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TMI Blog2011 (5) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer the seized material found during the course of search related to assessment years 2005-06 and 2007-08. These documents and books of account evidenced unaccounted purchases and non-billing of sale leading to sales suppression. The accounts maintained in the computers did not tally with the accounts maintained manually. The Assessing Officer found that in the assessment year 2005-06, as against the admitted sales of ₹ 17,71,297/-, the sale as per the seized material was ₹ 3,84,71,852/- The percentage of suppression worked out to ₹ 2071.95%. For the assessment year 2007-08, sale suppression ratio to disclosed sale was at 497.76%. In view of this position, Assessing Officer was of the opinion that the assessee was indulging in such suppression of sale for all these years. He further opined that the search and surveys conducted in the group concerns reveal a pattern of such suppression of income. Since the Assessing Officer was not satisfied without correctness or completeness of the accounts, Assessing Officer estimated the sale suppression and consequent profits and brought the same as assessee's undisclosed income from business. While comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing reasonable and judicious conclusions for the period relevant to A.Y.2006-07 which falls in between the two years." Thereafter, the ld. CIT(Appeals) worked out the suppression in sales for the assessment year 2005-06 at 2025.28% of disclosed turnover as against 2071.95% adopted by the Assessing Officer and for the assessment year 2007-08 of 497.76%. Thus, the average ratio of suppression to disclosed turnover worked out to 1261.52% as against 1284.85% adopted by the Assessing Officer and the Assessing Officer was directed to adopt the same. Thereafter, ld. CIT(Appeals) considered the claim of application of GP rate and after elaborately discussing the matter in page 22 and 23 at para.8.9 of his appellate order, directed the Assessing Officer to adopt the GP rate at 13.92% as indicated in the seized document and thus gave partial relief to the assessee. 5. In respect of levy of interest u/s.234A and 234B, the ld. CIT(Appeals) rejected the claim of the assessee and upheld the action of the Assessing Officer. However, the ld. CIT(Appeals) directed the Assessing Officer to re-compute the interest on the basis of quantum relief granted by him. 6. The ld. CIT(Appeals) also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the time of hearing and it is humbly prayed that the Tribunal be pleased to allow the appeal." 7. Now let us turn to ITA No.459/Coch/2010 pertaining to the assessment year 2005-06. In this case, in response to notice u/s.153A, assessee filed its return of income on 7-10- 2008 declaring total income of ₹ 94,500/-. 142(1) notice was also issued. During the course of search on 13-2-2007, many books of accounts and documents wwere seized and entered in Annexure SSA. A CPU of a computer was seized in Aannexure-SS-O. A loose sheet bunch marked "SSA (29)"was also seized from the premises of the assessee firm, which contained computer print-pouts of trading and profit and loss account and balance-sheet as on 31-3-2005. In response to 142 notice, Mr Poly Kuriakose informed the investigating officers that the software was in the development stage and hence data extracted from the computer could not be relied. Entries posted into the system were giving totally irrational figures and the developer was in the process of fixing the bugs and rectifying the errors one by one. In the process of fixing the bugs and rectification of software, the developer had entered test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd seized during the search and the computer print out from the seized CPU evidence suppression of sales by the assessee. Except the statement of Shri Poly, assessee did not produce any evidence to show that the data from CPU could not be relied upon. 8.1. In the P&L Account filed along with the return of income for this year, assessee shown a GP of ₹ 6,15,339/- on a total sale of ₹ 17,71,297. The GP works out to 34.73% but the P&L Account shows a loss ofRs.5,23,502. By offering an income of ₹ 6,20,000/- the loss of the assessee for the year became a positive income of ₹ 94,497/-. According to the Assessing Officer this is the further proof that the books of accounts are not correct and complete and hence a notice u/s.144(1) r.w.s.145(3) was issued but no reply was filed. Therefore, assessment was made u/s.144(1) of the Act. The Assessing Officer estimated gross profit at ₹ 1,33,61,274/- on the sale of ₹ 3,84,71,852/- at the rate of 34.73% GP as admitted by the assessee and treated the same as undisclosed income of the assessee. 8.2. The opening stock of the assessee as per the books of accounts shows at ₹ 1,46,57,757/- whereas as per SSA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief to the assessee. 10. Turning to the unexplained investment in stock of ₹ 45,07,243/-, the CIT(Appeals) upheld the determination of undisclosed stock. However, he was of the view that the assessee should get the benefit of telescoping on the addition of undisclosed income in different assessment years which was upheld by him. Therefore, CIT(Appeals) directed the Assessing Officer to identify the undisclosed assets and after telescoping the addition of undisclosed income determined in the assessment years 2001-02 to 2004-05, grant benefit of telescoping for the impugned assessment year. 11. The ld. CIT(Appeals) upheld the levy of interest u/s.234A and 234B. However, CIT(Appeals) directed the Assessing Officer to re-compute the interest after taking into account the quantum relief granted. 12. Being not satisfied with the relief granted by the ld. CIT(Appeals), the assessee is on appeal on the following issues: a) Regarding assumption of jurisdiction u/s.144; b) Assumption of jurisdiction u/s.145(3); c) Estimation of sale and consequential GP; d) Addition of unexplained investment in stock; and e) Levy of interest u/s.234A and 234B. 13. Now we shall take up the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest u/s.234A, 234B and 234C. Since the facts of the case are similar to that of the assessment year 2005- 06, we are not repeating those facts, here once-again. 14. We have considered rival submissions and perused thee materials available on record including the precedents relied upon by the parties. We first proceed to consider the assessment years 2005-06 to 2007-08. The search u/s.132 was conducted on 13-2-2007 in the group cases of P.A. Kuriakose and Paulson Varkey Group. This group is mainly engaged in Hotel and jewellery business. M/s. P.A. Kuriakose Jewellers- the assessee - was subjected to search u/s.132 of the Act on the very same day of 13-2-2007. A statement was recorded from Shri Poly Kuriakose, partner of the firm, who was available at the time of search. During the course of search books of accounts, documents relating to the income of the assessee, besides a CPU of computer was seized in Annexure SSO, loose sheet bunch marked as SSA(29) was also seized from the premises of the assessee. This bunch contained computer printout of trading and profit and loss account as on 31-3-2005[loose sheets (6)] and a balance-sheet as on 31-3-2005 [loose sheets (4&5)]. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer. The ld. CIT(Appeals) on appeal directed the Assessing Officer to work out gross profit on suppressed turnover by applying GP rate of 13.92% as indicated in the seized document as against the substantial higher GP disclosed by the assessee in the books. Therefore, the ld. CIT(Appeals) was of the view that it is judicious in respect of suppressed turnover worked out on the basis of seized document, the GP rate as indicated in the seized document is only to be applied. Thtus, the ld. CIT(Appeals) has no hesitation in coming to the conclusion that the estimation of undisclosed turnover by the assessee on the basis of seized document is justified and the ld. CIT(Appeals) found that the Assessing Officer refused to accept the GP rate as indicated in the seized document, which according to the ld. CIT(Appeals) is alone applicable as the Department cannot blow hot and cold that once they accept the suppressed turnover and proceed on estimate on the basis of the seized document, the GP rate as indicated in the books of accounts alone is to be taken as a justifiable action. Instead, the Assessing Officer refused to adopt the GP rate indicated in the books only on the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd relating to this year is not disputed. The contention of the ld. counsel for the assessee is that there cannot be any escape of income and the assessee filed the return showing the same income as returned originally. However, this assessment was framed u/s.153A as has been made for the assessment years 2005-06 to 2007-08 applying the same ratio of profit under the presumption that there would have been suppression of turn over and escapement of income. In the absence of any material connecting these assessment years it is only surmises and conjunctures to arrive at the above estimated income by rejecting the books of accounts. The co-operation of the assessee has also been rightly pointed out by the ld. counsel for the assessee on the ground that the assessments were completed in a hurried manner. Therefore, the Assessing Officer was precluded from judging the assessee's objections as it was Xmas eve and the time considered by the Assessing Officer was very short. The ld. Assessing Officer has not considered the submissions of the assessee in proper perspective as he went to follow the search related years for these years also. The case of the Assessing Officer is that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be exchanged as barter. It is is subjected to sale consideration and the present value as on date the sale. The assessee is enjoying compounding benefit and paying higher tax in the compounding Sales-tax benefit. Further, the ld. counsel submitted that this practice is being forced on all the jewelers. Therefore, the decision of Hon'ble Supreme Court in the case of CST v. HM Esufali 90 ITR 271 is not applicable to the case of the assessee. The ld. counsel relied on the decision of the Cochin Bench in the case of Matha Entnerprises, which is one of the group case, wherein the Tribunal has decided the very same issue on the same set of circumstances, regarding the application of the seized material by the Assessing Officer beyond the period covered in the seized material which was held by the Tribunal as unjustified. 17. On the other hand, the ld. Commissioner of Income- tax., DR objected to the appeal of the assessee and contended that notice and other things has to be verified with reference to the assessee's paper book page Nos. 1 to 11. The ld. DR further submitted that the statement of Nachamma, 153A proceeding is applicable to all these four assessment years, even though th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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