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TMI Blog2012 (8) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Appellate Tribunal (ITAT) has failed to decide the issue of depreciation on the alleged foreign car and therefore the order is perverse? 1788/2010 2002-03 1. Whether the Income Tax Appellate Tribunal (ITAT) was right in law in deleting the addition of Rs.68,10,158/- and Rs.1,02,93,262/- on account of suppressed sale value of Hing and compound Hing, respectively? 2. Whether Income Tax Appellate Tribunal (ITAT) has failed to decide the issue of depreciation on the alleged foreign car and therefore the order is perverse? 2023/2010 2003-04 1. Whether the Income Tax Appellate Tribunal (ITAT) was right in law in deleting the addition of Rs.89,81,169/- and Rs.1,37,45,163/- on account of suppressed sale value of Hing and compound Hing, respectively? 2. Whether Income Tax Appellate Tribunal (ITAT) has failed to decide the issue of depreciation on the alleged foreign car and therefore the order is perverse? 1789/2010 2004-05 1. Whether the Income Tax Appellate Tribunal (ITAT) was right in law in deleting the addition of Rs.73,58,074/- and Rs.1,32,07,596/- on account of suppressed sale value of Hing and compound Hing, respectively? 2. Whether Income Tax Appellate Tribunal (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.8 3.2 3.9 The Assessing Officer also noted that the documents seized during the search showed that the assessee was indulging in under invoicing of sales and purchases of Hing and that the seized papers related to business transactions between 1st November, 2005 and 18th November, 2005. It was noticed that some of the sale transactions recorded in these papers exactly matched with the sale bill issued to various persons except the rate of sale of Hing. The Assessing Officer referred to several such instances from the seized material at pages 21 to 23 of the assessment order for the assessment year 2000-01. They are not reproduced here for the sake of brevity. In addition, he also referred to 7 instances of sales where two rates of sale were mentioned in the papers. This is also set out at pages 23-24 of the aforesaid assessment order. One of these rates was higher than the other. According to the Assessing Officer the sales were made at the higher rate whereas bills were issued only for lower rate. On the basis of these papers the Assessing Officer made the additions for suppressed sale value of Hing and compound Hing. The following tables set out at pages 26 and 28 of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) There is evidence to show that the assessee recorded two rates on the papers found whereas in the bills it had accounted only for the lower rate. (b) Though the seized papers related only to November, 2005, it indicates the practice of the assessee to suppress the real sales and such practice was also admitted by the partner during the search. Therefore, the rejection of books is justified and estimate of profit is also justified. 6. It may be seen from the above that the CIT (Appeals) relied on the seized papers to infer therefrom the practice of the assessee to indulge in suppression of sales which were kept away from the regular books of accounts. He has accordingly justified the action of the Assessing Officer in rejecting the books of accounts by virtue of his powers under Section 145 of the Act. The CIT (Appeals) has also recognized the right of the Assessing Officer to estimate the profits, having rejected the books of accounts. He thereafter proceeded to consider what in his opinion would be a reasonable rate of profit earned by the assessee in the business. As far as the Hing is concerned, he enhanced the gross profit by 2% of the sales and added the difference to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of pure hing. The A.O. also proceeded on the ground that there is no manufacturing account has been shown by the assessee for the production of a compound and accordingly estimated the same by taking the value at Rs.500/- per k.g. By taking this value she has computed the total sales at Rs.1,30,49,500/- as against Rs.24,79,961/- disclosed by the appellant. The above addition has no basis at all. There is no support either for turnover or for rate taken up for valuation. The A.O. has simply assumed the production rate and proceeded to estimate the value without bringing on record any cogent evidences. It is difficult to sustain the estimated turnover computed by the A.O. without any record of evidences. Accordingly, the same is directed to be deleted. However, as held in the above paragraphs there is tendency on the part of the assessee to suppress the profit rate on the sales made in respect of hing compound also. During the year on a turnover of Rs.24,79,961/- declared gross profit of Rs.2,93,813/- @ 11.8%. As already decided in respect of hing, the same rate of G.P. is taken in this case also i.e. @ 20% which comes to Rs.4,95,992/-. Thereby the difference of Rs.2,02,179/- is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver or excess price realization. The addition in this behalf are rightly deleted by Ld. CIT (A)." 10. It would appear that before the Tribunal the Revenue placed reliance on the judgment of the Supreme Court in Commissioner of Income Tax, Madhya Pradesh v. H. M. Esufali H. M. Abdulali, (1973) 90 ITR 271. The Tribunal held that this decision was inapplicable to the present case because of the following reasons: - "a) Besides loose material found, no evidence is found that actual turnover of assessee is much more than declared turnover. To estimate turnover higher than declared, primarily evidence on record should suggest that actual turnover is not correct and not by inference it needs to be estimated. b) Since in present case, undisputedly, no independent enquiry at any time from any of the purchasers of the assessee has been done either by AO or Ld. CIT (A), to find out whether there is any understatement of sale consideration, although subject loose papers may be sufficient for invoking/ arousing suspicion and enquiry but, same in our opinion, is not sufficient to draw the conclusions. c) Since it is well settled that even though loose papers are not properly explained by ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of evidence found in the course of the search or other post-search material or information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. The question, however, is whether the seized material can be relied upon to also draw the inference that there can be similar transactions throughout the period of six years covered by Section 153A. It is in this context it is relevant to note the judgment of the Supreme Court in H M Esufali H. M. Abdulali (supra). We have to remember that with the advent of Section 153A we are taken back to the pre-chapter XIV-B situation, where assessments were made on the basis of material and evidence collected during search. In the cited judgment the facts were these. The case arose under the sales tax law. Assessments under the MP General Sale Tax Act and Central Sales Tax Act had been completed on a dealer of iron and steel. They were made primarily on the basis of the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment" assessment. The assessee cannot be permitted to take advantage of his own illegal acts. It was his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. That fact must be within his personal knowledge. Hence, the burden of proving that fact is on him. No circumstance has been placed before the assessing authority to show that the assessee's dealings during September 1, 1960, to September 19, 1960, outside his accounts were due to some exceptional circumstance or that they were proportionately more than his dealings outside his accounts during the remaining periods. The assessing authority could not have been in possession of any correct measure to find out the escaped turnover during the periods November 1, 1959, to August 31, 1960, and September 20, 1960, to October 20, 1960. The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the "best judgment" assessment, no do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as estimated by the Assessing Officer instead of directing him to accept the turnover of Hing and compound Hing as shown by the assessee, with a slight enhancement of the gross profit by 2% in the case of Hing and by directing the Assessing Officer to adopt the same rate of gross profit in the case of compound Hing as was adopted in the case of Hing. The CIT (Appeals) does not appear to be justified in interfering with the estimate made by the Assessing Officer, having regard to the observations made in the judgment of the Supreme Court cited (supra). The limited question which the CIT (Appeals) could have examined was whether the turnover estimated by the Assessing Officer was arbitrary or based on some material. 13. Coming to the order of the Tribunal, we are of the view that the reasons given by it to distinguish the judgment of the Supreme Court cited (supra) are not sound. Firstly, there was seized material in the present case to show that the assessee has been indulging in off-record transactions. The observation of the Tribunal that no evidence was found to show that the actual turnover of the assessee was more than the declared turnover is hair splitting. The Tribunal l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that there is "nothing more in Revenue‟s kitty apart from those said loose papers pertaining to November, 2005 (financial year 2005-06) to support suppression of sales receipts on the part of the assessee firm". The Tribunal, with respect, has misread the observations of the CIT (Appeals) and has relied on a single observation without reading the order of the CIT (Appeals) as a whole. Moreover, in such cases, it is expected of the Tribunal to also independently examine the decision of the CIT (Appeals) which is impugned before it. In such cases it would be more appropriate to find out or ascertain whether there is any positive material which is in support of the assessee‟s case or anything upon which the assessee can rely in order to discharge the burden placed upon him in the light of the judgment of the Supreme Court in H M Esufali H. M. Abdulali (supra). Mere negative findings should not be made use of to throw out the case of the department. Lastly, the reliance placed by the Tribunal on the judgment of this Court in CIT v. Anand Kumar Deepak Kumar, (2007) 294 ITR 497 does not seem appropriate. There it was held that there was no presumption that unaccounted sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to be the main person of the group to seek clarification regarding the seized papers, the latter opted to keep silent from which the Assessing officer, not without justification, drew the inference that Bhatia was not in a position to offer any explanation. This aspect - the stoic silence of the assessee before the Assessing Officer - has been lost sight of by the CIT (Appeals) whose decision was subjected to further appeal before the Tribunal. It was not for the Tribunal to merely endorse the findings of the CIT (Appeals) in a case like this, though normally it may not be necessary for the Tribunal to give detailed reasons in support of its decision if it agrees with the findings and conclusions of the first appellate authority. There are exceptions to this rule. Where the matter is complex and fact - intensive, particularly where it is a case of search where material or documents have been seized, it would be more appropriate for the Tribunal to put the findings of the departmental authorities to a detailed examination by itself, without merely endorsing the conclusions of the first appellate authority. The Act has constituted the Tribunal as the final fact finding body and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cognates of an appeal. An institution of correction is under a duty to ensure that the assessment is made as accurately as possible consistent with the statutory provisions and where complex facts, evidence or material is involved, it is all the more necessary for the correctional institution to bestow its care and attention on them in a manner consistent with the status conferred upon it by the Act and in a judicial spirit. 16. Moreover, the Tribunal is the ultimate fact-finding authority and an appeal to the High Court is provided only on a substantial question of law. The findings of fact entered by the Tribunal are normally binding on the High Court. However, if those findings are perverse or are so unreasonable that no person, properly instructed on facts and in law could have reached the findings which the Tribunal did, it is open to the High Court to disregard the findings of fact as not binding on it. This is a well-settled position and has been accepted in several cases, a few of which have been noticed by us in our decision in the case of the CIT v. Nova Promoters and Finance Ltd., (ITA 342/2011 dated 15.02.2012) (reported in (2012) 342 ITR 169). Herein, we find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dass Bhatia (supra). However, the seized papers have been found by the CIT (Appeals) to relate to the present assessee namely M/s. Chetan Dass Lachman Dass. The CIT (Appeals) in the present case has also found that the partners of the present assessee - firm admitted that they adopted the practice of suppressing the profits. We have also found earlier in our order that the partners did not adduce any explanation or evidence before the Assessing Officer in response to the various notices issued by him and they remained silent throughout. Lastly both the Assessing Officer and the CIT (Appeals) have found in the present case that one J. K. Khann @ Tainu, who was a Hing broker, gave a statement that the rate of imported Hing was between Rs.1,500/- to Rs.1,700/- per kg. and the same was being sold in the local market at Rs.3,000/- per kg. In holding that the Tribunal was not justified in the present case in upholding the order of the CIT (Appeals) substantially deleting the additions made for suppression of profits, we have differentiated and distinguished between the present assessee‟s case and the case of Lachman Dass Bhatia (supra) on account of the distinguishing features note ..... X X X X Extracts X X X X X X X X Extracts X X X X
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