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TMI Blog2011 (10) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... Adattil Mohammed, Shri Adattil Mujeeb and Shri Adattil Jabir, is a dealer in furniture of all kinds. It originally returned a loss for both the years under reference. A search action u/s. 132 of the Act was carried out at its business premises as well as at the residential premises of the partners, and books of accounts and other documents seized. Notices u/s. 153A were issued on 29.10.2008 and serviced on 3.11.2008, in response to which the assessee filed the returns on 20.1.2009, declaring a loss of ₹ 16,75,385/- for both the yea Rs. The assessment proceedings were taken up by the issue of notice u/s. 143(2), served on 4.5.2009, and the assessments framed on the basis of the statement of Sh. A. Jabir, partner, u/s. 132(4) of the Act on 12.9.2007(PB pgs. 21 to 44). Vide the said statement, Shri A.Jabir explained the modus operandi in respect of its sales being followed by the firm. Explaining a tag, which is attached to each item of the furniture, he specified w.r.t. one such reading as under (in answer to Q. No. 10 of his statement): 139G GRAND CHAIR Mahogany D/D 3375 that it would be billed for ₹ 3375/-, i.e., the D/D code is the billing rate. The ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only be profit, i.e., is not amenable to being subject to the gross profit method. Finally, an inspection by the Department of Commercial Taxes in the case of Kottakkal Wood Complex, another sister concern in the same business, on 17.8.2006, reflected excess stock of ₹ 1438785/-, and which difference was in fact admitted to by the said firm (i.e., for 12 of the 31 items of stock inventorized). He, accordingly, framed the assessment by working out the suppressed turnover on the basis of the statement of Shri Jabir. The same stood confirmed in first appeal on the same basis. However, the ld. CIT(A) found merit in the assessee s plea that the sale of branded items, which carried a MRP (Maximum Retail Price), would not be sold in excess thereof, so that the same had to be excluded while working out the excess turnover. The matter was, therefore, remanded by him back to the file of the AO for working out the excess turnover after examining the assessee s contention on merits, and grant it relief as appropriate. The assessee also raised another contention before him, i.e., that the additional profit worked out ought to be subject to deduction in respect of interest on the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 4.1 We have given our careful consideration to the matter, and find the assessee s claim as, in the main, not acceptable. There is nothing on record to suggest that the statement was coerced or given under duress, even as the same bears a declaration/averment to the effect that it is true and rendered voluntarily. Further, though stated as having been closed only by 4 clock on 13/9/2007, the same bears the date ₹ 12/9/2007 , and also signed and dated by two witnesses. As such, we find no basis for the said claim. In fact, the factual details emanating from the statement, none of which has been shown as incorrect or mistaken, would itself bear out that it could not be issued except by a person who is in complete knowledge of the sale process. To reiterate the same, we write the details as displayed on a tag, as mentioned in the statement u/s. 132(4) itself (as also in the assessment order): 139G GRAND CHAIR Mahogany D/D 3375 Let us analyse the same in some detail. ₹ 139G is admittedly the item code. Rs. Grand Chair represents the name of the item of furniture. Rs. Mahogany represents the wood used. It is the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the same, the price cannot be; they entailing vastly different quantity of raw material (wood) and labour. As such, the assertion of the code D/D as representing a design code is without basis and inconsistent. The first question, i.e., that if the same (D/D code) had no relation with the sale value, why did the partner state so, remains in any case unanswered? Not only so, he conjures up some formula, linking two things as diverse and distinct as the drawing design code and the sale price! Why? Further, assuming that the same is actually a design code, with no relevance to or relationship with the sale value, the next question is: How, then, is the sale price communicated to the customer? Are there any other documents/s, listing the sale price with reference to the D/D code or the item code? The Rs. explanation raises a number of questions, none of which stands addressed. As such, the contention of the same as not representing the code in respect of sale value, but a different code, is unsubstantiated, without any basis in fact/s, as well as contradictory. 4.2 Next, we examine the contours, as well as the contextual background of the statement. Shri Jabir not only states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... destroyed after verification at the end of each day, and after he (deponent) is entrusted with the cash. The staff member usually preparing the daily cash statement is also named by him (Mr. Arun). Further, a slip for sale of Benjare Ceat 5 , proposed to be sold for ₹ 39,000/-, and against which ₹ 10,000/- had been received as advance, from the customer, was also found during search, and which was confirmed as representing an actual sale, with the advance received being reflected in the daily cash statement of 11.9.2007, i.e., the immediately preceding day (in answer to Q. # 5). Admission, it is well-settled, is the best form of evidence, even as the statement stands accorded statutory recognition per s. 132(4). In the instant case, it is not only corroborated, but also there is no basis for retraction. In fact, some of the pleas raised, one of which has also been accepted, and only rightly so, by the ld. CIT(A), i.e., qua branded goods, rather, further confirm and reinforce the Revenue s stand of the suppression of/in sales, and the assessee s books as not reflecting the correct sale value of the goods sold. That is, notwithstanding the acceptance or non-acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be managed differently. As pointed out by Mr. Jabir, disinclination on the part of the customer to bear the sale tax rate (of 12.5%) is one of the contributing reasons for not raising the bill for the full sale value (refer answers to Q. No. 6,7). Such considerations are usually absent in the case of large organizations, with access only to accounted funds, so that they bear the incidental tax. Accordingly, though we confirm and endorse the findings by the first appellate authority, we only consider it fit and proper under the circumstances to restore this aspect of the matter back to his file, to allow the assessee an opportunity to present its case with regard to bulk sales, with a further direction to admit the same where a prima facie stands made out by it. Further, if so, he shall adjudicate on merits in accordance with law, and with due regard to the procedure, i.e., after due opportunity of hearing to both the sides, besides the opportunity to the AO to examine as well as to meet the assessee s case in the matter. We decide accordingly. 5. We shall next take up the additional claims qua which the assessee has raised specific grounds, on merits. 6. As regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement between the partners, which authorizes the same. It needs to be appreciated that both the interest as well as the salary to the partners is only a part of and toward their share in the profits of the firm and, accordingly, is to be necessarily with reference to the partnership deed and the books of accounts of the firm recognised thereby. Does, it may be asked, the said deed envisage transactions not recorded in the assessee s regular books of accounts? It is only the books of account as maintained in the regular course of its business, on the basis of which returns stand filed with the Revenue, which stands recognized by the partnership agreement, so that the sharing of the profit or loss, including by way of interest and salary to partners, allowable u/s. 36(1)(iii)/37(1) r.w.s. 40(b) of the Act, is only with reference to the capital and the profit disclosed thereby, i.e., on the basis of such books of accounts. We, therefore, do not find merit in the assessee s claim. As rightly pointed out by the ld. CIT(A), the decision in the case of CIT vs. Jain Constructions Co., 156 CTR (Raj.) 290 is not applicable in the present case. The deduction of interest on capital and sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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