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TMI Blog2017 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act, 1961 (in short 'the Act'). Shri S. Sridhar, the Ld. Counsel for the assessee submitted that there was a search operation under Section 132 of the Act on 10.11.2005 in the case of assessee's husband Shri P. Anbazhagan. According to the Ld. Counsel, the assessee filed the income tax return for the assessment year 2002-03 in regular course on 12.03.2003 before the search operation, disclosing the total income as Rs. 1,27,710/-. Consequent to the notice under Section 153C of the Act, the assessee has filed a return on 23.07.2007 disclosing the very same amount of Rs. 1,27,710/-. According to the Ld. Counsel, the assessee was engaged in the business of manufacturing cloth by name M/s. Sri Vishnu Durgaadevi Textiles. On perusal of the accounts, the Assessing Officer found that an amount of Rs. 1,00,000/- was credited in the personal capital account on 01.02.2002. Similarly another amount of Rs. 25,000/- was credited on 07.03.2002. The Assessing Officer also found that Rs. 25,000/- was credited in the personal capital account on 18.03.2002. The assessee explained before the Assessing Officer that the amount was credited on transfer from her capital account in the proprietary co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2002-03 on 12.03.2003 in the regular course before the date of search operation. Therefore this Tribunal has considerable opinion that in the absence of any material found during the course of search operation, there cannot be any addition under Section 158BC. Therefore we are unable to uphold the order of the lower authorities. Accordingly, the order of the lower authorities is set aside and the addition of Rs. 1,50,000/- is deleted. 6. In the result, the ITA No.2174/Mds/2013 stand allowed. 7. Now coming to assessment year 2003-04, the first issue arises for consideration is addition of Rs. 3,50,000/- under Section 68 of the Act. 8. Shri S. Sridhar, the Ld. Counsel for the assessee submitted that no material was found during the course of search operation for the assessment year 2003-04. The Assessing Officer found credit in the capital account in the Books of Accounts during the course of assessment proceedings. The assessee claimed before the Assessing Officer that it was only a transfer from her capital account from the proprietorship concern. According to the Ld. Counsel in the absence of any material found during the course of search operation, there cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... husband Shri P. Anbazhagan who is also engaged in the similar business as of the assessee, the net profit was never below 1%. In the case of the assessee, according to Assessing Officer the net profit shall be more than 1%. The Assessing Officer further found that the net profit disclosed by the assessee was less than 1%. Accordingly, the Assessing Officer found that there shall be addition towards net profit. The assessee explained before the Assessing Officer that discounts were given to the customers more than what was given by Shri P. Anbazhagan. The Assessing Officer has estimated the net profit at Rs. 1,00,000/- for the assessment year 2003-04 and for the assessment year 2005-06. The Assessing Officer has also estimated the understatement, the net income at Rs. 50,000/- for the assessment year 2004-05. In the absence of any search material, according to the Ld. Counsel there cannot be any estimation of net profit by comparing the net profit disclosed by the assessee's husband Shri P. Anbazhagan. This being a block period, under Section 153C of the Act, for the purpose of estimating the profit there shall be a material found during the course of search operation in the hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration in respect of business of the assessee. Therefore, the comparison made by the Assessing Officer with that of the net profit of the assessee's husband Shri P. Anbazhalagan in the absence of any search material for the block period cannot be sustained. The matter would stand differently in case Revenue authorities found materials during the course of search operation for understatement of the profit. No such evidence was found during the course of search operation. Therefore this Tribunal is unable to uphold the order of the lower authorities. Accordingly, the addition made by the Assessing Officer for shortfall of net profit for the assessment years 2003-04, 2004-05 & 2005-06 are set aside and the addition made by the Assessing Officer for the respective assessment years are deleted. 15. Now coming to assessment year 2004-05, the only disallowance made by the Assessing Officer is Rs. 50,000/- towards expenses. 16. We heard Shri S. Sridhar, the Ld. Counsel for the assessee and Shri A.V. Shreekanth, the Ld. Departmental Representative. While disclosing of identical issue for the assessment year 2003-04, this Tribunal found that there was no material found during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t declared by the assessee's husband Shri P. Anbazhagan. 21. We have considered the rival submissions on either side and perused the material available on record. The block assessment under Section 153C was framed consequent to the search operation made in the case of Shri P. Anbazhagan. Therefore the Assessing Officer has to confine himself only to the material found during the course of search operation. Comparison of the net profit with that of the similarly placed traders can be made in the regular assessment under Section 143(3) of the Act. When the assessment was framed under Section 153C of the Act, comparing the profit ratio of the similarly placed traders cannot be made in the absence of any search material. The matter would stand differently in case the Revenue authorities found some material regarding the suppression of sale by the assessee. Mere non-maintenance of Books of Accounts and failure of the assessee to get the Books of Accounts audited cannot be a reason for estimating the net profit by comparing the same with that of the similarly placed traders. Therefore this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after paying Rs. 20,00,000/- to each of the partners. This Tribunal found that the addition made by the Assessing Officer was without any basis. Referring to the order of this Tribunal in the case of Shri S. Selvaraj, the Ld. Representative for the Revenue submitted that there was no material other than the statement recorded from one of the partner Shri P. Easwaran. This Tribunal further found that all the payments made by the said Shri S. Selvaraj reflects in the respective capital accounts. Accordingly, the addition made by the Assessing Officer to the extent of Rs. 40,00,000/- was deleted in the case of Shri S. Selvaraj. 25. In this case before us, the assessee admitted that he received Rs. 20,00,000/- on his retirement from M/s. Anburaj Textiles. Therefore it is a benefit arising under Section 28(i)(iv) of the Act. Hence the CIT (Appeals) is not justified in allowing the claim of the assessee. 26. On the contrary Shri S. Sridhar, the Ld. Counsel for the assessee submitted that in the case of Shri S. Selvaraj in fact who took over the business of M/s. Anburaj Textiles, this Tribunal found that there was no evidence other than the statement made by one of the partner Shri P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed investment. From the order of this Tribunal which was reproduced by CIT (Appeals), it appears that no statement was recorded from the said Shri S. Selvaraj, the addition was made only on the basis of the statement made by Shri P. Easwaran. Therefore this Tribunal found that there cannot be any addition on the basis of the statement recorded from the said Shri P. Easwaran. 28. In the case before us, admittedly the statement was recorded from the assessee under Section 132(4) of the Act during the course of search operation. When the assessee admits in the course of search proceeding while examining under Section 132(4) of the Act, this Tribunal is of the considered opinion, the decision of this bench of the Tribunal in Shri S. Selvaraj cannot come to rescue of the assessee. The assessee himself admitted during the course of examination under Section 132(4) of the Act. Therefore the statement made by the assessee under Section 132(4) has an evidentiary value. The matter would stand differently in case the addition was made on the basis of the statement made by the third party. Since, the assessee himself made the statement and there is no reason why such statement made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd time limit to complete the assessment under Section 143(3) of the Act has not expired, this Tribunal is of the considered opinion, the Assessing Officer has rightly compared the average profit for the assessment year 2006- 07 and estimated the net income at 1.18% for the year under consideration. Therefore the addition made by the Assessing Officer was rightly sustained by the CIT (Appeals). This Tribunal did not find any reason to interfere with the order of the lower authorities. Accordingly, the same is confirmed. 33. Now coming to assessment year 2006-07, in the case of M/s. Anburaj Exports, the only issue is addition of Rs. 76,800/- made by the Assessing Officer. 34. Shri S. Sridhar, the Ld. Counsel for the assessee submitted that the Assessing Officer estimated the addition at 1.19% of the total turnover of Rs. 2,57,56,197/-. After reducing the net profit disclosed by the assessee at 0.89%, the Assessing Officer estimated the suppression of income at Rs. 76,800/-. According to the Ld. Counsel there is no material available on record for making such estimation. In the absence of any material, the Assessing Officer ought to have accepted the net profit disclosed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years. For the earlier six assessment years, the average income disclosed by the assessee was 1.18%. The Assessing Officer has found that the assessee has disclosed only 0.75% of the profit during the year under consideration. Accordingly, estimated the profit at 1.18% and determined the suppression at Rs. 1,50,000/-. Therefore the CIT (Appeals) has rightly confirmed the appeal made by the Assessing Officer. 40. We have considered the rival submissions on either side and perused the material available on record. The average income for earlier six years comes to 1.18%. This is not in dispute. The last three years average comes to 1.11%. This is also not in dispute. The assessee has disclosed only 0.71%. The Assessing Officer has computed the suppression of income by taking the difference of average income of earlier years and the income disclosed during the year under consideration. This Tribunal is of the considered opinion that the Assessing Officer computed the average income of the assessee by comparing the profit ratio disclosed by the assessee himself. Therefore there cannot be any reason to interfere with the order of the lower authorities, especially when the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered and unaccounted money lending as evidenced by the Diary. But the Diary does not prove anything. It cannot be regarded as an account book. There is no proof that it relates to any business done by the assessee. And if at all any business is done, it does not explain why it is restricted to the period 02/12/97 to 29/07/98 only and why it is recorded in a 1997 Diary and that too in the months of April & May 1997. It also does not explain why no opening balance is mentioned notwithstanding that the closing balance is repeated three times" 45. In view of the above observation, it may not be correct to say that the assessee was not carrying any unaccounted business. There is a prima facie evidence to indicate that the assessee is carrying on some activity for the period 02.12.1997 to 21.07.1998. What actually was done by the assessee was to be examined by the Assessing Officer after giving opportunity to the assessee. Accordingly the orders of the lower authorities are set aside and the issue is remitted back to the file of the Assessing Officer for re-examination in the light of the material available on record and thereafter decide in accordance with law after giving reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit purchase were not taken in to consideration. Therefore the CIT (Appeals) is not justified in confirming the order of the Assessing Officer. 52. On the contrary, Shri A.V. Shreekanth, the Ld. Departmental Representative submitted that admittedly there was a difference between the physical stock verified by the department and the stock disclosed in the Books of Accounts. The assessee appears to have explained before the Assessing Officer that the closing stock was an aggregate stock of 4 concerns. If the stocks of all the 4 concerns were taken in to consideration there may not be any excess of stock. The assessee cannot presume that the sock of Rs. 52,66,344/- as on 31.03.2005 continue to exist for all the years under consideration. The closing stock as on 31.03.2005 may not have any impact on the excess stock found by the authorities during the course of search operation. The CIT (Appeals) has rightly confirmed the addition made by the Assessing Officer. 53. We have considered the rival submissions on either side and perused the material available on record. During the course of search operation, the physical stock of the assessee was quantified and it was found that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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