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TMI Blog2019 (2) TMI 2108X X X X Extracts X X X X X X X X Extracts X X X X ..... as a clear case of suppression which was found during the course of search and seizure operations, it is to be reasonably presumed that for the previous assessment years i.e., 2005-06, 2006-07 and 2007-08, the assessee had done suppression of sales. The discrepancies found during the search on 21/08/2007 were brought to the notice of Mr. Sunny Jacob who in reply to Q. No. 5 explained that the assessee was issuing estimate slips only for showing the customer, but they were issuing bills on finalization of the sales. This method adopted by the assessee is having no legal sanction. It was also noticed that the assessee had effected sales by issue of estimate slips instead of sale bills and that sale bills were prepared for accounting purposes only in a few cases. It was also noticed that the sales on estimate slips were not accounted resulting in unaccounting of sales and suppression of turnover. The estimate slips collected from different shops and the margin of profit on sale of gold ornaments were clearly compiled in para 18 of the original assessment order. This practice was regularly followed by the assessee. In view of these facts and circumstances, there is a clear pattern of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her provisions requiring the Department to collect information and evidence for each and every year for the six previous years u/s. 153A of the I.T. Act. Therefore, the argument of the learned counsel for the appellant-assessee that the information gathered either during pre-search enquiry or during the course of search cannot be made use so far as the six previous assessment years, is unsustainable. Thus we find that the AO has given a categoric finding with regard to suppression of sales for all the assessment years. While estimating the profit, the Assessing Officer has assessed the income on the basis of rate of profit adopted for the assessment year 2008-09. On this reasoning, we do not find any infirmity in the order of the Assessing Officer and the same is confirmed. Hence, this ground of appeals of the Revenue are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... in few cases. It was also noticed that the sales on 'estimate slips' were not accounted resulting in under recording of sales and suppression of turnover. As part of pre-search enquiries gold ornament was purchased from the assessee's shop on 25/07/2007 by the Investigation Wing. On purchasing 1.580 gms of gold on 25/07/2007, they had issued 'estimate slip' showing receipt of Rs. 1,550/-. But no sale bill had been issued. Subsequent to the search, on verification of the accounts maintained by the assessee, it was noticed that the above sales on the basis of 'estimate slips' were not accounted by them, either in the computer or in any other books. Similar estimate slips were issued from the different shops of the Sunny Jacob Jewellers Group while selling gold ornaments. While recording statements from Shri Sunny Jacob by the Asst. Director of Income-tax(Inv.) after the search, the above 'estimate slips' had been shown to him. In reply to Qn. No. 5 he had stated that the assessee was issuing 'estimate slips' only for showing the customer, but they were issuing bills on finalization of the sales. The above contention of the assessee was reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also stated that he is not aware whether any other bill is prepared for the sales made in your shop. He further stated that recording of the actual sales are not made in the hard disk of the computer. As per his statement, no purchase bills are issued while exchanging old gold ornaments in your shop for purchasing new ones. Instead, the purchases are recorded in the 'estimate slips' prepared." 4.4 During the course of search at the premises of M/s. Sunny Jacob Gold Hyper Market, Kollam on 21/08/2007, three note books marked as MSP(1), MSP(2) and MSP(3) were seized. These note books contained accounts of purchases and issue of gold ornaments and when compared with the regular stock register maintained by them, i.e., MSP(113), it was noticed that there was wide variations in accounting purchases and issues as per these registers during the period 26/07/2007 to 07/08/2007. It was noticed that in place of real purchase of 1207.430 gms., only 188.500 gms. found place in the regular stock register giving rise to suppression of 1018.93 gms. which showed that a very good percentage of business of the show room at Kollam., i.e., about 84.39% was outside the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers were passed by the Commercial Taxes. The assessee stated before the Asst. Director of Income-tax(Inv.) that the orders were challenged before the High Court but the orders of the High Court have not been received so far. From the books/documents found during the course of search, data found in the assessee's computer, information collected from the Sales Tax Department and on the basis of the information gathered before the search, it was apparent that the assessee was making sales on 'estimate slips' instead of sale bills and that they are generating sale bills only for accounting purposes and hence, the sales recorded in their accounts were not reflecting the actual turnover of their business. Since the accounting was not based on actual sales, but on made up one and the sale bills produced for accounting purposes only were entered and saved in the computer, the assessee's computer generated accounts did not reflect the actual sales or transactions in their business. Hence, it was proposed to estimate the total turnover of the assessee taking into account the circumstances of the case. 4.9 It was found that as per the account books of Sunny Jacob 916 show roo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hop and it is only in the cases where there were possibilities of an immediate exchange, estimate slips were given after affixing cash received seal. Shri Mathew Eapen in his statement dated 21/08/2007 had stated that his shop was not issuing sale bills for all sales and purchase bills for all purchases but on re-examination, he stated that his shop was issuing sale bills for all sales and purchases bills for all purchases. Similarly, Shri Bejimon S., erstwhile Manager of M/s. Sunny Jacob Jewellers and Wedding Centre, Kottarakkara tried to explain that the shop at Kottarakkara was not using computer but on re-examination he stated that the computer was used at least sparingly. The statement given by Shri Pintu T. Jacob, Computer Operator, M/s. Sunny Jacob 916 Jewellery, Trivandrum was a clarification to the effect that he was only printing estimate slips and not sale bills and he was only entrusted with the work of printing estimate slips and sale bills were written by Shri Mathew Eapen. According to the AO, none of the above statements was sufficient enough to prove that the business establishments in the group were not issuing estimate slips, instead their statements establish th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales turnover at 20% of Rs. 7,57,04,295/- as against the rate of 22% made in the original assessment order. 5. On appeal, the CIT(A) observed that the Assessing Officer had reworked the GP by applying the rate of 20% instead of GPO @ 22% applied in the original order on the same suppressed turnover and estimated the same as total income of the assessee. According to the CIT(A), the AO had resorted to estimation of suppressed profit as well as the estimation of applicable G.P. rate, based on the findings of the period relevant to the AY 2008-09 and the finding of the AY 2008-09 has been stretched back to cover the entire period between the AY 2002-03 to 2007-08. According to the CIT(A), only the real income can be taxed and no nominal income can be assessed to tax based on assumptions and presumptions. The Assessing Officer had not brought out any new facts on records. Therefore, it was held that the addition based on deriving the income out of applying estimated GP rate at the estimated suppressed turnover has got no basis. Accordingly, the CIT(A) deleted the additions for the AYs. 2005-06, 2006-07 and 2007-08. 6. Against this, the Revenue is in appeal before us. The Ld. DR rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all entered in computer or books of accounts. e) Statements given on 21/8/2007 by employees/customer & cross examination offered by the assesses on 22/12/2009. f) Analysis of difference found between the Purchase Note books MSP-1, MSP- 2, MSP-3 and daily stock register MSP 113-(reflected suppression of sales). g) Discrepancy noticed in books of accounts. h) Suppression of sales found by Commercial Dept. Kottayam. i) Purchase of immovable properties by the partners Sri Sunny Jacob and Smt. Maggy Sunny where only 20% of purchase value has been registered. 6.2 The Ld. DR submitted that the Assessing officer had analysed all the materials available before him, including objections raised and had taken a liberal view, giving the benefit of doubt to assessee and adopted 20 % of turnover as gross profit/income of assessee. Therefore, the order of A.O. was reasonable. 6.3 It was submitted that the CIT(A) had also erred in accepting the retraction of statement by the employees of the assessee firm during cross examination. The Ld. DR submitted that the CIT(A) was influenced by the statement of the employees that during search proceedings, out of fear, they admitted suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than Rs. 20 crores in immovable properties itself is a concrete evidence for concealment of income for the earlier years in which investments were made. 6.6 The Ld. DR submitted that the CIT(A)-III, Kochi vide order dated 23/09/2010 and CIT(A)-IV, Kochi vide order dated 31/03/2016 having followed the judgment of the High Court of Andhra Pradesh in the case of Rajnik & Co. vs. ACIT (252 ITR 561) and sustained the addition for AY 2008-09, ought to have sustained the additions for the A.Ys. 2003-04 to 2007-08. Reliance was also placed on the order of the ITAT, Cochin in the case of M/s. Rajan Jewellery in ITA Nos. 331-337, 366-372 dated 24/05/2013 wherein the gross profit determined @ 20% was confirmed. In view of the above, it was submitted that the Assessing Officer had correctly assessed the income of the assessee based on evidence gathered during search proceedings and adopted the gross profit @ 20% as against the original assessment at 22%. For these reasons, it was prayed that the order of the CIT(A) may be set aside and that of the AO restored. 7. On the other hand, the Ld. AR submitted that the purchase of 1580 gms of gold against the payment of Rs. 1550/- pertains to ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d documents which were seized did not establish any co-relation, document-wise, with four A.Ys. then order passed for initiation of proceedings u/s. 153C should be quashed." 8. We have heard the rival submissions and perused the record. The main contention of the Ld. AR is that for the assessment years under consideration, there was no seized material to suggest the undisclosed income of the assessee. Even if there is seized material, it is not at all relevant to the assessment years 2005-06 to 2007-08 and it is only relevant to assessment year 2008-09. The assessment for the assessment year 2008-09 was accepted by the assessee by an order of Tribunal ITA No. 371/Coch/2016 dated 10/10/2018. Further, it was submitted that the judgment of Jurisdictional High Court in the case of CIT vs. Meriya Hotel (332 ITR 537) cannot be applied to the assessee's case. In that case, there was admission by the managing partner that 20% of the sales turnover was suppressed and only 80% of the sales turnover was recorded in the books of account which was the practice from the beginning. Hence, in that case, it was presumed that there was willful concealment of income for all the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer held that volume of business as per computerized data was only 30'% of the real turnover or the volume of business in the various showrooms of the Group. On verification of the data in respect of the show room at Trivandrum, it was observed that the data regarding the volume of business relating to a particular date is logged into the computer at a particular time one after the another. For example, on 08/05/2007 there are in all 4 sales as per bill Nos. 201, 201, 203 and 204 which were entered into the computer at 1:12:06 p.m., 1:12:41 p.m., 1:31:25 p.m. and 1:13:25 p.m. This showed that the bills under reference were not prepared during the course of the business but it was prepared at a stretch one after another at a particular time of the day. The cluster of bills at a particular point of time proved beyond any doubt that the computerized data were not reflecting the real business but only imaginary or virtual ones and are not having any nexus to real ones. Hence, the Assessing Officer determined the estimated income on the basis of suppression of sales. It was observed that assessee was concealing 70% of its real turnover. Therefore, on the suppressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the sales on estimate slips are much larger than that on sale bills. If the assessees statement that estimate slips are issued to the customer only when there is possibility of exchange or return is expected, it will result in a situation where a large percentage of customers are returning or exchanging ornaments bought from them within a few days. This is a highly improbable situation. The contention of the assessee in this regard is not at all reasonable considering the natural probability. 22. The Sales Tax Department had conducted a search at the premises of all the 5 business concerns in 2006 and it was found that there was large scale sale on estimate slips. The consequent assessment made is, as per the assessee disputed before the High Court, The fact that the Sales-Tax Department also could come to the findings that the assessee had sold, ornaments on estimate slips corroborates the findings made during the course of search. From the above facts it can be concluded that the assessee is making sales on estimate slips." 7.2 Further, the Assessing Officer has made the following observations: 5.5. In para 10 of the assessment order the AO has referred to 3 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant. In my view for assessment year 2008-09 there- was sufficient material on record and in the possession of the Department which prove that the appellant assessee was engaged in sale/transactions outside the regular books of accounts. Howsoever unscientific the method of computation of concealed income has been adopted by the AO it cannot be denied that there is evidence of concealment of income came to light during the course of search. In various case laws cited in my orders for the same assessee for the assessment-year 2002-03 to 2007-08, one principle, which is common for framing the assessment for the search and seizure case is that there should be evidence which came to light during search and is supported by corroborative evidence regarding the concealment of income. In the present case and for the present year though the assessment is again based on estimate basis but the availability of incriminating documents is not ruled-out for which there is no satisfactory explanation given by the appellant. In the earlier years no additions were maintainable because there was no material relating to those years found or seized during the course of search, but for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to Rs. 1,44,98,015/- [i.e. 2,21,83,206*119/100]. Accordingly, the addition of Rs. 26,80,305/- made vide order dated 20.03.2013 giving effect to the order u/s. 263 of the CIT(Central) is restricted to Rs. 23,14,809/- while completing the assessment." 7.4 In our opinion, there is no error in the estimation of income of the assessee on the basis of the seized records. The estimation of income by the Assessing Officer is based on the documents found during the search and statement recorded during the course of search. Being so, the Assessing Officer is completely justified in adopting those figures for the whole year and for the next year. For this proposition, reliance is placed on the judgment of the Jurisdictional High Court in the case of Travancore Diagnostics P. Ltd. vs. ACIT (390 ITR 167) wherein it was held that when suppression had been found from the documents and the statement on record, the Assessing Officer was completely justified in adopting those figures for the whole year and for the next year which was based on sound rationale, since from the statement on behalf of the assessee, the suppression was found to be continued. In view of the uncontroverted and adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f turnover. The estimate slips collected from different shops and the margin of profit on sale of gold ornaments were clearly compiled in para 18 of the original assessment order. This practice was regularly followed by the assessee. 8.3 In view of these facts and circumstances, there is a clear pattern of sales suppression visible in this case. Therefore, the ratio of the judgment of the Supreme Court in the case of Commissioner of Sales Tax vs. H.M. Esufali H.M. Abdulali (90 ITR 271) clearly applies to the case in hand. In that case, it was held as under: "For the period November 1, 1959 to October 29, 1960, the assessee, a dealer in iron and steel, was assessed to sales tax on a turnover of Rs. 1,21,567 under the M.P. General Sales Tax act, 1958, and on a turnover of Rs. 22,916 under the Central Sales Tax Act, 1956. These assessments were made primarily on the basis of the returns filed by the assessee and the books of account. Subsequently, the flying squad of the department inspected the business premises of the assessee and found a bill book for the period September 1 to 19, 1960, showing sales of the value of Rs. 31,171.28, which had not been entered in the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewellers and Wedding Centre, Kottarakkara tried to explain that the shop at Kottarakkara was not using computer but on re-examination he stated that the computer was used at least sparingly. The statement given by Shri Pintu T. Jacob, Computer Operator, M/s. Sunny Jacob 916 Jewellery, Trivandrum was a clarification to the effect that he was only printing 'estimate slips' and not sale bills and he was only entrusted with the work of printing estimate slips and sale bills were written by Shri Mathew Eapen. The statement given by Shri A. Baby, retired KSRTC Driver, Kollam that he was not issued any purchase bill in respect of purchase of new gold ornaments in exchange of old gold ornaments was correct. The statements recorded by the Assessing Officer from the above persons were confirmed by this Tribunal in ITA No. 371/Coch/2016 vide order dated 10/10/2018. Moreover, this fact is also supported by the inspection report from the Commercial Tax Department dated 24/02/2006 wherein it was found that similar practice was being adopted by the assessee in sale of jewellery by issuing estimate slips. In these circumstances, the Assessing Officer had no option but to estimate the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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