The ITO, Ward-1(3), Visakhapatnam v. Sri P Bhima Rao, Visakhapatnam

ITSSA 19/VIZ/2005 | misc
Pronouncement Date: 17-02-2010 | Result: Dismissed

Appeal Details

RSA Number 1925316 RSA 2005
Assessee PAN AAFHP1312K
Bench Visakhapatnam
Appeal Number ITSSA 19/VIZ/2005
Duration Of Justice 4 year(s) 10 month(s) 8 day(s)
Appellant The ITO, Ward-1(3), Visakhapatnam
Respondent Sri P Bhima Rao, Visakhapatnam
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 17-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 17-02-2010
Assessment Year misc
Appeal Filed On 08-04-2005
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SRI B.R. BASKARAN ACCOUNTANT MEMBER I.T(SS).A. NO.19/VIZ/2004 BP: 1-4-1989 TO 27-8-1999 SHRI P. BHIMARAO (HUF) VISAKHAPATNAM VS. ACIT CIRCLE-1(1) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAFHP 1312 K IT(SS)A NO.16/VIZAG/2005 BP: ENDING 27.8.1999 SHRI P. BHIMARAO (HUF) VISAKHAPATNAM (APPELLANT) VS. ACIT CIRCLE - 1(1) VISAKHAPATNAM (RESPONDENT) PAN NO.AAFHP 1312 K IT(SS)A NO.19/VIZAG/2005 BP ENDING: 27.8.1999 ITO WARD-1(3) VISAKHAPATNAM VS. SHRI P. BHIMARAO (HUF) VISAKHAPATNAM PAN NO.AAFHP 1312 K APPELLANT BY : SHRI C.V.S. MURTHY CA RESPONDENT BY : SHRI SUB RATA SARKAR CIT (DR) O R D E R PER B..R. BASKARAN ACCOUNTANT MEMBER : THE APPEAL NUMBERED AS IT(SS)A NO.19/VIZAG/200 4 FILED BY THE ASSESSEE RELATE TO THE QUANTUM ASSESSMENT AND OTHER TWO CROS S APPEALS RELATE TO THE PENALTY LEVIED U/S 158BFA(2) OF THE ACT. SINCE ALL THE THREE APPEALS WERE HEARD TOGETHER WE FIND IT CONVENIENT TO DISPOSE THEM OF BY THIS COMMON ORDER. A. IT(SS)A NO.19/VIZAG/2004 1. THE APPEAL OF THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 25.3.2003 PASSED BY LD CIT(A)-I HYDERABAD AND IT RELATES TO THE BLOCK PERIOD ENDING ON 27.8.1999. 2. IN THE LATEST REVISED GROUNDS OF APPEAL FILE D BY THE ASSESSEE ON 11.11.2008 FOLLOWING ISSUES ARE CONTESTED. 2 A. ADDITION OF RS.10 89 014/- RELATING TO THE DIFFE RENCE IN THE COST OF CONSTRUCTION. B. ADDITION OF AMOUNT RECEIVED FROM FOLLOWING PERSO NS: (I) G.SAKUNTHALA - RS.10 0 00/- (II) P.VISVESWARA RAO - RS.20 000/- (III) G.RAMA MOHANA RAO - RS.20 000/- C.. MISTAKE IN DEPRECIATION CLAIM - RS.34 4 77/- D. INTEREST INCOME NOT DISCLOSED - RS.57 69 1/- E. GAIN ON SALE OF DEPRECIABLE ASSET - RS.2 16 957 /-. 3. THE FACTS RELATING TO THE CASE ARE SET OUT I N BRIEF. THE ASSESSEE IS ENGAGED IN BUSINESS OF CONSTRUCTION OF BUILDINGS UNDER THE NAME AND STYLE M/S RAO CONSTRUCTIONS. SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT IN THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 27.8.1999. SUBSEQUENTL Y O 21.10.1999 THE ASSESSEE FILED AN AFFIDAVIT MAKING A DISCLOSURE OF RS.5.00 LAKHS AS HIS UNDISCLOSED INCOME FOR THE BLOCK PERIOD FROM THE CO NSTRUCTION ACTIVITIES. ACCORDINGLY THE ASSESSEE ALSO FILED HIS BLOCK RETUR N. THE ASSESSING OFFICER DETERMINED THE UNDISCLOSED INCOME AT RS.58 78 828/ -. THE ASSESSEE GOT PARTIAL RELIEF IN HIS APPEAL FILED BEFORE LD CIT(A). STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE FIRST ISSUE RELATES TO THE ADDITION ON A CCOUNT OF UNEXPLAINED INVESTMENT. THE ASSESSEE HAD CONSTRUCTED A BUILDING NAMED M/S D OCTORS & DOCTORS PLAZA BY ENTERING INTO AN AGREEMENT WITH THE PLOT OWNERS NUM BERING SEVEN WHO HELD UNDIVIDED SHARES THEREIN. THE YEAR WISE GROSS RECE IPTS DISCLOSED BY THE ASSESSEE TO THE DEPARTMENT ARE LISTED BELOW: ASSESSMENT YEAR AMOUNT 1996-97 6 44 000 1997-98 49 15 000 1998-99 30 35 070 1999-00** 10 57 100 ----------------- 96 51 170 ========== (** FILED AFTER THE DATE OF SEARCH) THE ASSESSEE OFFERED INCOME U/S 44AD OF THE ACT @ 8 % OF THE GROSS RECEIPTS FOR THE ASSESSMENT YEARS 1996-97 1998-99 AND 1999-2000 . FOR THE ASSESSMENT YEAR 1997-98 THE ASSESSEE MAINTAINED BOOKS OF ACCO UNT AND FILED THE RETURN OF 3 INCOME ALONG WITH TAX AUDIT REPORT. THE AO REFERRE D THE MATTER OF VALUATION OF BUILDING TO THE DVO WHO ESTIMATED THE COST OF CONST RUCTION OF THE BUILDING AT RS.124.87 LAKHS BEFORE ALLOWING DEDUCTION FOR SELF SUPERVISION @ 3.5%. THE AO TREATED THE DIFFERENCE IN THE VALUE OF BUILDING AS THE INVESTMENT MADE BY THE ASSESSEE. THE AO DETERMINED THE UNDISCLOSED INVEST MENT IN THE BUILDING AT RS.38 92 930/-. LD CIT(A) REDUCED THE VALUE OF UND ISCLOSED INVESTMENT TO RS.10 89 014/-. 4.1 THE FIRST CONTENTION OF THE LD AR IS THAT N O INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH WHICH WARRANTS AN ADDIT ION TOWARDS THE COST OF CONSTRUCTION. IN THIS REGARD LD AR PLACED RELIANC E ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASHOK KHETR APAL (2007) (294 ITR 143). ACCORDINGLY LD AR CONTENDED THAT THERE IS NO JUSTIF ICATION FOR MAKING A REFERENCE TO THE VALUATION CELL IN BLOCK ASSESSMENT PROCEEDIN GS WHICH IS JUST A POST SEARCH ENQUIRY. HENCE ANY ADDITION MADE ON THE BASIS OF POST SEARCH ENQUIRY IS LIABLE TO BE QUASHED IN BLOCK ASSESSMENT PROCEEDINGS. TH E NEXT CONTENTION OF THE LD AR IS THAT THE TAX AUTHORITIES HAVE WRONGLY PRESUME D THAT THE ASSESSEE HIMSELF HAS CONSTRUCTED THE IMPUGNED BUILDING. THE FACT IS THAT THE ASSESSEE IS ONLY A CONTRACTOR WHO HAS CONSTRUCTED THE BUILDING ON THE BEHALF OF OTHERS AND HENCE THE QUESTION OF MAKING ANY UNDISCLOSED INVESTMENT B Y THE ASSESSEE DOES NOT ARISE AT ALL. EVEN FOR A MOMENT IT IS ASSUMED THA T THE ASSESSEE HAS SPENT MONEY SINCE THE ASSESSEE IS A BUILDER AND THE BUIL DING IS HIS CURRENT ASSET THE COST OF CONSTRUCTION WILL CONSTITUTE ONLY AS HIS EX PENDITURE AND HENCE IT WILL NOT GIVE RISE TO ANY UNDISCLOSED INCOME. 4.2 ON THE OTHER HAND LD DR SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE FACT OF EARNING ADDITIONAL INCOME IN THE STATEMENT TAKEN FROM HIM DURING THE COURSE OF SEARCH. FURTHER THE ASSESSEE HAS ALSO FI LED AN AFFIDAVIT OFFERING UNDISCLOSED INCOME OF RS.5.00 LAKHS. THE ASSESSEE HAS ADMITTED THAT HE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUNT AND HENCE T HE AO WAS RIGHT IN REFERRING THE MATTER OF VALUATION TO THE DVO. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS A CIVIL CONTRACTOR. HE HAS CO NSTRUCTED THE IMPUGNED BUILDING NAMED DOCTORS & DOCTORS PLAZA BY ENTERING CONSTRU CTION AGREEMENT WITH THE OWNERS OF THE PLOT. SINCE THE ASSESSEE IS NOT THE OWNER OF THE BUILDING THE 4 QUESTION THAT ARISES IS WHETHER THE DIFFERENCE IN T HE COST OF CONSTRUCTION OF THE BUILDING IF ANY IS ASSESSABLE IN THE HANDS OF THE ASSESSEE. THE ANSWER COULD ONLY BE NO SINCE IT IS IN THE COMMON KNOWLEDGE O F EVERY BODY THAT NO CONTRACTOR WOULD INVEST HIS OWN MONEY IN THE CONSTRUCTION OF B UILDING BELONGING TO OTHERS. IN THE INSTANT CASE THERE IS NO PROOF TO SHOW THAT THE ASSESSEE HAS PUT IN HIS OWN MONEY IN THE CONSTRUCTION. IT IS NOW WELL SETTLED THAT THE BLOCK ASSESSMENT CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL SEIZED DURING THE COURSE OF SEARCH. THOUGH THE AO STATES IN THE PREAMBLE OF TH E ASSESSMENT ORDER THAT DEPARTMENT COULD LAY ITS HAND ON SOME OF THE BOOKS OF ACCOUNT AND INCRIMINATING MATERIAL AND EVIDENCES THE SAID OBSERVATION OF THE AO IS VERY VAGUE WITHOUT POINTING OUT TO ANY SPECIFIC MATERIAL. AT THE TIME OF DISCUSSING THE SPECIFIC ISSUE ALSO THERE IS NO REFERENCE TO ANY OF THE SEIZED MA TERIAL. IN THIS REGARD IT IS PERTINENT TO REFER TO THE HEAD NOTES OF THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF ASHOK KHETRAPAL REFERRED SUPRA WHICH R EADS AS UNDER: THE SPECIAL PROCEDURE OF CHAPTER XIV-B OF THE INC OME TAX ACT 1961 IS INTENDED TO PROVIDE A MODE OF ASSESSMENT OF UNDISCL OSED INCOME WHICH HAS BEEN DETECTED AS A RESULT OF SEARCH. UNDER THIS CH APTER BEFORE AN ADDITION OF AN UNDISCLOSED INCOME CAN BE MADE THE ASSESSING OFF ICER HAS TO BRING ON RECORD THE MATERIAL TO SHOW THAT ON EVIDENCE FOUND AS A RE SULT OF SEARCH THERE IS AN UNDISCLOSED INCOME REPRESENTED BY THE CREDITS APPEA RING IN THE BOOKS OF ACCOUNT. HENCE IN A BLOCK ASSESSMENT PROCEEDING AN ADDITIO N CAN BE MADE ONLY ON THE BASIS OF THE INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH. FROM THE ASSESSMENT ORDER IT IS NOT DISCERNIBLE WHETHER THE RE WAS ANY INCRIMINATING MATERIAL. FURTHER THE ASSESSEE HEREIN IS ONLY A C ONTRACTOR AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE MON EY REQUIRED FOR THE ADDITIONAL INVESTMENT IF ANY WAS BROUGHT IN BY THE ASSESSEE. LEAVING ASIDE THE QUESTION WHETHER REFERENCE TO DVO IS PROPER OR NOT IN OUR O PINION NO ADDITION IS WARRANTED IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE REPORT OF THE DVO FOR THE REASONS STATED ABOVE. ACCORDINGLY WE REVERSE T HE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT. 5. THE NEXT ISSUE RELATES TO THE ADDITION OF CR EDITORS BALANCE AGGREGATING TO RS.50 000/-. AS STATED EARLIER THE ASSESSEE DID N OT MAINTAIN BOOKS OF ACCOUNT FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT Y EAR 1996-97 SINCE HIS GROSS CONTRACT RECEIPTS WERE LESS THAN RS.40.00 LAKHS. H OWEVER THE GROSS CONTRACT 5 RECEIPTS FOR THE FINANCIAL YEAR RELEVANT TO THE ASS ESSMENT YEAR 1997-98 EXCEEDED RS.40.00 LAKHS. HENCE THE ASSESSEE PREPARED BOOKS OF ACCOUNT BY DRAWING A OPENING BALANCE SHEET AS ON 1.4.1996 ON SOME BASIS AND FILED THE RETURN OF INCOME PRIOR TO THE DATE OF SEARCH. THE OPENING BA LANCE SHEET CONTAINED FOLLOWING THREE CREDITORS. G.SAKUNTHALA - RS.10 000/- P.VISVESWARA RAO - RS.20 000/- G.RAMA MOHANA RAO - R S.20 000/- THE AO TREATED THESE THREE CREDITORS AS THE UNDISCL OSED INCOME OF THE ASSESSEE SINCE THE GENUINENESS OF THESE THREE LOANS WAS NOT PROVED. HOWEVER THE UNDISPUTED FACT IS THAT THE EXISTENCE OF THESE THRE E CREDITORS HAD BEEN DISCLOSED TO THE DEPARTMENT BY FILING THE RETURN OF INCOME PR IOR TO THE DATE OF SEARCH. FURTHER THE REVENUE HAS NOT SEIZED ANY INCRIMINATIN G MATERIAL TO SUGGEST THAT THESE THREE CREDITORS ARE BOGUS. HENCE THE QUESTIO N OF APPLICABILITY OF SECTION 68 OF THE ACT WOULD ARISE ONLY DURING THE COURSE OF RE GULAR ASSESSMENT PROCEEDINGS. ACCORDINGLY WE REVERSE THE ORDER OF LD CIT(A) ON TH ESE THREE ADDITIONS AND DIRECT THE AO TO DELETE THE ADDITION MADE ON THESE THREE I TEMS. 6. THE NEXT ISSUE RELATES TO THE MISTAKE IN THE DEPRECIATION CLAIM. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSM ENT YEAR 1996-97 U/S 44AD OF THE ACT BY ESTIMATING INCOME @ 8% OF THE GROSS RECE IPTS. IN THE SUCCEEDING ASSESSMENT YEAR 1997-98 THE ASSESSEE PREPARED THE BOOKS OF ACCOUNT AND FILED THE RETURN OF INCOME ALONG WITH TAX AUDIT REPORT S INCE ITS GROSS RECEIPTS EXCEEDED RS.40.00 LAKHS. THE ASSESSEE HAD PURCHASE D A LORRY ON 01-9-1995 AT A COST OF RS.5 51 601/-. IN THE RETURN OF INCOME R ELATING TO THE ASSESSMENT YEAR 1997-98 THE ASSESSEE CLAIMED DEPRECIATION ON THE O RIGINAL COST OF THE LORRY @ 25% WHICH AMOUNTED TO RS.1 37 900/-. ACCORDING TO THE AO THE ASSESSEE SHOULD HAVE CALCULATED DEPRECIATION ON THE WDV AS O N 1.4.1996 SINCE THE DEPRECIATION RELATING TO THE ASSESSMENT YEAR 1996-9 7 SHALL BE DEEMED TO HAVE BEEN ALLOWED U/S 44AD OF THE ACT. ACCORDING TO THE AO THE DEPRECIATION ACTUALLY ALLOWABLE WORKS OUT TO RS.1 03 425/-. HENCE THE AO TOOK THE VIEW THAT THE EXCESS DEPRECIATION TO THE EXTENT OF RS.34 477/- CLAIMED B Y THE ASSESSEE IS ASSESSABLE AS UNDISCLOSED INCOME AND ADDED THE SAME. LD CIT(A ) ALSO CONFIRMED THIS ADDITION ON THE GROUND THAT THE DEFINITION OF THE T ERM UNDISCLOSED INCOME AS 6 PROVIDED U/S 158B(B) HAD BEEN AMENDED TO INCLUDE DE DUCTION CLAIMED UNDER THE ACT WHICH IS FOUND TO BE FALSE. 6.1 IT IS FACT THAT THERE WAS A MISTAKE IN THE CALCULATION OF THE DEPRECIATION AND THE SAME WAS ALSO ACCEPTED BY THE ASSESSEE. HOWEVE R AS CONTENDED BY THE LD AR THE MISTAKE WAS DETECTED BY THE AO DURING THE P OST SEARCH ENQUIRY AND NOT ON THE BASIS OF ANY SEIZED MATERIAL. IN THE ABSENC E OF ANY SEIZED MATERIAL THE MISTAKE COULD BE RECTIFIED ONLY DURING THE COURSE O F REGULAR ASSESSMENT PROCEEDINGS. HENCE IN OUR OPINION IN THE FACTS O F THE CASE NO ADDITION IS CALLED FOR IN RESPECT OF THE MISTAKE IN THE DEPRECIATION C LAIM IN THE BLOCK ASSESSMENT PROCEEDINGS. ACCORDINGLY WE REVERSE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION RELATING TO TH E MISTAKE IN THE CLAIM OF DEPRECIATION. 7. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF INTEREST INCOME OF RS.57 691/-. THE ASSESSEE HAD ADVANCED A SUM OF RS.10.25 LAKHS T O A CONCERN NAMED M/S SAGAR DURGA HOSPITAL. FROM THE BOOKS OF M/S SAGAR DURGA HOSPITAL IT WAS NOTICED BY THE AO THAT THE SAID CONCERN HAD PAID IN TEREST OF RS.30 673/- AND RS.1 47 018/- DURING THE FINANCIAL YEAR ENDED 31.3. 98 AND 31.3.99 RESPECTIVELY. HOWEVER THE ASSESSEE HAD OFFERED A SUM OF RS. NIL AND RS.1 20 000/- IN THE RETURN OF INCOME FILED FOR THE FINANCIAL YEAR ENDED 31.3.98 AND 31.3.99 RESPECTIVELY. ACCORDINGLY THE AO INCLUDED THE DIFF ERENCE AMOUNT OF RS.57 691/- AS THE UNDISCLOSED INCOME OF THE ASSESSEE. THE LD CIT(A) CONFIRMED THE SAME. 7.1 THE CONTENTION OF THE ASSESSEE THAT IT HAS OFFERED INTEREST INCOME ON RECEIPT BASIS AND HENCE IT HAS RESULTED IN A DIFF ERENCE OF RS.57 691/-. HOWEVER THE ASSESSEE COULD NOT SUBSTANTIATE ITS CONTENTION WITH ANY EVIDENCE THAT IT IS FOLLOWING CASH SYSTEM OF ACCOUNTING IN RESPECT OF T HE INTEREST INCOME. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT (A) IN CONFIRMING THIS ADDITION. 8. THE NEXT ISSUE RELATES TO THE INCOME OF RS.2 16 957/- ASSESSED UNDER THE HEAD CAPITAL GAINS. THE ASSESSEE HAD PURCHASED A L ORRY IN THE FINANCIAL YEAR 1995-96 AND A CAR IN THE FINANCIAL YEAR 1996-97. T HE ASSESSEE ALSO DISCLOSED THE PURCHASE OF BOTH VEHICLES IN ITS RETURN OF INCO ME. HOWEVER IN THE STATEMENT TAKEN FROM THE ASSESSEE DURING THE COURSE OF SEARCH THE ASSESSEE ADMITTED THAT 7 IT HAD SOLD BOTH THE VEHICLES IN THE YEAR 1998. HO WEVER THE SALE OF BOTH THE VEHICLES WAS NOT DISCLOSED TO THE DEPARTMENT. ACCO RDINGLY THE AO WORKED OUT THE SHORT TERM CAPITAL GAINS AT RS.2 16 957/- AND T REATED THE SAME AS THE UNDISCLOSED INCOME OF THE ASSESSEE. THE SAID ADDIT ION WAS CONFIRMED BY THE LD CIT(A). 8.1 THE MAIN CONTENTION OF THE ASSESSEE WAS THA T THE SHORT TERM CAPITAL GAIN ON SALE OF THESE VEHICLES SHALL BE ASSESSABLE ONLY IN THE REGULAR ASSESSMENT PROCEEDINGS SINCE BOTH THE VEHICLES WERE ALREADY DI SCLOSED TO THE DEPARTMENT. WE ARE UNABLE TO AGREE WITH THE CONTENTION OF THE A SSESSEE. THE REASON IS THAT THE SHORT TERM CAPITAL GAIN ARISES ONLY ON THE SALE OF VEHICLES AND THE ASSESSEE HAS FAILED TO DISCLOSE THE FACT OF SALE OF VEHICLES TO THE DEPARTMENT THE REVENUE CAME TO KNOW OF THE DETAILS OF SALE OF VEHICLES ONL Y ON ACCOUNT OF SEARCH PROCEEDINGS AND HENCE THE SHORT TERM CAPITAL GAIN O N SALE OF BOTH THE VEHICLES IS ASSESSABLE AS UNDISCLOSED INCOME OF THE ASSESSEE. 8.2 AT THE TIME OF HEARING THE LD AR SUBMITTED THAT THERE IS A MISTAKE IN THE AMOUNT OF SHORT TERM CAPITAL GAIN COMPUTED BY THE A O. LD AR SUBMITTED THAT THE VEHICLES WERE SOLD IN THE YEAR 1998 AND HENCE NO DE PRECIATION IS ADMISSIBLE FOR THE FINANCIAL YEAR 1998-99. HENCE THE WDV AS ON 1. 4.1998 HAVE TO BE DEDUCTED FROM THE SALE VALUE FOR THE PURPOSE OF ARRIVING AT THE SHORT TERM CAPITAL GAIN. HOWEVER THE AO HAS CALCULATED THE DEPRECIATION FOR THE FINANCIAL YEAR 1998-99 ALSO AND ACCORDINGLY ADOPTED THE WDV AS ON 1.4.99 F OR THE PURPOSE OF CALCULATION OF SHORT TERM CAPITAL GAIN. 8.3 WE FIND MERIT IN THE CONTENTION OF THE ASSE SSEE. AS PER THE ACT DEPRECIATION IS NOT ADMISSIBLE IN THE YEAR OF SALE. SINCE THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT BOTH THE VEHICLES HAVE BEEN SOLD IN THE YEAR 1998 ONLY THE WDV AS ON 1.4.1998 IS DEDUCTIBLE FOR THE PURPOSE OF COMPUTATION OF SHORT TERM CAPITAL GAIN. ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO MAKE NECESSARY CORRECTION IN THE WORKING OF SHORT TERM C APITAL GAIN. 9. WE NOTICE FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAD OFFERED A SUM OF RS.5.00 LAKHS AS HIS UNDISCLOSED INCOME IN THE B LOCK RETURN FILED BY IT. HOWEVER THE AO HAS PROCEEDED TO DETERMINE THE UNDI SCLOSED INCOME OF THE ASSESSEE INDEPENDENTLY WITH OUT TAKING INTO ACCOUN T THE AMOUNT OF RS.5.00 LAKHS 8 OFFERED BY THE ASSESSEE. IN THE EARLIER PARAGRAPHS WE HAVE CONFIRMED THE ADDITION RELATING TO THE INTEREST INCOME AND THE CA PITAL GAIN ONLY. SINCE THE ASSESSEE ITSELF HAS OFFERED RS.5.00 LAKHS WITHOUT A NY SPECIFIC REFERENCE TO ANY OF THE ITEMS IN THE INTEREST OF NATURAL JUSTICE WE D IRECT THE AO TO TELESCOPE BOTH THE ADDITIONS CONFIRMED BY US AGAINST RS.5.00 LAKHS OFF ERED BY THE ASSESSEE. 10. THE CROSS APPEALS NUMBERED AS IT(SS)A NO.16/V IZAG/2005 AND IT(SS)A 19/VIZAG/2005 RELATE TO THE LEVY OF PENALTY U/S 158 BFA(2) OF THE ACT. IN THE EARLIER PARAGRAPHS ALL THE ADDITIONS EXCEPT TWO HA VE BEEN ORDERED FOR DELETION. THE SAID TWO ADDITIONS CONFIRMED BY US HAVE ALSO BE EN TELESCOPED AGAINST THE INCOME VOLUNTARILY OFFERED BY THE ASSESSEE. THUS FINALLY THE INCOME RETURNED BY THE ASSESSEE STANDS. CONSEQUENTLY THE PENALTY ORD ER GETS VITIATED. ACCORDINGLY WE DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S 1 58BFA(2) OF THE ACT. 11. IN THE RESULT THE QUANTUM APPEAL OF THE AS SESSEE IS PARTLY ALLOWED. THE PENALTY APPEAL OF THE ASSESSEE IS ALLOWED AND THE P ENALTY APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 17-02-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 17 TH FEBRUARY 2010 A COPY OF THIS ORDER IS FORWARDED TO : 1 SHRI P. BHIMA RAO-HUIF PROP. RAO CONSTRUCTIONS DOCTORS & DOCTORS PLAZA OPP: KGH O.P. GATE VISAKHAPATNAM 2 THE ACIT CIRCLE-1 VISAKHAPATNAM 3 THE ITO WARD-1(3) VISAKHAPATNAM 4 THE CIT CENTRAL HYDERABAD 5 THE CIT (APPEALS)-I HYDERABAD 6 THE DR ITAT VISAKHAPATNAM 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT VISAKHAPATNAM BENCH