TaxTMI 
TaxTMI 
1997 (4) TMI 119
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....ough no proceedings under section 132(5) had taken place in the assessee's case, section 132(7) was made applicable and the entire assessment was accordingly framed on the basis of the search carried out in the case of the assessee's father. Since the legality of the entire assessment is under challenge, it would be proper, first to decide this issue and then, if need be, shall decide the other grounds. 2. Search operations had taken place on 22-12-1988 and 23-12-1988 at the business and residential premises of Shri Parasmal Jain, the father of the assessee. While searching the residential premises, it was noticed that the assessee was running his personal business of gota making (Zari business) in the same premises. The books of account and other documents pertaining to the assessee's business were seized. The assessee's statement was recorded under section 132(4) wherein it was admitted by him of owning and running the zari business. The Assessing Officer, therefore, applied the provisions of section 132(7) and considered the seized documents while framing the assessment. The validity of the assessment was challenged before the CIT(Appeals) who rejected the ground of the assesse....
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....inct and separate businesses, the names of both the concerns were identical which could have caused confusion. This confusion was bona fide which should not affect the validity of the assessment. For this proposition reliance was placed on the decision of the Supreme Court in the case of ITO v. Seth Bros. [1969] 74 ITR 836. The ld. D.R. also placed reliance on another decision of the Supreme Court in the case of Pooran Mal v. Director of Inspection [1974] 93 ITR 505. Thus the ld. D.R. strongly urged to uphold the validity of the assessment made in the assessee's case on the basis of the search carried out on his father. 5. We have heard the parties on the issue of the validity of the assessment. We have duly considered the material placed before us. We are of the considered opinion that on the facts as placed before us and in the circumstances of the case, the assessment cannot be held to be invalid or illegal. 6. It is true that the search warrant was not in the name of the assessee. However, what is important is that the search of the premises is valid. if the search party has entered into the premises with proper authorisation, it is not necessary that the search warrant shoul....
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....hout enquiring about its true nature, exposes himself to search'. Thus, under the circumstances described above, we do not see anything illegal about the assessee himself or his business premises being searched. 8. We have held the search of the business premises of the assessee to be valid. However, assuming that the search was illegal, the bases on which the assessee has been assessed, are evidences found in the course of such search. The question is, can such evidences, which are obtained in the course of an illegal search, be used against the person from whose custody they were seized. The reply is best provided by the Supreme Court in Pooran Mal's case: " It would thus be seen that in India, as in England, where the test of admissibility of evidence lies in relevancy, unless there is an express or necessarily implied prohibition in the constitution or other law of evidence obtained as a result of illegal search or seizure is not liable to be shut out. In that view, even assuming, as was done by the High Court, that the search and seizure were in contravention of section 132 of the Income-tax Act, still the material seized was liable to be used subject to law before the inco....
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....purchases were genuine and accounted for, the deletion thereof from the total income was urged for. 13. The ld. D.R. was of the view that perhaps the ledger was prepared after the search. The fact that at the time of the search, the impugned purchases were not entered in the books has not been disputed by the ld. counsel. For this submission, the ld. D.R. drew our attention to certain purchase bills which pertained to August, 1988. The same were not entered in the books upto December, 1988, i.e. upto the month in which the search took place and hence there was every reason to believe that the said purchases were unaccounted transactions. Further, according to the ld. D.R., the story that the accountant had left the services of the assessee was also an afterthought, as was evident from a different version given by the assessee in his statement recorded under section 132(4). 14. After duly considering the rival submissions and the material on record, we do not see any merit in sustaining the addition. The assessee's explanation before the Assessing Officer is very much palatable. It is observed that it has been the consistent practice of the assessee to record the credit purchases ....
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.... the G.P. rate of 17.6 per cent declared thereon. 16. The CIT(Appeals) again made a non-speaking order as follows : " I have considered the facts of the case. In principal (sic) addition is justified, however the appellant is entitled (sic) to benefit of set-off of Rs. 1,34,104 against the other additions. No separate addition is called for." 17. The assessee has challenged the above order for sustaining the addition in principle, whereas the department has challenged the set-off allowed by the CIT(Appeals) against other additions. The assessee has also filed his cross-objection against the ground raised by the revenue. 18. The ld. D.R. has relied on the order of the Assessing Officer, whereas the main contention on behalf of the assessee is that in the year under appeal the assessee has declared better results showing G.P. at 17.6 per cent as against 11.9 per cent in assessment year 1987-88 and 10.5 per cent in assessment year 1988-89. Therefore, there is no justification to sustain the addition. 19. At the out set, we do not approve of the Assessing Officer's observation regarding non-maintenance of day-to-day consumption register. Though technically speaking the assessee is....
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....wn in the trading account prepared for the period ending on the date of search. Whatever difference is there is due to the fact that some stocks were lying with workers. Moreover, the entire stocks are hypothecated to the bank. Thus there is no reason to treat the stocks as unaccounted. The ld. D.R. relied on the order of the Assessing Officer. 22. After considering the submissions and the material on record, we are of the view that the addition is wholly unjustified. Nothing is brought on record to show that the stocks are not accounted for. That the stocks are hypothecated to the bank is also not disputed. Moreover, when the trading account was recast by the Assessing Officer by enhancing the sales and applying 20 per cent of G.P. rate, it necessarily means that the trading account did include stocks, or else how could he arrive at or estimate any rate of gross profit. Moreover, when the stocks were inventorised at the time of search, item-wise verification may not have been possible at the time of assessment proceedings, but in a business like this which is more like a home industry, the Assessing Officer could have satisfied himself by tallying the valuation with a reasonable ....