9911796707
TMI Blog1997 (3) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... On 8th May, 1987 a search under s. 132 of the Act was conducted at the business premises of M/s Meghalaya Timber Industry, Khonapara and also at the residence of the assessee at Guahati. Various books of account and other documents were found and seized. The statement of the manager of the above timber business was also recorded under s. 132(4) of the Act. A search was also conducted at the residential premises of the assessee at Laitumkhra, Shillong, and some jewelleries etc. were seized. The Department also carried out search and seizure action in the business premises of M/s Gupta Brothers where the assessee was a partner and also in the business premises of M/s Gupta Enterprises where the assessee's brothers are partners. Books of account and other documents and valuable were also seized. The assessment order under s. 143(3) was passed on 30th March, 1988, which was set aside by the CIT(A) directing the AO to pass fresh assessment order. The assessment proceedings were then taken up by the AO. The assessee appeared before the AO from time to time. It was stated that no separate books of accounts in the personal capacity were maintained. It was also stated that books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as K-13 was Rs. 23,50,981. The sales on receipt basis as per seized register marked K-4 was Rs. 27,65,917. The sales figure, if at all, to be estimated should not, therefore, be more than what was shown in the seized register K-13. The AO also did not take into consideration the purchases and expenses recorded in the seized materials. There was no basis to justify the estimate of sales at Rs. 30 lakhs. The estimate of GP at 15 per cent of the sales was also objected to as unwarranted. The GP in the next assessment year was 10 per cent only. It is also stated that the AO estimated the GP rate on the basis of assessment records of other assessees having similar turnover but totally ignored the assessment records of the assessee. Non-payment of sales-tax or purchase-tax is totally irrelevant for the purpose of estimating sales and GP. It was, therefore, submitted that the estimate of sales and GP by the AO is not justified. The CIT(A) considered the submissions and order of the AO. He has taken a view that the books of account of the assessee cannot be accepted as representing the true state of affairs of the business activity of the assessee. He, therefore, declined to interfere w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate to some evidence or materials on record.......The AO is, therefore, not entitled to make a pure guess and make estimation without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment order. In reply, Shri S.N. Bhuyan, the learned senior Departmental Representative, relying on the orders of the Revenue authorities has submitted that since the assessee did not maintain regular books of account and whatever document, etc. produced were found to be unrealiable, the AO was perfectly justified in estimating the sales on the basis of seized documents and other facts stated at great length in the assessment order. Similarly the rate of GP estimated is also quite fair and reasonable considering the nature of business and the GP disclosed by the assessee in the next assessment year. It is further submitted that the cases cited by the assessee can be distinguished from the facts of the present case, inasmuch as, those parties maintained regular books of account whereas the present assessee did not do so. It is submitted that the order of the Revenue authorities deserves to be sustained. 6. We have carefully conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this point. 7. As regards rate of GP we find some force in the argument advanced by the authorised representative of the assessee. The GP taken by the AO in this assessee's case for the asst. yr. 1986-87 is 10 per cent of the total turnover. In the three comparable cases considered by the AO, the rate of GP ranges from 9.36 per cent to 10.20 per cent of the total turnover and the turnover of the parties was about Rs. 35 lakhs in each case. The net profit of the parties was ranging from 1.79 per cent to 2.71 per cent of the total turnover. In view of above and having regard to various judicial decisions cited and relied on by the assessee's counsel we are of the opinion that the Revenue authorities are not justified in estimating the GP at 15 per cent and the net profit at 10 per cent of the estimated total sales. On careful consideration of the total facts and circumstances of the case we feel that the rate of GP in the assessee's case may be reasonably estimated at 11 per cent of the estimated sales as the total turnover estimated is less than the total turnover in the cases of the comparable parties. As regards rate of net profit it may be estimated having regard to the cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile objecting to the order of the CIT(A) that the addition is not on the basis of facts and clear--Out finding by the AO. It is also submitted that the peak credit of earlier year was ignored by the Revenue authorities. Such peak credit could be worked out from the seized materials as they are available for explaining the sources of peak credits of the present assessment year. It is also stated that the AO has already estimated the sales, GP and net profit and, therefore, there is no scope for further addition by taking recourse to s. 68 of the Act. A number of judicial decisions were cited in support of the above submission. It is further submitted that intangible addition made in the form of enhanced business profit may also be treated as the sources of investment. It is contended that the Revenue authorities are not justified in the addition made by them. On the other hand, Shri S.N. Bhuyan, the learned senior Departmental Representative, opposed the submissions by relying on the orders of the Revenue authorities. 12. We have carefully considered the facts of the case, orders of the Revenue authorities and the paper-book filed by the assessee's counsel and also the various jud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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