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TMI Blog2014 (10) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... ould either go to further cement the case made out by the assessing officer or to help out the assessee against the findings of the assessing officer. The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the learned CIT(A). CIT(A) has confronted the assessing officer with the evidence thus received and the material thus gathered and allow the assessing officer to have his say in the matter vide remand report dated 29.4.2013 and being done so this dispute have no merits. No requirement in law that the first appellate authority should invariably consult or confront the assessing officer every time an additional evidence that was not filed before the assessing officer comes on the record of the first appellate authority. Where the additional evidence is obtained by the first appellate authority on its own motion, there is no requirement in law to consult / confront the assessing officer with such additional evidence. In such cases Sub-rule (2) of rule 46A requires the first appellate authority to allow the assessing officer a further opportunity to rebut the fresh evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the AO has made the addition only on pure guess work and not on the basis of any material found/seized during the course of search. Accordingly, the addition of 4,49,821/- made by the AO for the AY 2008-09 was deleted. We do not find any infirmity in the findings of the CIT(A) in deleting the addition; accordingly, the same is confirmed. The ground raised by the revenue is accordingly rejected. Disallowance of interest paid on deposits - AO found that the assessee firm has advanced funds to its sister concerns without charging interest and accordingly, he made proportionate disallowance in respect of interest paid on deposits @ 12% p.a and made addition to the total income for AYs 2002-03 to 2005-06 and AYs 2006-07 to 2008-09, no addition was made on this account since the entire interest paid was disallowed u/s 40(a)(ia) - HELD THAT:- In this case, the addition was made by the AO without referring any seized material and the addition was only on presumption without any material to show that borrowed funds have been advanced to sister concerns during the relevant assessment years. In the absence of any material to suggest that the advance made to sister concerns were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51/- for the AY 2008-09. The assessee could not controvert the above findings of the CIT(A). Disallowance u/s 40(a)(ia) - assessee has paid canvassing commission without deducing tax at source - HELD THAT:- CIT(A) correctly observed that there was no dispute in respect of the disallowance u/s 40(a)(ia) and accordingly, the same was sustained. We do not find any infirmity in the order of the CIT(A) on this issue. Disallowance of profit from terminated kuries - AO assumed that the auction discount due to the subscribers who have forfeited kuries was kept as a liability in the balance sheet of the assessee firm, even after the termination of the chitties and the assessee firm has neither returned the auction discount nor offered the same as income in the return of income - HELD THAT:- The assessee filed the detailed working of the profit from the terminated kuries. After going through the details furnished by the assessee regarding the outstanding of terminated kuries, he quantities it at 3,13,771/- and sustained the same and deleted the balance 31,11,054/ for the kuries which have not been terminated as on 31.3.2008. The CIT(A) given relief in respect of kuries which are not terminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the search action. Accordingly, this ground in the above Revenue appeals is dismissed. Disallowance of receipt from sale of trees - HELD THAT:- The assessee was having landed properties where the trees were grown. The reason for rejection of the assessee s plea by the Assessing officer is that the certificate from the Revenue authorities was not produced before him. However, the AO has not doubted the certificate issued by the revenue authorities which suggest the availability of timber therein. Being so, it is natural to earn income from sale of trees. Accordingly, we do not find any reason to interfere with the order of the CIT(A) and the same is confirmed. This ground of the Revenue is rejected. Addition towards investments in fixed deposits/Investment in SB A/c.- HELD THAT:- Considering the additional evidence and the remand report called for from the Assessing Officer and after receiving the comments from the Assessing Officer on the additional evidence given by the assessee, the CIT(A) was of the opinion that the explanation given by the assessee was proper since the assessee has properly substantiated the fixed deposit in the cash flow statement and therefore, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005-06. The CIT(A) further found that the other contentions such as own timber, procurement of bricks/tiles at reduced prices, cost of kennel, cost of horticultural work, cost of well, etc., were not proved by the assessee with sufficient evidences. Therefore, the CIT(A) deleted the additions accordingly. X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) while adjudicating the issue, certain fresh evidences, were produced by the assessee and the CIT(A) called for remand report on 14-03-2013 from the AO. The AO sent remand report vide his report dated 29-04-2013. After considering the remand report, the CIT(A) admitted the evidences and adjudicated the appeals filed before him. 7. The contention of the ld AR is that in these cases, the assessment order u/s 153A of the act was passed by the AO on 29.12.2009. The assessee explained the reasons for filing the fresh materials before the CIT(A) during the appellate proceedings as follows; (i) the books of accounts and connected records based on which the details are to be complied were seized during the course of search and photocopying of the same were completed only on 30.10.2009; ii) that the Managing Partner of the group was not keeping well during this period. iii) that the accountant of the assessee firm left service during the course of assessment proceedings; iv) that the Auditor of the assessee firm was also not cooperative and not filed the required details before the AO. 7.1 In view of the reasons mentioned above, the CIT(A) admitted the various documents, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kanpur Coal Syndicate 53 ITR 225 (SC) the Supreme Court have held that the first appellate authority can do what the assessing officer could do and can also direct the latter to do what the latter has failed to do. In the case of Jute Corporation of India Ltd v. CIT 187 ITR 688 (SC) and in the case of CIT v. Nirbheram Daluram 224 ITR 610 (SC) the Supreme Court have held that the powers of the first appellate authority over an assessment are all pervasive and they are not confined to the matters considered by the assessing officer. There are many judgments to the effect that in view of the provisions of Section 250(4), the first appellate authority is duty bound to make an enquiry even if such enquiry was not made by the assessing officer if the facts and circumstances of the case warrant such an enquiry to be made. Reference in this regard may be made to the judgments in the case of Mohammed (K.) v. Income-tax Officer reported in reported in 107 ITR 808 (Ker); in the case of Sewduttroy Rambullav and Son v. Commissioner of Income-tax reported in 204 ITR 580 (Cal); in the case of Smt. Prabhavati S. Shah v. Commissioner of Income-tax reported in 231 ITR 1 (Bom) and in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals), we are also of the view that in spite of the provisions of rule 46A(1), the provisions of Section 250 enable the Commissioner of Income-tax (Appeals) to accept additional evidence in appropriate cases which power has been preserved by Sub-rule (4) of rule 46A also. If the provisions of rule 46A, Sub-rule (4) thereof, are held to be mandatory that will go against the provisions of Section 250 of the Act conferring power on the first appellate authority to enquire into the matter and pass appropriate orders. In other words, rule 46A without Sub-rule (4) will be open to challenge as ultra vires Section 250 of the Act." 8.5. There are of course several judgments where it has clearly been laid down that the assessee on his own cannot produce any additional evidence not furnished before the assessing officer without meeting he various conditions provided under rule 46A for which satisfaction is to be recorded by the appellate authority in writing and with which the appellate authority is further required to confront the assessing officer and allow him reasonable opportunity to have his say in the matter. In the case of Rai Kumar Srimal v. Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the observations in the case of Ramgopal Ganpatrai Sons Ltd. v. Commissioner of Excess Profits Tax reported in 24 ITR 362 (Bom); in the case of Byramji Co. v. Commissioner of Income tax reported in 11 ITR 286 ( Nag). 8.6. In the case of CIT v. Vali Mohamed Ahmedbhai 134 ITR 214 (Guj), the Gujarat High Court have held as under: "If any additional evidence submitted by an assessee is accepted behind the back of the assessing officer and the assessing officer is not given proper opportunity to rebut the same, it would amount to the violation of the principles of natural justice. Hon'ble Gujarat High Court observed: It is clear from the above quoted provision that the AAC should not have taken into account any evidence produced under Sub-rule (1) unless the ITO had been allowed a reasonable opportunity to examine the evidence or to cross examine the witness whose evidence was taken on record or to produce any evidence in rebuttal of the additional evidence produced by the assessee. It is, therefore, obvious that the AAC could not have relied on the additional evidence without giving such opportunity to the ITO. The mere fact that notice of hearing of the appeal was given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for this reason that it is necessary to give him an opportunity to meet the additional evidence. The Tribunal has, therefore, fallen into an error in rejecting the plea of the revenue that the AAC ought to have given an opportunity to the ITO to examine the additional evidence or to cross examine the witnesses whose evidence was taken on record or to rebut the additional evidence. We, therefore, answer the question referred to us in the negative and against the assessee". 8.7. The proposition that the first appellate authority can admit additional evidence sought to be filed by an assessee only for good reasons and after allowing the assessing officer reasonable opportunity to have his say in the matter is supported by some more judgments such as CIT v. Babulal Jain 176 ITR 411 (MP); C. Unnikrishnan v. CIT 233 ITR 485 (Ker); and Ramprasad Sharma v. CIT 119 ITR 867 (All). 25.In the case of Smt. Prabhavati Shah v. CIT 231 ITR 1 (Bom). The Bombay High Court dealt with a case where the assessee sought to produce fresh evidence before the first appellate authority for no good reasons for not having produced the same before the assessing officer. Referring to the provisions of rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner fails to exercise his discretion judicially, and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority". 8.8 Thereafter the High Court again observed at page 8 in the following words: "On a conjoint reading of Section 250 of the Act and rule 46A of the rules, it is clear that the restrictions placed on the appellant to produce evidence do not affect the powers of the Appellate Assistant Commissioner under Sub-section (4) of Section 250 of the Act. The purpose of rule 46A appears to be to ensure that evidence is primarily led before the Income-tax Officer." 8.9. From the various authorities (supra) we find that the legal position is that the first appellate authority has wide powers over the order of assessment appealed against before him. In the course of exercise of such power the first appellate authority can direct the assessee to produce any evidence, information or material that was not produced before or considered by the assessing officer. The purpose of rule 46A is to place fetters on the rights of an appellant to produce additional evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce filed by the assessee. Even that requirement cannot be said to be a rule of universal application. If the additional evidence furnished by the assessee before the appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy in such a case no useful purpose served on performing the ritual of forwarding the evidence / material to the assessing officer and obtain his report. In such exceptional circumstances the requirement of Sub-rule (3) may be dispensed with. 10. In view of the above discussion, we find no merit in the grounds raised by the Revenue and accordingly, the grounds raised by the Revenue in all these appeals are dismissed. 11 Next common ground is with regard to profit from own chity investment. 11.1 Facts of the case are that according to the AO, the assessee firm was subscribing to various kuries conducted by the firm and it was not disclosing the income from own chitty investments in the return of income. During the course of search a document marked as A-21 was seized, which contains the details of large amount of subscription in own chits for the period from 10.2.2003 to 9.2.2008. Accordingly, the AO worked o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases and the findings given herein on the disputed issues to the extent the same are found relevant in the cases before them." Accordingly, the addition for the AY 2002-03 was deleted by the CIT(A). 12 We have heard the parties and perused the relevant material on record. In our opinion, the deletion of addition is justified as there was no incriminating material found or seized during the course of search to suggest the addition for the AY 2002-03. Accordingly, we do not find that the CIT(A) is justified in deleting the estimated addition for the AY 2002-03. The ground taken by the revenue is accordingly rejected for the AY 2002-03. 12.1 For the AY 2003-04, the material relating to the investment in own chity was found for the month of Feb and March 2003. Since these chits were not terminated during the relevant year, the CIT(A) was of the view that the AO has computed the income by projecting the investments found for two months against the whole year and further estimated the income at 10%. In our opinion, there is no need for estimating the income for the AY 2003-04 in view of the fact that the chity reflected in the seized material for the relevant year are not terminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), the AO has also worked out the year-wise investments and estimated income solely on the basis of the seized material A-21. The working of the assessee was also on the basis of the same seized material A-21 and on its verification, the AO has not pinpointed any deviation of the assessee from the seized material. Accordingly, he observed that the view of the AO that the assessee has to adduce further evidences to prove the loss in respect of own chitty investments was not in order. Accordingly, the CIT(A) was of the view that there was no discrepancy in the working furnished by the assessee. He also found that the assessee has admitted more investments in own chits than the figure worked out by the AO. Accordingly, he observed that the addition made by the AO on estimate basis towards profit from own chity investment was not justifiable. Being so, the CIT(A) observed that the addition of ₹ 1,39,264/- for the AY 2004-05 and to the extent of ₹ 74,329/- for the AY 2007-08 are to be made and deleted the balance addition of other AYs. 13 After considering the rival submissions, we do not find any infirmity in the findings of the CIT(A), which is confirmed. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om kuri late fee. The CIT(A) observed that the AO has made the addition only on pure guess work and not on the basis of any material found/seized during the course of search. Accordingly, the addition of ₹ 4,49,821/- made by the AO for the AY 2008-09 was deleted. We do not find any infirmity in the findings of the CIT(A) in deleting the addition; accordingly, the same is confirmed. The ground raised by the revenue is accordingly rejected. 15 Next ground relates to disallowance of interest paid on deposits. 16. Facts of the case are that during the assessment proceedings, the AO, found that the assessee firm has advanced funds to its sister concerns without charging interest and accordingly, he made proportionate disallowance in respect of interest paid on deposits @ 12% p.a and made addition to the total income in respect of AYs 2002-03 to 2005-06. In respect of AYs 2006-07 to 2008-09, no addition was made on this account since the entire interest paid was disallowed u/s 40(a)(ia) of the Act. 16.1 On appeal, the CIT(A) by relying the order of the Special Bench in the case of All Cargo Logistic Ltd (supra) observed that the addition to the returned income for these in an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the relevant material on record deleted the addition. While deleting the addition, the CIT(A) relied the decision of the Special Bench of this Tribunal in the case of All Cargo Logistics Ltd (supra). The CIT(A) observed that since no incriminating materials relating to the interest paid on housing loan, the AO was not justified in disallowing the same for the AYs 2003-04 to 2006-07. Accordingly, the disallowance of ₹ 27,750/- for the AYs 2003-04, ₹ 26,258/- for the AY 2004-05, ₹ 24,749/- for the AY 2005-06 and ₹ 21,301/- for the AY 2006-07 were deleted. The CIT(A) further observed that the AO has no case that the funds raised through housing loan were utilized for the personal purposes of the partners Sri E D Shaju. The only objection raised by the AO was that it was not clear how the loan amount which should have been received by chqeue in the name of the partner was directly credited in the account of the firm. CIT(A) was in agreement with the explanation offered by the assessee and accordingly, the addition of ₹ 18,185/- made for the AY 2007-08 was deleted. 19 We have considered the rival submissions and relevant material on record. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books. Accordingly, the AO rejected the books of account and estimated the interest income from money lending business by taking weighted average of interest rate charged by the assessee firm. 26.2 On appeal, the CIT(A) observed that since the AO has no dispute with the mistakes pointed out by the ld counsel; being so, he observed that the advances to be considered for estimation of income for these years as follows: i) As on 31.3.2002 ₹ 38,55,950 ii) As on 31.3.2003 ₹ 124,92,688 iii) As on 31.3.2004 ₹ 158,46,714 26.3 Finally, he observed that the AO applied the ratio of interest at 20.56% and on the balance as on the closing day of each financial year. According to the CIT(A) this method is totally unfair, since the total advances vary day-by-day due to sanctioning of new advances and closure of existing advances. According to the CIT(A), it is the normal practice that if the day-to-day balances are not available for computing interest income on product method, the average of the opening and closing balance of the financial year has to be considered for computation of interest. According to him, the true income can be estimated only by following averag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreman's commission. 29.1 According to the AO, the assessee was not fully accounting the foreman's commission received from conducting chits. He observed that the assessee was conducting 36 nos of chits during the period from AY 2002-03 to 2008-09. The AO worked out foreman's commission that may be receivable for each AY and treated the difference between the same and the foreman's commission disclosed in the return of income. 29.2 Before the CIT(A), the ld AR submitted that for the AY 2002-03, the foreman's commission receivable was only ₹ 21,57,875/- as against ₹ 24,36,281/- worked out by the AO. The ld AR further submitted that in respect of AY 2008-09, the foreman's commission receivable was only ₹ 17,05,250/- as against ₹ 26,04,095/- as worked out by the AO. The assessee furnished the detailed working in respect of each AYs, which was forwarded to the AO by the CIT(A) for his comments. In the remand report, the AO stated that in respect of the addition, the assessee contended that the total foreman's commission worked out in the assessment for the AY 2002-03 at ₹ 24,36,281/- was not correct, and the correct figure was only ₹ 21,57,875/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) observed that the AO worked out the foreman's commission receivable at ₹ 26,04,095/- as against ₹ 7,56,375/- disclosed in the return of income and ₹ 17,05,250/- which was subsequently admitted by the assessee in the appeal. He further observed that in the rejoinder, the assessee submitted that the correct foreman's commission receivable for the AY 2008-09 was at ₹ 23,63,326/-. The CIT(A) observed that the assessee reconciled the difference between ₹ 26,04,095/- as computed by the AO and ₹ 23,63,326/- which was claimed to be correct. 29.6 After verifying the working made by the as well as the assessee and also the reconciliation statement with supporting evidences, the CIT(A) found that the reconciliation made by the assessee for the AYs 2002-03 and 2008-09 are in order. Considering the facts and material, the CIT(A) was of the view that the foreman's commission receivable for the AYs 2002-03 and 2008-09 are ₹ 21,57,720/- and ₹ 23,63,326/- respectively. Accordingly, the CIT(A) sustained the addition on account of undisclosed foreman's commission amounts of ₹ 8,800/- for the AY 2006-07 and ₹ 16,06,951/-( total forema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile doing so, the AO placed reliance on the decision of the Hon'ble Kerala High Court in the case of CIT vs Guruvijaya Kuri Co Ltd reported in 302 ITR 239 (Ker). 33.2 Before the CIT(A), the ld AR submitted that for the above action of the AO, he has not brought on record any details in the assessment order regarding computation of the figure viz ₹ 34,24,825/- as profit from terminated kuries. According to the ld AR, such a figure was not reflected in the financial statements of the assessee firm also. Regarding recognition of profit in respect of terminated kuries, the ld AR submitted that as per accounting principles, income from terminated/forfeited kuries are ascertained, only if the entire subscriptions receivable from all the subscribers in respect of the corresponding kuri was fully realized. The ld AR further submitted that in this case, there are outstanding balances which are receivable from subscribers in respect of all the terminated kuries where credit balance was outstanding as per the balance sheet. According to the ld AR, no income can be recognized in respect of terminated kuries till the entire receivables are realized in full. It was submitted that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rused the relevant material on record. The assessee filed the detailed working of the profit from the terminated kuries. After going through the details furnished by the assessee regarding the outstanding of terminated kuries, he quantities it at ₹ 3,13,771/- and sustained the same and deleted the balance ₹ 31,11,054/ for the kuries which have not been terminated as on 31.3.2008. The CIT(A) given relief in respect of kuries which are not terminated . While doing so, the CIT(A) relied on the judgment of the Hon'ble jurisdictional High Court in the case of Guruvijaya Kuri Co Ltd, cited supra. We do not find any reason to interfere with the findings of the CIT(A), which is confirmed. Accordingly, the ground taken by the assessee in its cross objection is rejected. 35 In the result, the Cross Objection filed by the assessee in CO nos 112 to 118/Coch/2013 are dismissed. ITA Nos. 532 to 538/Coch/2013(AY 2002-03 to 2008-09 in the case of E T Devassy & sons Edassery Jewellers ( By the revenue) & CROSS OBJECTION No. 50 to 56/Coch/2013 (by the assessee): 36 The first common ground in these appeal is with regard to admission of additional evidence in violation of Rule 46A(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of search. But, according to the AO, under the current scheme of search assessment, the AO was empowered to assess or reassess the total income of all the six assessment years notwithstanding that the Income Tax assessment for certain years were concluded as on the date of search. Therefore, according to the AO, the objection of the assessee regarding initiation of assessment proceedings for the AY 2002-03 to 2005-06 was not legally valid. 38.3 In the rejoinder, the ld AR submitted that the issue regarding scope of assessment u/s 153A of the Act was settled by the decision of the Special Bench of the ITAT in the case of All Cargo Logistics Ltd., reported in 137 ITD 287. Thus, according to the ld AR, the assessment proceedings which have already terminated are not liable for abatement and only pending assessments as on the date of search shall abate. The ld AR submitted that in respect of AYs 2002-03 to 2005-06, the assessment are completed as on the date of search and the same can be reopen3d only on the basis of specific incriminating documents/transactions/seized assets. The ld AR also submitted that the ITAT in the case of DCIT vs Matha Enterprises in ITA NO. 269 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under summary scheme u/s 143(1) and the time limit for issue of notice u/s 143(2) had expired as on the date of search. The CIT(A) observed that there was no assessment pending in respect of these Asst Years and in such a situation, there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during the course of search. In the remand report, the AO stated that regarding the estimation on income for the AYs 2002-03 to 2005-06, it is true that there was no incriminating material which were found or seized relating to these years. The CIT(A) also observed that the AO has not referred to any seized material relating to the AYs 2002-03 to 2005-06. Accordingly, by following the decision of the Special Bench cited supra, the CIT(A) hold that the AO has no jurisdiction to make addition u/s 153A of the I T Act in respect of the AYs 2002-03 to 2005-06. Aggrieved, the revenue is in appeal before us. 40 After considering the rival submissions and relevant material on record, we do not find any reason to interfere with the findings of the CIT(A), which is confirmed in view of the decision of the Special Bench in the case of All Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41.2 The assessee submitted that the final accounts prepared by the AO from the seized record are not correct since the seized records are incomplete. According to the assessee, the financial statements prepared by the AO are not tallied and the differences are; i) For the AY 2005-06 7,44,907.23 ii) For the AY 2006-07 7,71,085.27 iii) For the AY 2007-098 16,90,703.99 The assessee further submitted that even if the seized books are assumed to be correct, in that event also the financial statements prepared from the seized books do not reflect the correct income since the valuation of stock made by the AO on various valuation date was not correct. The assessee further submitted that while valuing stock in trade, the AO made the following mistakes: i) Credit for the opening stock of gold ornaments i.e. stock as on 1.4.2005 was not properly given in the financial statements. ii) The quantity of gold ornaments as on the date of search as adopted in the assessment for valuation was not correct for the reason that deduction towards weight of stone and quantity of used ornaments are not considered. iii) For valuating new and old gold ornaments, the same rate was adopted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search that the firm was keeping two sets of account books and the seized books are the actual accounts of business. Therefore, by relying on the seized books, the AO computed the income for the AY 2006-07 to 2008-09. The ld AR of the assessee submitted that the seized accounts are not correct and reliable since the operating results shows huge los in one of the years and huge profit in other years even though the turnover was consistent for all the years. The ld AR pointed out that even f the seized records are assumed to be reliable, then also there are large scale errors in the preparation of financial statement. In the remand report, the AO has also admitted that there are certain mistakes in the financial statements prepared by him from the seized records. The CIT(A) found that it was important that the financial statements prepared by the AO are to be re-casted taking into account of errors pointed out by the assessee since it has a great bearing on the adjudication of the issue whether the seized records are fully reliable in the computation of income. 41.5 After considering the submissions and other relevant material, the CIT(A) was of the opinion that the seized books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... och/2013 relates to disallowance u/s 40(a)(ia), 40A(3) and 40(a)(ii) of the Act. 44 The assessee failed to deduct TDS for these assessment years u/s 194A/194C of the Act. On appeal, the CIT(A) observed that income of the assessee for the AYs 2006-07 to 2008-09 was estimated by the AO that there canot be any further addition after estimating the income of the assessee. Accordingly, by placing reliance on the decision of the Tribunal in the case Theja Constructions vs ACIT reported in 129 TTJ 57 (Hyd), the CIT(A) deleted the addition. 45 Since this issue covered by the decision of the coordinate Bench of the Tribunal in the case or Theja Constructions cited supra, wherein the Accountant Member was the party of that order; therefore, we are inclined to confirm the order of the CIT(A) on this issue. Accordingly, the ground taken by the revenue on this issue is dismissed. 46 In the result, the appeals filed by the revenue for all these Assessment Years in ITA Nos 532 to 538/Coch/2013 are dismissed. 47 Now, we will take up the Cross Objections filed by the assessee. CROSS OBJECTIONS No. 50 to 56/Coch/2013 48 The first ground is that since there is no search warrant, hence assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.587 to 591/Coch/2013; ITA No.525 to 531/Coch/2013 and ITA No. 594 to 600/Coch/2013 are dismissed. 56 Now, we will take up the Cross Objections filed by the assessee. Cross Objection Nos.121 to 122/Coch/2013 Cross Objection Nos. 119 & 120/Coch2013 Cross Objection Nos. 110 & 111/Coch/2013 Cross Objection Nos. 107 to 109/Coch2013 57 The common issue in all these Cross Objections relates to sustenance of addition to the extent of 12.5%. 58 While adjudicating the issue in the revenue's appeals, we have confirmed the order of the CIT(A) on this issue. Being so, the ground taken by the assessee in all these Cross Objection is dismissed as infructuous. 59 Next issue in Cross Objection no. 119 & 120/Coch2013, 110- & 111/Coch2013 and 107 & 108/Coch2013 relates to assessment which are concluded and no incriminating materials found and there cannot be abatement. 60 Similar ground was taken before us by the assessee in the case of E T Devassy & Sons in CO nos. 50 to 56/Coch/2013 and we have dismissed the ground taken by the assessee. Accordingly, following the findings in the Cross Objection in the case of E T Devassy & Sons, we dismiss the ground taken by the assessee in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural income as per return under section 153A 2002-03 25000 5,00,000 2003-04 10000 6,00,000 2004-05 21000 7,00,000 2005-06 60000 ₹ 8,00,000 2006-07 120000 10,00,000 2007-08 120000 11,00,000 ii) Larger agricultural income has been introduced in the post search returns in order to partially explain the source of investigations detected at the time of search. iii) The assessee has disclosed the receipt of total agricultural income of only ₹ 1,00,000/-per annum from the family property of himself, wife and children, in the statement under section 132(4) of the Act. iv) On enquiry by the Assessing Officer, the Agricultural Income Tax Officer. Trichur, who has jurisdiction over the assessee informed that the assessee was not an Agricultural income Tax assessee on the rolls of his office. v) At the time of assessment proceedings, the assessee has not furnished evidences for expenditure incurred on agricultural operations like purchase of fertilizers, payment of wages, etc., and also for the sale of agricultural produce. Accordingly, the Assessing Officer estimated the agricultural income of the assessee and treated the difference as taxable income by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to prove the agricultural activities, the assessee furnished a certificate from the member of the concerned parliamentary constituency. The assessee also furnished certificates from the local panchayat President and concerned member of the Panchayat ward stating that the assessee is one of the best agriculturists in the surrounding area and cultivates nearly 70 acres of paddy field and 47 acres of other crops such as coconut, arecanut, pepper etc. In order to prove the quantum of agricultural income earned from various properties, the assessee furnished certificates from the jurisdictional agricultural officers/village officers who have inspected the agriculture properties and verified the crops therein. The certificates issued by the concerned agriculture/village officers under whose jurisdiction the various agricultural properties are located. According to the assessee, copies of the certificates issued by the agricultural/village officers were already filed before the assessing officer except in certain cases where certificates were received after the completion of the assessment. 6.3 The assessee further submitted that the addition to the above properties (117.30 acres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice Co.op Bank 01.06.2010 03.08.2010 6. Jeeva Bonemeal 21.07.2010 30.07.2010 It is pertinent to state that the agricultural income claimed to have earned by the assessee is for the assessment year 2010-11 and not for the period under the search assessment period. Hence, it cannot be accepted as an evidence for the above assessment period." 65.6. In the rejoinder, the Ld. AR also submitted that in the remand report, the Assessing Officer has stated that the Income Tax Inspector has personally visited all the agricultural properties of the assessee and verified all the documents furnished in support of the agricultural income claimed by the assesses. According to the Ld. AR the assessing officer has no dispute with the extent of land (both paddy field and dry land cultivated by the assessee). The assessing officer further stated that he was satisfied with various documents furnished by the Ld. AR in support of his claim for agricultural income. It was submitted that the only issue raised in the remand report was that the additional evidences in the form of bills for the sale of agricultural produce/agricultural expenses furnished by the assessee, which do not relate to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 23,95,000 2007-08 53.41 11,37,000 42.46 20,13,000 31,50,000 2008-09 70.49 17,16,000 46.80 23,59,000 40,75,000 In support of the above claim, the Ld. AR furnished the following evidences: i) Certificates issued by the Agricultural/Village Officers having jurisdiction over the area regarding extent, crops grown and estimated income. ii) Certificate from the local Panchayath Member regarding agricultural operations carried out by the assessee. iii) Certificate from the local Panchayath President regarding agricultural operations carried out by the assessee. iv) Certificate from the Member of the Parliamentary constituency regarding agricultural activities of the assessee. v) Copy of bills in respect of sale of agricultural produce for the period from 04.03.2010 to 24.07.2010. vi) Copy of bills in respect of purchase of fertilizers/pesticides during the period from 01.06.2010 to 03.08.2010. 64.9 It was observed by the CIT(A), In this case the assessee and his family members, as per the certificates furnished by the concerned Agricultural/village officers, the assessee derived income from agricultural operations as under: Name of the village where the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural land held by the assessee and his family members during the various assessment years comprised in the search assessment period and the agricultural income estimated by the Agri/Village Officers from these properties. The CIT(A) further observed that in the remand report the Assessing officer has not questioned the merit and the evidentiary value of the various documents/evidences furnished by the assessee in support of his claim for agricultural income. The CIT(A) found that none of the evidences/submissions made by the assessee was rebutted by the Assessing officer in the remand report. From the working provided by the assessee, the CIT(A) observed that the average annual agricultural income per acre claimed by the assessee for the assessment years 2002-03 to 2008-09, which are tabulated as under: Asst. Year Paddy (Rs.) Per acre Other crops such as coconut, arecanut, nutmeg, pepper, platinum etc. (per acre) (Dry land area) 2002-03 17,150 36,402 2003-04 19,000 37,584 2004-05 19,900 43,848 2005-06 22,213 47,560 2006-07 21,865 38,600 2007-08 21,288 47,409 2008-09 24,343 50,405 65.12 It was further observed by the CIT(A) that from the working of agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee was doing paddy cultivation for a long period. The Panchayath President and Panchayath Member have certified that the assessee is getting substantial income from the agricultural properties for long time. The CIT(A) observed that the assessees are having large extent of agricultural land and are cultivating the fields continuously. The CIT(A) also found that the estimates given in the certificates are based on proper appreciation of the relevant factors such as nature of crops, number of plants etc. The CIT(A) observed that there being no question about the holdings of agricultural land and crops cultivated, then it cannot be denied that the assessee group were enjoying agricultural income therefrom. According to the CIT(A), the totality of the facts and circumstances of the case clearly leads to an inevitable conclusion that the assessee was holding agricultural properties and was doing agricultural operations during the impugned assessment years. The CIT(A) was of the opinion that the non-furnishing of bills/vouchers for sale of agricultural produce/expensed incurred for cultivation etc. has to be borne in mind while concluding the issue. According to the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, in the present case, the CIT(A) observed that the at the time of search, the assessee stated that he was getting Agrl. income from cultivated lands. The dispute is with regard to quantum of agricultural income for which th assessee furnished documentary evidences in the form of certificates from Agrl./Village officers. Thus the CIT(A) observed that the position in the present case was explicitly distinguishable from the factual position in the case of Jaikishan R. Agarwal on which the Assessing officer placed much reliance. Accordingly, the CIT(A) concluded that it would be just and proper to disallow 25% of the declared agricultural income in the returns filed u/s. 153A of the Act for the assessment years under consideration. Accordingly, the CIT(A) directed the Assessing officer to modify the assessment. Against this, the Revenue is in appeal before us. 66. We have heard the parties and carefully perused the relevant material on record. In these cases, admittedly, owning agricultural land was not doubted by the Department. There were evidences produced by the assessee suggesting agricultural income generated by the assessee in his land. Being so, since the Department have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the rejoinder, the assessee further submitted before the CIT(A) that in respect of his claim regarding receipt from sale of trees, the only objection raised by the Assessing officer is that these evidences were not furnished at the time of assessment proceedings but were filed before the appellate authority. According to the assessee, these evidences were filed before the Assessing officer on 21/12/2009 along with the reply to the pre-assessment notice, but the Assessing officer did not take into account of the same while framing the assessment. According to the Ld. AR, the Assessing officer had no dispute with regard to the merit and evidentiary value of the documents furnished by the assessee in support of his claim for the receipt from sale of trees. 68.5 On appeal, the CIT(A) observed that the certificates from revenue authorities furnished by the assessee as well as the remand report of the Assessing officer in connection with the claim of agricultural income, clearly shows that the assessee is having properties other than wetlands. According to the CIT(A), this undisputed fact disproves the contention of the Assessing officer that the properties owned by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 566 to 572/Coch/2013 is with regard to deletion of addition towards investments in fixed deposits/Investment in SB A/c. 71.1 For the sake of brevity, we consider the facts as narrated by the CIT(A) in I.T.A. No. 518/Coch/2013. The assessee has not included certain investments in Fixed Deposits totaling to ₹ 10,60,279/- in the cash flow statements as outgoings and hence added the same to the total income as undisclosed investments. 71.2. In respect of the above, the Ld. AR explained before the CIT(A)the reasons for not including certain deposits in the cash flow statements and also stated that the Assessing Officer was not correct in treating certain fixed deposits as unexplained investments in the hands of the assessee. 71.3. In the remand report, the Assessing Officer stated that according to the cash flow statements filed on fresh evidence, the assessee had shown only ₹ 3,26,276/- for the A.Y. 2007-08 and ₹ 2,94,003/- for the A.Y. 2008-09 as outflows. 71.4 In the rejoinder, the Ld. AR submitted that the remark of the Assessing Officer that the cash flow statement filed by the assessee was fresh evidence, which was factually incorrect. According to the Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal 6,46,276 A.Y. 2008-09 Name of the bank Deposit No. Amount (Rs.) Explanation CSB, Palayamparambu 20050029 35,789 Shown in the cash flow statement of Asst. Year 2009-09 " 20050218 29,291 " " 20050219 29,291 " " 20050220 29,291 " " 20050221 29,291 " Total 1,52,953 71.6. The Ld. AR relied upon the workings and evidences in the form of financial statements of the firm M/s. New Kerala Investments to substantiate his explanation regarding exclusion of certain fixed deposits from the cash flow statements. 71.7 After perusal of the evidences/explanations furnished by the Ld. AR, the CIT(A) observed that deposits appeared to be in order. The CIT(A) also observed that in the remand report, the Assessing Officer has not rebutted the explanation offered by the assessee for not including certain fixed deposits in the cash flow statements. Accordingly, the CIT(A) held that the assessee has taken care of all the unaccounted fixed deposits discovered during the course of search in his personal cash flow statements. Accofdingly, the CIT(A) deleted the addition of ₹ 1,20,000/- for the assessment year 2004-05, ₹ 6,00,000/- for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable properties were ascertained on the basis of seized documents. The amounts shown as outflow towards investment in immovable properties in the cash flow statement was made as a result of an afterthought and hence be rejected. 74.2. The Ld. AR also submitted that no additional evidences were furnished by the assessee in respect of the above addition at the appellate stage. The assessee only explained that certain investments which were treated as not included in the cash flow statements are in fact reflected in the cash flow statement and further the reason for not including certain investments in the cash flow statements. According to the assessee, from the remand report, it can be seen that the Assessing Officer had no objection with regard to the merit of the explanation furnished by the assessee in respect of the addition towards investments in immovable properties. 74.3. On appeal, the CIT(A) observed that the Assessing Officer prepared a list of year-wise investment in immovable properties made by the assessee as under: Asst. Year Investment in immovable properties (Rs.) 2002-03 4016862 2003-04 1763090 2004-05 348083 2005-06 123672 2006-07 5499178 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 554/1353 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 21,285 7,095 Shown in the cash flow statement for the assessment year 2003-04 26.02.2003 555/031 acre 1.5 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 39,872 13,291 " 28.02.2003 578/03 50 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 19,600 6,533 " 07.03.2003 644/0367 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 28,000 9,333 " 07.03.2003 645/0366 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 28,000 9,333 " 17,63,090 A.Y. 2004-05 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 2003 2273/03 53.625 cents Devassy E.T., Lilly, Shaju & others 22,405 7,468 Accounted in the books of St. Francis Clay Décor Tiles 16.05.2003 1353/03 38.5 cents Devassy E.T., Lilly, Shaju & othres 15,120 5,040 Accounted in the books of M/s. St. Francis Clay Décor Tiles 19.07.2003 2569/033 acre 27.5 cents Devassy E.T. & Joy Mandakan 1,40,021 70,011 Shown in the cash low statement for the assessment year 2004-05 01.09.2003 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up is only ₹ 11,75,334/- 13.09.2006 24 cents Devassy E.T. 36,000 36,000 shown in the cash flow statement 26.09.2006 53 cents Devassy E.T. 95,400 95,400 " 02.12.2006 13 cents Devassy E.T. 20,800 20,800 " 02.12.2006 22.8 cents Devassy E.T. 36,400 36,400 " 24.01.2007 3.390 cents Devassy E.T. 25,42,500 25,42,500 As per agreement dated 24.01.2007, ₹ 5,00,000/- was paid as advance for the purchase of this property and the same was accounted in the books of M/s. New Kerala Investments but this deal does not materialize. 81,56,865 A.Y. 2008-09 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 24.04.2007 Devassy E.T. 47,125 47,125 Shown in the Cash flow Statement of E.D. Salu. 24.04.2007 311/2 cents Devassy E.T. 55,125 55,125 Shown in the cash flow statement. 24.04.2007 273/4 cents Devassy E.T. 55,000 55,000 " On the various dates in F.Y. 2007-08 Shares of Hotel Lucia Devassy E.T. 8,00,000 8,00,000 Shown in the cash flow statement of E.D. Shaju.. 02.01.2008 36.65 cents 96,75,000 96,75,000 This is not a purchase but sale of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that the additions made by the Assessing officer on account of unexplained investment in immovable properties for the Asst. Years 2002-03 to 2008-09 were unwarranted. Therefore, the CIT(A) deleted the addition of ₹ 40,16,862/- for the assessment year 2002-2003, ₹ 15,87,534/- for the assessment year 2003-04, ₹ 2,73,023/- for the assessment year 2004-05, ₹ 93,385/- for the assessment year 2005-06, ₹ 50,01,595/- for the assessment year 2006-07, ₹ 81,56,865/- for the assessment year 2007-08 and ₹ 1,11,14,790/- for the assessment year 2008-09. Against this the Revenue is in appeal before us. 75. We have heard both the parties and perused the record. In these cases also, the assessees have furnished evidence before the CIT(A) and explained the investments in the properties in the cash flow statements. The CIT(A) had also called for remand report. After going through the remand report, the CIT(A) has observed that the unexplained investments in immovable properties were accounted for as fixed assets in the regular books of account of the firm in which the assesses were partners and the same cannot be considered as unexplained investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir personal cash flow statements are adequate as given below: Asst. Year E.T. DEVASSY E.D. SALU E.D. SABU E.D. BENNY TOTAL 2008-09 96000 69600 37200 37200 240000 2007-08 90000 66000 36000 36000 228000 2006-07 84000 60000 36000 36000 216000 2005-06 78000 54000 36000 36000 204000 2004-05 72000 48000 36000 36000 192000 2003-04 66000 25200 25200 25200 141600 2002-03 60000 24000 24000 24000 132000 81.2 According to the Ld. AR, from the above table, it can be seen that the drawings admitted by the assessee and his family members for the assessment year 2008-09 and the drawings estimated by the Assessing Officer for this year are the same. According to the assessee, while estimating the drawings of the earlier years, the Assessing Officer did not take into account of the fact that Srhi E.D. Sabu got married only in the assessment year 2007-08 and Shri E.D. Benny got married only in the assessment year 2008-09. Moreover, the elder daughter of Shri E.D. Salu started going to school only during the assessment year 2008-09. The assessee further submitted that, the Assessing Officer also did not consider the fact that the assessee is an agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot taken into account of the general inflation in the economy year by year. But according to the CIT(A), the assessee has not adduced any evidence to substantiate his arguments for the low drawings admitted for the relevant years. In these circumstances, the CIT(A) was of the view that no interference was required in respect of the drawings estimated by the Assessing Officer for the assessment years 2002-03 to 2004-05. Therefore, considering the drawings admitted by the family members, additions to the extent of ₹ 72,000/- (₹ 2,04,000/- - 1,32,000/-) for the assessment year 2002-03, ₹ 68,400/- (₹ 2,10,000 - ₹ 1,41,600) for the assessment year 2003-04, ₹ 24,000/- (₹ 2,16,000 - ₹ 1,92,000) for the assessment year 2004-05 were sustained by the CIT(A). Against this asseessees have raised Cross Objections. 82. We have heard both the parties and perused the record. As seen from the above,, the Assessing Officer estimated very huge drawings. Considering the drawings estimated by the Assessing Officer, the CIT(A) observed that for the assessment year 2005-06 to 2008-09, there is no necessity of any addition as the drawings admitted by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is fair and reasonable. Therefore, the addition made towards unexplained investments in residential house is unwarranted. 83.6. In the remand report, the Assessing Officer stated that in this respect it has to be stated that in the cash flow statement filed by the assessee's son Shri E.D.Jaison, as fresh evidence, he had shown ₹ 15,00,000/- as cash out flow equally for the three financial years 2003-04, 2004-05 and 2005-06. 83.7. The Ld. AR further submitted that from the remand report it can be seen that the Assessing Officer has admitted the fact that an investment of ₹ 15,00,000 in residential house was reflected in the cash flow statements of Shri E.D. Jaison. The Ld. AR submitted that it was clear from the remand report that the Assessing Officer has no dispute with the merit and evidentiary value of the additional evidences filed by the assessee in connection with the cost of construction of the residential house. According to the Ld. AR, from the remand report it is also clear that the Assessing Officer had no objection with regard to the explanation offered by the assessee for not including certain expenditure on account of residential house in the cash f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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