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TMI Blog2019 (3) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of the Assessing Officer having not followed the requirement of law, of examining the panchas when it was first sought for. Having not raised the contention before the Assessing Officer we perfectly agree with the Standing Counsel that if it is permitted at the appellate stage, it could only lead to chaos. Referring to decision in Pooran Mal [1973 (12) TMI 2 - SUPREME COURT] which itself specifically spoke of the safeguards insofar as a search under Section 132 held that compliance with the provisions of the CrPC, with respect to search and seizure is the most important safeguard insofar as the acceptability of the search is concerned. If there is no compliance with the most important safeguard, definitely it should fail. We have no quarrel with the proposition as laid down in the cited decisions. But however, the contention raised here is with respect to the absence of panchas; which we are of the firm opinion, should have been raised at the first instance. The non-presence of panchas raised for the first time before the First appellate authority after a period of three years from the search conducted, cannot at all be countenanced. There was no valid ground for the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at count and the addition made is only on the turnover at ten times, reduced later to six times, with gross profit @ of 20%. We also find that such a ground was not taken up before any of the appellate authorities. Hence we do not think that such a ground can be raised at the stage of appeal under Section 260A - Assessee appeal dismissed. - ITA 246/2013, ITA.5/2014, ITA.280/2013, ITA.283/2013, ITA.289/2013, ITA.293/2013 And ITA.312/2013 - - - Dated:- 14-2-2019 - MR K. VINOD CHANDRAN AND MR ASHOK MENON, JJ. For The Appellant : ADV. SRI.RAMESH CHERIAN JOHN For The Respondent : ADVS. SRI.P.K.R.MENON, SENIOR COUNSEL, GOI(TAXES) AND SRI.JOSE JOSEPH SC FOR INCOME TAX JUDGMENT Vinod Chandran, J. Assessments were carried out for seven years, 2003-04 to 2009-10, under Section 153A, and the appeals arise from the order of the Tribunal which disposed of appeals filed by the assessee and revenue. The questions of law raised by the assessee as available in the memorandum of appeal are the following:- 1. Whether on the facts and in the circumstances of the case Income Tax Appellate Tribunal, after admitting that Appellate authorities are entitled to adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were subjected to search under Section 132 on 09.04.2008. It was noticed that the assessee had not kept any accounts for the period from 01.04.2008 to 09.04.2008. Huge stock of silver and gold ornaments not disclosed in the books of accounts were also found. The documents recovered showed a consistent practice of sale of ornaments by estimate slips, with the books of accounts reflecting only 10% of actual sales. The assessee disclosed Gross Profit in the range of 36.55% to 48.08%; which the Assessing Officer found was to legitimise the profit realised on unaccounted sales. The Assessing Officer also held that the GP would be only at 20% in the line of business. There were additions made on that basis estimating the turnover at ten times from that seen from books of accounts of the relevant years, applying GP at 20%. 3. In first appeal, for the first time, the assessee raised a contention with respect to the search being invalid specifically claiming that the panchas were absent during the search and the recording of statement under Section 132(4). A ground of limitation was also urged based on the period of 21 months provided under Section 153B of the Act. Both these grounds wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal pointing out that there was sufficient material to reject the books of accounts as recovered on search. Reliance is placed on the judgment of this Court in ITA No.19 of 2011 dated 10.01.2019 [Commissioner of Income Tax I v.Orma Marble Palace (P)Ltd.] to contend that a dishonest dealer cannot be expected to keep the evidence revealing dishonesty for the prior earlier years which is permissible of being reopened under Section 153A, in pursuance to a search under Section 132. The fact that a number of estimate slips were recovered in the period in which there were no accounts properly maintained by the assessee as also recovery of huge undisclosed stock would be sufficient to reject the books of accounts of the assessee. As to the question of limitation, it is pointed out that though not specifically referred to by the Tribunal, the paper book produced by the assessee produced a postalitem tracking document which indicate that the dispatch was made on 31.12.2010 itself. The contention raised on limitation was for reason of the dispatch having been made after office hours, which cannot be sustained. On the ground of continuation of assessment proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We extract paragraph 11. We are, therefore, to see what are the inbuilt safeguards in Section 132 of the Income Tax Act. In the first place, it must be noted that the power to order search and seizure is vested in the highest officers of the department. Secondly, the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in Section 132(1)(a),(b) and (c) exists. In this connection it may be further pointed out that under sub-rule (2) of Rule 112, the Director of Inspection or the Commissioner, as the case may be, has to record his reasons before the authorisation is issued to the officers mentioned in sub-section (1). Thirdly, the authorisation for the search cannot be in favour of any officer below the rank of an Income Tax Officer. Fourthly, the authorisation is for specific purposes enumerated in (i) to (v) in sub-section (1) all of which are strictly limited to the object of the search. Fifthly when money, bullion, etc. is seized the Income Tax Officer is to make a summary enquiry with a view to determine how much of what is seized will be retained by him to cover the estimated tax liability and how m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in any of such appellate proceedings. We have no quarrel with the proposition as laid down in the cited decisions. But however, the contention raised here is with respect to the absence of panchas; which we are of the firm opinion, should have been raised at the first instance. 9. We first look at the judgment of the learned Single Judge in WP(C) No. 34655/2011, produced along with the paper book placed before the Tribunal. There, in pursuance to a search conducted under Section 132, the assessee had first raised a plea of requirement of examination of a Department Officer before the First Appellate Authority. The learned Single Judge found that the request of the assessee for cross-examining the authorised officer of the Department is in accordance with the provisions of law. We cannot but distinguish the decision when the claim is of absence of panchas; independent persons called by the department to evidence the search and the preparation of mahazar. This cannot be equated with the request made for cross-examination of an officer of the Department. Jose Cyriac (supra)was a case where the validity of an authorisation issued under Section 132 was first challenged in appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passage of time, have won over the panchas, to make statements retracting their attestation in the mahazar; of having witnessed the search from its commencement to its conclusion. The mahazar which the assessee had acknowledged contains the signatures of the panchas and they had specifically stated that they were present during the search, recording of statement, preparation of mahazar and acknowledgment of mahazar. The same was relied on by the A.O and at that time there was no objection raised to the same. We do not think that any of the decisions cited, help the assessee, since the question is a mixed one of facts and law. On facts we find that the question of presence of panchas cannot be questioned in appeal, unless it is first raised at least before the Assessing Officer. 12. We also notice that MD Overseas Ltd . dealt with only the change in procedure after introduction of Section 153A. The sanctity of the search and safeguards being sacrosanct remained the same before and after amendment. We do not think the decision in any way aids the assessee's case. The non-presence of panchas raised for the first time before the First appellate authority after a period of thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revealed estimate slips issued for a period of 15 days which totalled a sale of 175.174 gms; whereas the sale accounted for the said 15 days was only 17 gms. This is the basis on which the Assessing Officer rejected the accounts and estimated the turnover. The materials as revealed in the search in our opinion, was sufficient to reject the books of accounts of the assessee. 15. On the question of estimation we have to notice that the Assessing Officer had found that the assessee disclosed Gross Profit of 36.55% to 48.08% in its accounts. In fact, when estimating the turnover, the assessee could have adopted the Gross Profit as disclosed in the books of accounts. However, a reasonable computation was made considering the Gross Profit available in that line of business and a far lower gross profit of 20% was adopted for all the years. The estimation was made at ten times the returned turnover, finding that only 10% of the sales are accounted. The addition of ten times turnover was reduced by the First Appellate Authority to five times. The Tribunal modified it slightly to make it six times. There is absolutely no question of law arising from the estimation and we decline to answer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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