2013 (10) TMI 1187 - HC - Income Tax

Estimation of income - assessment u/s 158BC after search - Estimated G.P. rate - business of the Sarrafa Held that - From the record, it appears that the G.P. rate in the trade of the Saraffa in various cases was accepted by the A.O. @ 15% to 25%. So, the CIT (A) has taken the average G.P. Rate @ 20% on the estimated sale and deleted the addition of Rs.20/- lacs which was endorsed by the Tribunal - Estimation is a question of fact as per the ratio laid down in the case New Plaza Restaurant v. ITO 2008 (7) TMI 260 - HIMACHAL PRADESH HIGH COURT ; Sanjay Oil Cake v. C.I.T. 2008 (3) TMI 323 - GUJARAT HIGH COURT - In view of above, it appears that the A.O. has made the addition of Rs.20.0 lacs on estimate basis. The CIT (A) has deleted the same on estimate basis and the Tribunal upholds the same - estimation is a question of fact Decided against the Revenue. Investment in jewellery seized during the search Held that - Seized jewellery was claimed by three ladies namely Rupali Rastogi, Smt. Sunita Rastogi; and Smt. Kamni Rastogi. All the ladies belonged to the reputed families and they are married. As per the CBDT Circular discussed in the case of Smt. Pati Devi vs. ITO; 1999 (2) TMI 43 - KARNATAKA High Court , 500gm, jewellery is expected in the possession of a married lady and that much of ornaments cannot be seized. If we go with the CBDT Circular dated 11.05.1994 and the ratio laid down in the case of Smt. Pati Devi (supra), then each lady is expected to own 500gm. Ornaments Decided against the Revenue.

Issues:
1. Justification of ITAT's decision on the statement of partner recorded under section 132(4) of the Income Tax Act, 1961.
2. Appraisal of evidence by ITAT and consideration of undisclosed income and investment.
3. Estimation of GP rate and undisclosed investment by Assessing Officer.
4. CIT(A) and Tribunal's decision on GP rate and undisclosed income.
5. Treatment of seized jewellery belonging to three ladies.
6. Application of CBDT Circular on jewellery possession.
7. Writ petition filed by the assessee for the release of seized items.

1. Justification of ITAT's decision on the statement of partner recorded under section 132(4) of the Income Tax Act, 1961:
The case involved an appeal by the department under Section 260-A of the Income Tax Act against the ITAT's decision on the statement of a partner recorded under section 132(4). The department argued that the ITAT had improperly appraised the evidence, focusing on certain parts of the statement while ignoring others. The department contended that the statement admitting undisclosed income should have been given more weight. However, the Tribunal upheld its decision, considering the seized documents and the partner's statement.

2. Appraisal of evidence by ITAT and consideration of undisclosed income and investment:
The A.O. estimated the GP Rate and undisclosed investment, making additions to the income of the firm. The CIT(A) and Tribunal reviewed these estimates and provided relief to the assessee by reducing the additions. The ITAT considered the statement of the partner and the seized jewellery, ultimately upholding the CIT(A)'s decision. The Tribunal's decision was based on the evidence presented and the estimation methods used by the Assessing Officer.

3. Estimation of GP rate and undisclosed investment by Assessing Officer:
The Assessing Officer estimated the GP Rate and undisclosed investment, leading to additions in the firm's income. The A.O. based the additions on turnover and undisclosed transactions. The CIT(A) and Tribunal reviewed these estimates, considering industry standards and previous cases. The A.O.'s estimation methods were scrutinized, leading to adjustments in the final additions made to the firm's income.

4. CIT(A) and Tribunal's decision on GP rate and undisclosed income:
The CIT(A) estimated the GP Rate and reviewed the undisclosed income, providing relief to the assessee. The Tribunal upheld the CIT(A)'s decision, considering industry practices and the specific circumstances of the case. The appellate authorities analyzed the evidence and made adjustments to the additions based on the facts presented during the proceedings.

5. Treatment of seized jewellery belonging to three ladies:
The seized jewellery belonged to three ladies associated with the firm. The CBDT Circular and legal precedents were considered to determine the ownership and possession of the jewellery. The ladies' marital status and the disclosure of jewellery in their regular returns were crucial factors in deciding whether the seized items should be treated as undisclosed during the block period.

6. Application of CBDT Circular on jewellery possession:
The CBDT Circular and legal principles regarding jewellery possession by married ladies were applied to assess the ownership and disclosure of the seized items. The Circular's guidelines and the ladies' prior disclosures in their returns influenced the decision to treat the jewellery as covered and not undisclosed during the block period.

7. Writ petition filed by the assessee for the release of seized items:
The assessee had filed a writ petition seeking the release of the seized jewellery, cash, and ornaments. The High Court had already ruled in favor of the assessee, ordering the release of the seized items. This legal action further supported the assessee's position in the ongoing tax dispute.

In conclusion, the judgment analyzed various aspects of the case, including the estimation of income, treatment of seized items, and the application of legal principles and precedents. The decision favored the assessee, upholding the relief provided by the appellate authorities and dismissing the department's appeal.

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