain advances given to the boat owners was allowed as business loss, that cannot lead to the conclusion that the entire amount of unaccounted sales is to be taxed. Accordingly, these grounds of the revenue are dismissed. Amounts due to boat owners - HELD THAT:- As assessee explained that seized material CS/CS/1 regarding transaction of ₹ 35.47 lakhs is advances made to Purse-sein boat owners and also explained from the chartwise details of advances, there was liability of ₹ 11.57 lakhs which is sum due to the boat owners and credit has been given towards this amount. In our opinion, the outstanding liability due to boat owners and assessee s claim is supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) erred in not condoning the entire delay in filing block return for the purpose of interest u/s 158BFA. 9. The appellant craves for leave to add, to delete from, or to amend the Grounds of Appeal. 3. The assessee has also raised the following additional grounds:- 1. The order of assessment made on the appellant in the status of Individual u/s.158BC of the Act, is bad in law as the warrant of search was not in individual name to assume that search was initiated individually to make an assessment u/s.158BC but in the joint names and therefore, the assessment ought to have been made in the status of AOP having regard to the ratio of the decision of the Hon'ble Karnataka High Court in the case P.J.KUMAR [supra] and the decision of the Hon'ble ITAT, Bangalore B Bench in the case of SRI CHANDRA REDDY and DR. K.PRAVEEN KUMAR OTHERS [supra]. 2. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered. 4. The revenue has raised the following grounds:- 1. The order of the CIT(A) is opposed to law and facts of the case. 2. Excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in seized books as under: Ex.No. CHCS 2 ₹ 10,85,225 CHCS 42 ₹ 10,39,101 Total: ₹ 21,24,326 4.2 The CIT(A) has erred in not computing the profit on sale of fish, in spite of holding that only profit portion on account of sale of fish should have been assessed. 5. Amounts due to Purse-sein Boats Owners ₹ 11,57,000/-. 5.1 The learned CIT(A) erred in allowed the assessee's claim for liabilities amounting to ₹ 11.57 lakhs accepting the assessee's claim that the amounts are shown in seized material CH/CS/1. The learned CIT(A) failed to take note of the fact that the assessee is not fully disclosing the income earned on auction sales and also income earned by purchase and sale of raw fish. 5.2 The learned CIT(A) erred in allowing this claim without computing income from purchase and sale of fish. 6. Prior Period Advances: a. Canoe Boat Advances: ₹ 7,53,092 b. Purse-sein Boat Advances: ₹ 4,16,461 6.1 The CIT(A) has erred in deleting a portion of the advances made to the Canoe Boat Owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hitharaj 34,712 2.9.90 24,450 Laxminarayana 15,928 1.9.90 49,350 Ramanjenya 10,000 1.9.90 18,590 Sagar Deep 37,121 1.9.90 24,675 Suvarnakiran 10,000 1.9.90 7,990 S K Fisheries 5,000 2.9.90 1,380 Udaya Rashmi 25,000 1.9.90 20,680 Upkar 20,000 2.9.90 3,645 Chandrakiran 10,000 1.9.90 25,100 Vishva Indra 49,000 1.9.90 12,180 Sunder Enterprises 21,240 1.9.90 7,560 Gangajenya 8,000 1.9.90 2,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso found and seized. In the residential premises of Bharat Bhushan, one diary marked as Ex A/BB/1 containing details of advances given to various Canoe boat owners for purchase of fish relating to the firm was found and seized. In the business premises of assessee, one ledger marked CHCS-I containing details of advances given to Porceine boat owners on left hand side and amount payable to them at the right hand side was found and seized. Cash deposit of ₹ 26,07,363 in SB A/c No.2565 of Mahalaxmi Co-op. Bank standing in the name of Smt. Daya C. Mendon was found and seized and there was physical cash of ₹ 26,979 at the business premises of assessee found and seized. Consequently, assessment u/s. 158BC r.w.s. 143(3) of the Act was framed on 27.9.2002 for the block period 1.4.1990 to 6.9.2000 determining total income of ₹ 1,53,40,340 as follows:- Cash found : ₹ 26,34,333 Advance made to Canoe Boats : ₹ 69,38,192 Advance made to Porceine Boat : ₹ 35,47,380 Amount receivable on account of fish sales as on the date of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad debt. The claim of assessee was not allowed u/s. 36(1)(vii) r.w.s. 36(2) of the Act. However, it was allowed business loss u/s. 28 as the assessee had not maintained any books of account and to be allowed as business debt. According to the ld. AR, the lower authorities accepted the statement recorded u/s. 132(4) of the Act and it is nothing but cherry picking and the AO considered only the facts which is favourable to the department which is improper. He further submitted that the total advance is ₹ 104,85,472 out of which prior period expenses of ₹ 11,69,000 is not covered under the block period and the net advance is ₹ 93,16,572 only. The assessee offered 40% of ₹ 93,16,572 @ ₹ 37,26,628 as income of the assessee. As against this, the CIT(Appeals) sustained ₹ 45,10,374 which is to be corrected. The ld. AR relied on the order of the Tribunal in the case of Bharat Bhushan in IT(SS)A No.12/Bang/2010 dated 30.4.2020 wherein it was held as under:- 5. The next issue on merit is raised by the assessee as per Ground No. 7 in which this is a grievance of the assessee that assessing of ₹ 27,64,604/- being business advance made by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 26,34,333 Advance to Canoe boat owners : ₹ 26,98,077 Advance to Porceine boat owners : ₹ 14,98,952 ₹ 41,17,029 ₹ 67,51,362 However, consequent to notice u/s. 158BC dated 11.11.2000, the assessee filed return of income for the block period on 8.3.2001disclosing undisclosed income at ₹ 58,41,163 as follows:- Advance to Canoe boat owners : ₹ 26,35,000 Advance to Porceine owners : ₹ 14,18,952 Cash at bank and at the premises : ₹ 26,34,333 ₹ 66,88,285 Less: Liabilities outstanding 1. Nellakanth Plastics ₹ 7,27,442 2. M/s. Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not possible to accept this finding of the CIT(Appeals) as the assessee has identified the amount of bad debts out of total advances made by the assessee and it was duly reflected by the assessee in its statement recorded u/s. 132(4) of the Act. The department having no material in its hands, both the lower authorities rejected the claim of assessee in one way or the other which is not correct. 15. In the present case, the assessee advanced money to various fishermen without keeping any legal and proper documents and if the result of search was any loss to the assessee, then it has to be considered as business loss. Therefore, the assessee s claim has to be allowed in the absence of such enforceable books of account or legal documents. In the present scenario, even advances given with legal documents and securities were unable to be recovered and the assessee who has advanced money to various fishermen in the course of business activity which is undisclosed to the department, the claim of assessee has to be allowed as per statement recorded u/s. 132(4) of the Act. The authorities cannot reject the statement recorded u/s. 132(4) without bringing any material on record to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of CIT v. Milton Laminates Ltd. in ITA No.1022/2010 dated 24.1.2012 wherein it was held as under:- 7. In view of the above, we do not find any reason to interfere with the Tribunal's ultimate conclusion in allowing the assessee's appeal. Though some of the observations may not appeal to us, nevertheless, for the reasons somewhat different from those recorded by the Tribunal we come to the same conclusion. The decision of the apex court in case of Shelly Products (supra), was rendered in very different background. It was a case where the assessee had filed the return. The assessee had paid self-assessment tax on the income disclosed in the return. The Tribunal on appeal by the assessee held that the order of assessment passed by the Assessing Officer was ab initio void since he had no jurisdiction to deal with such proceedings. The Revenue sought reference before the High Court. When such reference was pending, the assessee applied to the Department for refund of the tax paid. It was in this background the apex court expressed the opinion that liability to pay income-tax does not depend on assessment being made and failure or inability to frame fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the ld. AR, in the present case, the above judgment cannot be applied as there was no annulment of assessment made by the AO and there was only disclosure of additional income on mistake of fact by the assessee. Being so, this being the block return, the assessee is not at all familiar in income tax matters and it is not fair to conclude that the return of income cannot be retracted if it is declared without understanding the nature of transactions by the assessee. According to him, the assessee declared income by mistake and the judgment of Supreme Court in Shelly Products (supra) is not coming in the way of assessee to retract the earlier income declared by the assessee. 21. The ld. AR relied on the decision of the Pune Tribunal in the case of ACIT v. Bajaj Finance Ltd. ITA Nos.288 to 291/PN/2014 dated 29.1.2015, wherein it was held as under:- 9. We have carefully considered the rival submissions. In our considered opinion, the discussion made by the CIT(A) in para 10 of the impugned order, which we have extracted above, settles the controversy in favour of the assessee. The reliance placed by the Revenue on the CBDT s Circular dated 31.10.1989 (supra) and the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance on the order of the Tribunal in the case of M.A. Siddique v. DCIT in ITA Nos. 62 to 66/Bang/2020 dated 14.8.2020 wherein it was held as under:- 42. As per Ground No. 3, the dispute is about addition of ₹ 103.68 Lacs made by the AO as per para 8 on page 23 of the assessment order by alleging that this amount is deposited by the assessee in Bhatkal Urban Cooperative Bank but the turnover declared by the assessee is of only ₹ 95.25 Lacs from sale of apartments and it was received by the assessee by way of cheques. The AO held that the assessee could not explain the source of this cash deposit and he added the full amount of cash deposit as assessee s unexplained income. Before CIT (A), this was the submission of the learned AR of the assessee as noted by CIT (A) in para 5.5.2 of his order that this is surprising that this addition is made by the AO without rejecting the books of account and the AO arrived at this figure of cash deposit without detailed discussion and by ignoring this aspect that the cash deposit in bank may not be turnover of the same year and it may be out of cash receipts from the credit sales of the earlier years and the AO has totally ignore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 95.25 Lacs from sale of apartments. This results into profit rate of 6.50%. Respectfully following this tribunal order, we hold that only profit element @ 6.50% of undisclosed turnover of ₹ 103.68 Lacs should be added instead of addition of ₹ 103.68 Lacs being total cash deposit in bank. This ground is partly allowed. 44. In the result, the appeal of the assessee in the case of Mr. Mohammed Safwan for A. Ys. 2015 16 in ITA Nos. 67/Bang/2020 is partly allowed in the terms indicated in the order. 25. Accordingly, this ground of the assessee is partly allowed. 26. Ground No.8 is regarding condoning the delay in filing block return for the purpose of interest u/s. 158BFA which is mandatory and consequential in nature and to be computed accordingly in the light of the judgment of the Hon ble High Court of Karnataka in CIT Anr. v. Smt. Sire Kanwar Bai (2010) CTR (Kar) 198 wherein it was held that the interest u/s. 158BFA(1) is levied to compensate the Government for withholding the taxes by the assessee and therefore, interest is payable only on the sum found payable by the assessee as per the assessment order as reduced by the tax paid prior to the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.] (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period. 31. Being so, the income for AY 2000-01 which is included in the return of income filed by the assessee and not unearthed by the department by way of any incriminating material cannot be considered as undisclosed income of the assessee. Therefore, the deletion of addition is justified. These grounds of the revenue are dismissed. 32. Grounds No.3 to 3.5 of the revenue re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and another as sale of fish. Being so, the CIT(Appeals) allowed the claim of the assessee that only profit element of this transaction can be taxed as it would be an asset, since the total cost of fish sales was adjusted out of the advances given to the boat owners. This view of ours is supported by the judgment of Madhya Pradesh High Court in the case of Smt. Daya Bai v. CIT, 154 ITR 248 (MP) wherein it was held that under the Income-tax Act, levy of tax twice on the same income is not permissible. In the present case, since the advances made to boat owners was subject to tax out of which fish was supplied and Same was sold and the sale proceeds was shown as receivables from debtors. Allowing relief to the assessee as bad debts / business loss out of advances given to the boat owners is a separate issue. It is because of certain advances given to the boat owners was allowed as business loss, that cannot lead to the conclusion that the entire amount of unaccounted sales is to be taxed. Accordingly, these grounds of the revenue are dismissed. 36. Grounds No.5 to 5.2 relate to amounts due to Purse-sein boat owners. Before the CIT(Appeals), the assessee explained that seized ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ₹ 7,53,052 as advance given to Canoe Boat owners prior to block period which is as follows:- a. Under Canoe boat advances 1. Sagar Kiran ₹ 1,50,000 2. Srirama, Kodikial ₹ 1,00,000 3. Meghadoot (Kamat) Ullal ₹ 1,10,000 4. Mahalakshmi Bengere ₹ 20,004 5. Mahalakshmi Fund Boloor ₹ 42,000 6. Chaitanya Fund, Ullal ₹ 1,31,048 7. Sri Anjeneya Bengere ₹ 2,00,000 ₹ 7,53,052 Advance to parties prior to block period ₹ 4,16,461 Total ₹ 11,69,553 40. Purse-sein boat Advance ₹ 4,16,461 : As per letter dated 2.8.2005 filed before the CIT(A), the assessee has claimed the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.9.90 15,040 Total 4,16,461 3,31,915 41. The assessee has referred to the seized book CHCS 137. On verification of the seized book it is seen that all the entries have commenced on 1.9.1990 and afterwards, and in none of the ledger account period prior to 1.4.1990 has been mentioned. These are shown in columns 4 5 above. Therefore, the assessee's claim regarding prior period items is not supported by any seized materials. Therefore, according to the ld. DR, the orders of the CIT(A) on this issue are not acceptable. 42. We do not find any infirmity in this finding of the CIT(Appeals) which is based on material facts emanating from the seized material. These grounds of the revenue are dismissed. 43. Grounds No.7 to 7.2 are regarding liabilities for purchases not paid. During the course of hearing before the CIT(Appeals), the ld. AR pointed out that in question No.17 of statement recorded during the course of search, Shri Bharat Bhushan, partner, has stated that purchases since 1st September upto date of search have not been paid. These paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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