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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 ..... ht from the assessment years 2001-02 to 2006-07 and found that there was a marginal difference between the profit ratio disclosed in the earlier assessment year and for the assessment year 2006-07. Accordingly, the Assessing Officer estimated the profit at 1.19% being the average for the assessment year 2005-06. AO has taken the profit at 1.18% which was confirmed by the CIT (Appeals). This Tribunal has also confirmed the order of the CIT (Appeals). Therefore for the sake of consistency the order of the lower authorities is modified and the Assessing Officer is directed to estimate the profit at 1.18% instead of 1.19%. Suppression of net profit - Held that:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 31-1-2017 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER, AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Assessees : Shri S. Sridhar, Advocate For The Revenue : Shri A.V. Shreekanth, JCIT ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: All the appeals of the assessees and the Revenue are directed against the respective orders of Commissioner of Income Tax (Appeals), Salem in respect of three independent assesses. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order. 2. Let us first take ITA No.2174 of 2013 for the assessment year 2002-03 in respect of Smt. A. Jothimani. 3. Shri S. Sridhar, Ld. Counsel for the assessee submitted that the only issue arises for consideration is addition of ₹ 1,50,000/- under Section 68 of the Income 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 y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly an addition was made under Section 68 of the Act. 5. We have considered the rival submissions on either side and perused the material available on record. It is not in dispute 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. The assessment was made against the assessee under Section 153C of the Act. Therefore it is obvious that the assessee is a person other than the search person. We have carefully gone through the Section 153C of the Act. In respect of the person other than the search person, the Assessing Officer cannot initiate the proceeding for assessment or the Assessing Officer can assess the income on the basis of the material found during the search operation. In the case before us, admittedly no material was found during the course of search operation. The assessee filed return of income for the 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search operation. In case, no material was found during the search operation, in respect of credit found in the Books of Accounts which is produced during the course of proceedings, this Tribunal is of the considered opinion that there cannot be any addition under Section 153C of the Act. In this case, admittedly no material was found during the course of search operation in respect of the addition made by the Assessing Officer to the extent of ₹ 3,50,000/- under Section 68 of the Act. Therefore the addition made by the Assessing Officer cannot be sustained. Accordingly, the same is deleted. 11. The next issue arises for consideration is disallowance of ₹ 1,00,000/-. 12. Shri S. Sridhar, the Ld. Counsel for the assessee submitted that the Assessing Officer found that the assessee has under stated the gross profit for the assessment years 2004-05 2005-06. While considering the assessment of the assessee s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2004-05 and another ₹ 1,00,000/- for the assessment year 2005-06. 14. We have considered the rival submissions on either side and perused the material available on record. Admittedly, the assessment was framed for understating the net profit for the block period under Section 153C of the Act. It is not in dispute that the undisclosed income for the block period has to be computed only on the material found during the course of search operation in respect of the person other than the search person under Section 153C of the Act. In the case before us, the Assessing Officer has not referred any search material in the impugned assessment order. The Assessing Officer simply compared the net profit of the assessee s husband Shri P. Anbazhalagan with that of the assessee and found that the net profit disclosed by the assessee is less than 1% cannot be sustained. The fact remains is that no material was found during the course of search operation 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was declared by the assessee. According to the Ld. Counsel this being a block assessment under Section 153C of the Act, the assessment has to be made only on the basis of the material found during the course of search operation. In the absence of any material found during the course of search operation, according to the Ld. Counsel there cannot be any addition on estimation basis. 20. On the contrary, Shri A.V. Shreekanth, the Ld. Departmental Representative submitted that the assessee admittedly has not maintained any Books of Accounts. The turnover of the assessee exceeded the prescribed limit under Section 44AB of the Act. Therefore, it is a clear case of suppression of the income, by not maintaining the Books of Accounts. Therefore, the Assessing Officer found that estimation of net profit at 0.75% by the assessee was not supported by any records. Accordingly, the Assessing Officer rejected the estimation made by the assessee and the net profit was estimated at 1.325% on the basis of the profit 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (HP) 230 ITR 791, the Ld. D.R., submitted that addition can be made on the basis of the admission made by the assessee, when the assessee made a confession during the course of search operation. The CIT (Appeals) can still retain the addition made by the Assessing Officer. Referring to the judgment of the Kerala High Court in Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala 91 ITR 18, the Ld. D.R., submitted that admission is a piece of evidence which cannot be ignored at all. Therefore the CIT (Appeals) is not justified in deleting the addition made by the Assessing Officer, by placing reliance on the order of this Tribunal in the case of Shri S. Selvaraj. 24. The assessee claimed before the Assessing Officer that he received ₹ 20,00,000/- on retiring from partnership firm M/s. Anburaj Textiles. The CIT (Appeals) found that this Tribunal examined an identical issue in the case of Shri S. Selvaraj. The above said Shri S. Selvaraj is none other than the person who took over the business of M/s. Anburaj Textiles after paying ₹ 20,00,000/- to each of the partners. This Tribunal found that the addition made by the Assessing Officer was without any basis. Refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the return of income filed on 30.10.2001 came to an end by operation of law, the Assessing Officer has to confine himself only to the material found during the course of search operation. In the case before us, according to Ld. Counsel no material was found during the course of search operation other than the so called statement said to be made by the assessee in the course of examination under Section 132 (4) of the Act. The question now arises for consideration is whether there can be an assessment under Section 153A of the Act for the block period on the basis of the statement recorded during the course of search operation under Section 132 (4) of the Act. In the absence of any material found during the course of search operation, the CIT (Appeals) by placing reliance on the order of this Tribunal in the case of Shri S. Selvaraj found that there cannot be any addition on the basis of the statement all alone. In fact, from the order of the CIT (Appeals) it appears that the addition was made in the hands of Shri S. Selvaraj under Section 69C of the Act, for undisclosed investment. From the order of this Tribunal which was reproduced by CIT (Appeals), it appears that no statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1%. For the assessment year 2005-06, according to the Ld. D.R., the earlier average profit was 6.03%. The Assessing Officer has found that the assessee has inflated the purchase. Therefore the Assessing Officer estimated the net average income at 1.18% and worked out the suppression of income at ₹ 76,804/-. According to the Ld. D.R.,, the Assessing Officer has rightly estimated the suppression of income. 32. We have considered the rival submissions on either side and perused the material available on record. Admittedly the search took place on 10.11.2005. The estimation of income is for the assessment year 2005-06. The time limit for filing the return of income expired on 30.07.2005. From the order of the Assessing Officer, it appears that the assessee has not filed the return of income for the assessment year 2005-06. The assessee filed the returns on 23.07.2007, consequent to the notice issued under Section 153C of the Act, disclosing agricultural income of ₹ 96,110/-. Since, the assessee has not disclosed the income in the regular course by filing a return of income and time limit to complete the assessment under Section 143(3) of the Act has not expired, this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities is modified and the Assessing Officer is directed to estimate the profit at 1.18% instead of 1.19%. 37. Now coming to the appeal of Shri P. Anbazhagan for the assessment year 2006-07 in ITA No.2179/2013, the first issue is with regard to suppression of net profit to the extent of ₹ 1,50,000/-. 38. Shri S. Sridhar, the Ld. Counsel for the assessee submitted that the assessee filed the return of income for the assessment year 2006-07 on 23.07.2007 disclosing the total income of ₹ 34,38,214/- including agricultural income of ₹ 61,500/-. According to the Ld. Counsel, the assessee disclosed the net profit at 0.75%. The Assessing Officer without any basis estimated the profit at 1.18% and made an addition of ₹ 1,50,000/-, in the absence of any search material. According to the Ld. Counsel there cannot be any addition. 39. On the contrary, Shri A.V. Shreekanth, the Ld. Departmental Representative submitted that the assessment year under consideration is 2006-07 and the addition made by the assessment year was on the basis of the profit ratio disclosed by the assessee in the earlier assessment years. For the earlier six assessment years, the aver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Representative submitted that even though the assessee claimed that the assessee had carried out unrecognized money lending business, the diary does not disclose anything. The diary doesn t reflect the business activity carried out by the assessee. The diary doesn t explain the opening balance referred therein, even though the closing balance was repeated three times. In the absence of any material for the opening balance, the Assessing Officer rejected the claim of the assessee and found that the cash balance as on 31.09.1999 has to be taken as undisclosed income of the assessee. Therefore CIT (Appeals) has rightly confirmed the addition made by the Assessing Officer. 44. We have considered the rival submissions on either side and perused the material available on record. The fact that the diary was found during the course of search operation is not in dispute. From the order of the Assessing Officer there was some reference about the business activity for the period from 02.12.1997 to 21.07.1998. This is apparent from the observation made by the Assessing Officer at page 5 of the impugned order The assessee claims that they were doing unregistered and unaccounted money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. We have considered the rival submissions on either side and perused the material available on record. As seen from the assessment order, it appears that the credit was made by cash. Even though, the assessee claims that it was a transfer from M/s. Sri Durga Textiles, there was no debit entry in the Books of Accounts of M/s.Sri Durga Textiles. The assessee appears to have proposed an arithmetical tally inside the account by relying on journal entries. When the capital account disclosed the investment by cash, this Tribunal is of the considerable opinion that the claim made by the assessee that it was transferred from M/s. Sri Durga Textiles is an afterthought. Therefore the CIT (Appeals) has rightly confirmed the addition made by the Assessing Officer. 50. The next issue arises for consideration is addition of ₹ 31,91,834/- towards excess stock. 51. The Ld. Counsel for the assessee submitted that at the time of search, the physical stock was quantified at ₹ 57,24,397/-. However Books of Accounts discloses the stock at ₹ 25,32,563/-. The difference of stock to the extent of ₹ 31,91,834/- was taken as excess stock by the Assessing Officer. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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