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TMI Blog2014 (1) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... nover so determined by him has attained finality - The undisclosed income has to be estimated on Rs.57 lakhs - The AO has adopted the net profit rate at 5% in the succedding year - In order to maintain consistency, the net profit rate may be adopted at 5% in this year also - The undisclosed income calculated @ 5% on the suppressed turnover of Rs.57.00 lakhs shall work out to Rs.2.85 lakhs - The order of CIT(A) has been set aside - Decided against assessee. Undisclosed income for the period 01.4.93 to 31.3.94 - Held that:- In this year, the assessee has not maintained books of account and hence it has offered income on estimated basis during the course of regular assessment proceedings also - In the absence of regular books of accounts, the AO was justified in taking the aggregate amount of collections as the turnover of the assessee and estimating income thereon - The assessing officer has given set off of proportionate amount relatable to the 50 shops falling in Narakkal range while arriving at the undisclosed income of the assessee for this year - Decided against assessee. - I.T.(SS)A. No. 07/Coch/2003 - - - Dated:- 10-1-2014 - Shri N. R. S. Ganesan, JM And B. R. Baskaran, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee a sister concern. In our view, the Tribunal has rendered the decision without reference to facts and without noticing the findings in the assessment as well as in the order of the first appellate authority. We therefore set aside the order of the Tribunal and remand the matter back to the Tribunal for reconsideration on merits after going through the records and after hearing both sides". 3. The facts relating to the case are stated in brief. The assessee is a partnership firm consisting of 11 partners and is engaged in the business of selling toddy and foreign liquor. The Department carried out search and seizure operations in the residential premises of two of its partners and also in the business premises of assessee's sister concern. During the course of search, certain documents relating to the assessee-firm were seized. Accordingly, proceedings u/s. 158BD of the Act was initiated in the hands of the assessee. The Ld A.R has pointed out that the common partners of the assessee firm and M/s A.T Kunjachan Associates are as under:- a) Shri K.K. Parameswaran b) Shri K.B. Sai c) Shri A.T. Kunjachan d) Shri C.K. Ramakrishnan e) Shri P.N. Krishna Lal f) Shri P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar assessment proceedings and accordingly arrived at the undisclosed income of Rs.15,84,458/- for the period from 1.4.92 to 31.3.1993 in the block period. 4.2 For the financial year 1.4.93 to 31.3.1994, the department seized cash memos for Narrakkal Range consisting of 50 shops. As per the cash memo cited above, the aggregate collections net of expenses for the whole year was noticed at Rs.99,87,831/-. The AO estimated income at 5% of the above said aggregate collections and accordingly arrived at a profit of Rs.4,99,391/-. As in earlier year, the assessee was running 60 more shops at Marrappilly and Varapuzha ranges. In the regular assessment, the income for 110 shops were assessed at Rs.2,46,116/-. Accordingly, the proportionate income for 50 shops was worked out by the AO at Rs.1,11,870/- and gave set off of the same against the profit worked out by him. Accordingly, the AO determined the undisclosed income for the financial year 1.4.93 to 31.3.1994 at Rs.3,87,521/- in the block period. 4.3 In the financial year 1.4.95 to 31.3.96, the cash book impounded by the department revealed a cash shortage of Rs.58,753/- on 13.4.95. The AO assessed the same as undisclosed income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account to verify and confirm that the turnover of the Narakkal Range as per seized register has been included or not. However it is clear that the total turnover for the 1993-94 was only Rs.94.42 lakhs. 15) More over, firm has also discontinued business years back and some of the partners have also expired. 16) For the reasons stated above, I am unable to produce the books of accounts for AY 1992-93." 8. The Ld D.R submitted that the assessee was not able to prove that the turnover noticed in the seized record was accounted for in the books of account. Hence, the AO was justified in estimating the suppression for the whole year on the basis of the turnover noticed in the seized record. The Ld D.R further submitted that the Ld CIT(A) has made reasonable adjustments and accordingly contended that the order of Ld CIT(A) be sustained. 9. We have heard rival contentions on this issue. The following observations made by the Hon'ble High Court, which was extracted above, are relevant here. "If the turnover of business of 50 shops for 3-1/2 months detected in the search pertains to assessee's business, then certainly the correctness of the income returned for regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the seized record pertained to only one range consisting of 50 shops. Accordingly, in our view, the undisclosed income can be determined for Narakkal range only, since the seized record pertained to those shops only. Accordingly, we proceed to determine the undisclosed income for the shops falling in Narakkal range. We notice that the Ld CIT(A) has determined the whole year's turnover for Narakkal range at Rs.1.00 crore. Since the revenue did not file any appeal against the order of Ld CIT(A), the turnover so determined by him has attained finality. As per the assessee the total turnover declared by it for 110 shops in the regular return of income was Rs.94.41 lakhs. The average turnover of 50 shops falling in Narakkal range shall be 94.41 lakhs/110 x 50 = 42.91 lakhs or say 43.00 lakhs Hence the undisclosed turnover for 50 shops will be Rs.57 lakhs, i.e., Rs.100 lakhs less Rs.43 lakhs. In our view, the undisclosed income has to be estimated on Rs.57 lakhs. We have already noticed that the AO has adopted the net profit rate at 8% and the Ld CIT(A) has taken the net profit rate at 6%. However, in the succeeding year, the AO has adopted the net profit rate at 5%. In our view, in or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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