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TMI Blog2004 (12) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... rate, in spite of that it was explained before him that the earning capacity of each and every branch is affected by various factors such as locality, market competition, goodwill, etc., and further supported by the income statements of each and every branch showing different earnings of commission income already recorded in the regular books of account before the date of search conducted by NCB and also before the date of requisition under s. 132A of the Act by the IT authorities during the block period concerned as well income statements relevant to the earlier periods furnished with the Department from the very inception of the appellant-firm. Thus, the learned CIT(A)-II, Ahmedabad, has erred in confirming the view of the AO in making assessment by applying the notional rate of 64:1 to all the branches in spite of the very fact that there is no such common criteria or index or ratio applicable as indicator of earning capacity of the branch, moreso when the Department itself has rightly accepted in the past, commission income earned by different branches at the different earning rate in the appellant's own case as well in the cases of other Angadias. Various submissions, explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on 20th Nov., 2000. Therefore, there is no justification to make notional addition on the basis of estimated commission @ Rs. 2 per thousand on incoming and outgoing transfer of money belonging to the various customers who are the real owners as contained in Annex. A-49 found during search particularly when there is no indication anywhere in seized materials to show that even in respect of other period, i.e., 7.67 months, the appellant-firm has maintained such record which was, for some reason or other not found in the course of search. Thus, the learned AO is not within his rights to make estimation of income for the period of 7.67 months beyond period of month of June, 2000, indicated in seized being Annex. A-49 in which the appellant-firm well before the requisition made under s. 132A of the Act offered undisclosed income of Rs. 41,00,000. Thus, the learned CIT(A)-II, Ahmedabad, could have found that the assessment made by the learned AO by presuming that there must be other material or evidence which was not found during search showing unaccounted income of other branches and the appellant must have derived undisclosed income to the extent of Rs. 24,15,12,960 for its differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was reported to the headquarter. The CIT(A) modified the AO's finding and addition to the extent of Rs. 12,07,56,480 sustained with the following observations: "06. I have carefully perused the arguments raised by the appellant. However, the main issue regarding detection of unaccounted commission by the appellant appears to be clearly established through the seized material as well as the statement on oath of the manager of Delhi office, the appellant. The AO appears to be justified in assuming the turnover since unaccounted transactions of Delhi branch of one month were detected as a result of search by the Narcotics Control Bureau and requisition made under s. 132A of the Act. It is also revealed that the appellant is charging commission ranging from Rs. 1 to Rs. 6 per thousand on the transfer of money as admitted by the manager of Delhi branch. It is also noticed that for unaccounted transactions, amount of each party runs into crores of rupees which is mentioned in coded figures. The clandestine practice that the appellant is not having names and addresses of the parties concerned but their telephone numbers only because cash is to be transferred immediately establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. 08. The AO ascertained total ratio of 64.1 for financial year 2000-01 in respect of Delhi Branch. In this manner total undisclosed income of block period of the appellant is taken at Rs. 24,15,12,960 (37,73,640 x 64). The fact remains that all transactions contained in Annex. A-49 are unaccounted and there is no correlation between the income as a result of detection of undisclosed income and income shown by the appellant in routine. The appellant never paid advance tax as per income worked out by the AO. Existence of unaccounted income cannot be ruled out since members of the family of the appellant having no independent source of income have disclosed huge incomes under the VDIS, 1997. Under these facts and circumstances, I would observe that the methodology adopted by the AO can be modified only and there is no reason and no ground that the appellant's contention can be accepted. Thus, undisclosed income determined by the AO is halved and rounded off to Rs. 12,07,56,480 and remaining addition is deleted." 4. The learned Authorised Representative argued the case at length and submitted that the AO and the CIT(A) has considered the following irrelevant materials: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on disclosure made by family members under VDIS, 1997. 5. It is also submission of learned Authorised Representative that following relevant facts and material has been ignored by the AO and the CIT(A). (i) Assessment orders of past years are ignored though all assessment orders are made under s. 143(3) or 143(1). (ii) All transactions are recorded in books of account of the assessee. (iii) According system and books of account are same for all years since inception of the business of the assessee. (iv) Cash book of all branches and of HO though produced, the AO has not referred or considered the same in his order. (v) Seized papers contained in A-1 to A-48 ignored presumably to avoid the fact that the assessee had fully explained the same. (vi) Statement of Jaswantbhai Patel dt. 15th Dec., 2000, and 15th Feb., 2001, recorded by Department ignored. (vii) Both the AO and CIT(A) ignored that NCB did not take any action against the assessee. (viii) Both the AO and CIT(A) ignored the working of average rate of commission of Rs. 1.74 per thousand. (ix) Disclosure of Rs. 41 lakhs made on 16th Aug., 2000, and Rs. 1,14,242 and Rs. 3,02,700 on 3rd Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in accordance with the method of accounting regularly employed by the assessee. The learned Authorised Representative in support of his contention relied upon the following decision: (i) Pandit Bros. vs. CIT (1954) 26 ITR 159 (P H) (ii) Dhirajlal Girdharilal vs. CIT (1954) 26 ITR 736 (SC) (iii) Mehta Parikh Co. vs. CIT (1956) 30 ITR 181 (SC) (iv) CIT vs. A. Krishnaswami Mudaliar Ors. (1964) 53 ITR 122 (SC) (v) State of Orissa vs. Maharaja Shri B.P. Singh Deo (1970) 76 ITR 690 (SC) (vi) R.B. Bansilal Abirchand Spinning Weaving Mills vs. CIT (1970) 75 ITR 260 (Bom). 8. The learned Departmental Representative supported the orders of the AO and filed written submission which has been placed on record. In brief, he submitted that the addition was made on the basis of material found. He further submitted that the assessee has admitted that fact vide letter dt. 18th Nov., 2002, filed before the AO that the statement of Jaswantbhai is correct to the extent that the transaction recorded in seized material viz., Annex. A-49 are not recorded and is out of the books as on the date of action by NCB authorities. The learned Departmental Representative further submit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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