TaxTMI 
TaxTMI 
2009 (11) TMI 663
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....ase business of Hing and other items such as Zeera, etc. 3. The chart for various additions as made by the Assessing Officer and respectively disputed by assessee and revenue, vis-a-vis orders of ld. CIT(A), is produced below : Additions by Assessing Officer AO's additions as sustained by ld. CIT(A) Assessment Year 2000-01 Rs. 40,12,470 on a/c of understatement of sale consideration Rs. 57,339 on a/c of understatement of sale consideration Rs. 1,05,69,359 on a/c of processed Hing Rs. 2,02,179 on a/c of processed Hing Rs. 5,00,000 on a/c of out of books expense Assessment Year 2001-02 Rs. 44,59,659 on a/c of understatement of sale consideration Rs. 58,008 on a/c of understatement of sale consideration Rs. 1,14,75,914 on a/c of processed Hing Rs. 1,98,075 on a/c of processed Hing Rs. 5,00,000 on a/c of out of books expense Rs. 2,92,000, depreciation on car Assessment Year 2002-03 Rs. 68,10,158 on a/c of understatement of sale consideration Rs. 8,04,547 on a/c of understatement of sale consideration Rs. 1,02,93,262 on a/c of processed Hing Rs. 2,12,138 on a/c of processed Hing Rs. 5,00,000 on a/c of out of books expense Rs. 5,26,000, depreciation on car ....
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.... Bhatia (HUF). There is a panchnama of 31B/2, Rajpur Road, Delhi where the name of Lachhman Das Bhatia, Sanjay Bhatia, Anil Bhatia has been given. In the panchnama there is a mention of the name of Chetan Das Lachhman Das. But it has nowhere been stated that, search is in the name of firm or there is a search in the case of the firm. M/s. Chetan Das Lachhman Das 31B/2 has no relation with the firm Chetan Das Lachhman Das since this is neither residential nor business address of Chetan Das Lachhman Das, 31B/2 is neither godown nor the branch office of the firm. This address is also not included any where in the sale tax record of the firm. This is only residence of Lachhman Das and his two sons Anil Bhatia and Sanjay Bhatia. To repeat it has nothing to do with the partnership firm M/s. Chetan Das Lachhman Das or its partners and in the circumstances, it is submitted that there is no search in the case of assessee-firm. There is no warrant in the case of the firm and, hence, there cannot be any such section 153A assessment and therefore, the same is illegal void and, hence, merits quashing. For an assessment under section 153A, the pre-requisite is the warrant of search and then its ....
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.... under section 132 has been conducted on any of the premises belonging to assessee-firm much less on its partners/HUF's. (d)That on date of search on 13-12-2005, a survey under section 133A was conducted on assessee-firm premises, which never got converted into search, supports that revenue never intended to conduct search on assessee-firm. (e)That since firm is an artificial taxable entity different from its partners under section 2(7) of the Act dealing with definition of person, mere search on residential premises of Karta's of Partner/HUF's cannot be translated/equated into search conducted on firm, irrespective of something is found from said residential premises belonging to firm. (f)Search under section 132 is both assessee and premises specific and documents found from residential premises of karta's of partners could have been processed under section 153C of the Act (if at all required). (g)Mere issuance of warrant in the name of the firm could not give jurisdiction under section 153A as it satisfies only one legal requirement thereof, viz., initiation of search under section 132, whereas section 153A further requires satisfaction of condition of "conduct of search", f....
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....te. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner : Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that, (i)save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii)in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." On the reading of section 153A, it is clear that for framing assessment under section 153A, what is relevant is that a search is initiated under section 132 and is also conducted in the case of any person....
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.... search should have also been conducted. The fact that the decisions relied upon by the learned counsel for the assessee are distinguishable on facts has been admitted by the counsel for the assessee during the course of hearing itself and, hence, we do not propose to deal with the same in this order. Suffice it to say that the Assessing Officer rightly assumed jurisdiction for framing assessment under section 153A of the Act in view of the facts of the present case as narrated hereinabove. Accordingly, the legal plea raised on behalf of the assessee is required to be dismissed. 9. As regards merits of additions made by the Assessing Officer, the relevant extract from ld. CIT(A)'s order (assessment year 2000-01), containing submissions of assessee is extracted herein : "Assessment has been completed based on doubt and suspicion. The books of account, etc., were available with the Assessing Officer in the computer and, therefore, the assessee was never called to bring such books of account. On the contrary, the Assessing Officer is making an allegation that the assessee did not co-operate. The entire assessment smacks of estimate and doubt. It is stated that Hing has been under in....
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....as always less than 11.54 per cent in other years except in assessment year 2006-07. Similarly the N.P. Rate varied from 3.9 per cent to 2.5 per cent and it is always less than the assessment year 2000-01 except in assessment year 2002-03. On the basis of such G.P. rate and N.P. rate the Assessing Officer says that there is a possibility of manipulation. The Legislature does not provide any such kind of addition on the basis of possibility. The Assessing Officer has given no valid reasons for making an addition for Rs. 40,12,570.The Assessing Officer says that there were certain bills found where two rates have been given, e.g., 100/300. The Assessing Officer says that the Hing has been sold at the rate of 300 whereas the bills have been prepared at the rate of 100. The details of all such bills have been given on pages 2 to 4 of the assessment order where the maximum rate is 4100 and the minimum rate is 100. Assessing Officer opines that the lower one is rate meant for issuing sale bills while the higher is actual rate of sale of Hing. This assessment order does not show any thermometer or barometer to support the arbitrary conclusion of the Assessing Officer in the assessment or....
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.... nature of evidences have been extensively discussed in the impugned assessment order. Based on the material found, the Assessing Officer estimated the turnover of Hing by relying on the statement of Mr. J.K. Khan alias Tainu, a broker that the value of import of hing is between Rs. 1,500 to Rs. 1,700 per kg. and the sale value in the local market is around Rs. 3,000 per kg. Accordingly, she has re-determined the sale value at Rs. 2,000 per kg. on the quantity sold by the assessee as declared in the books. Thereby the difference between estimated sale value and sales as per books is arrived, and computed the gross profit at the rate of 25 per cent by making reference to M/s. Gracious Portfolio (P.) Ltd. Accordingly, addition of Rs. 40,12,470 was made on account of suppression of hing for the current year. I have gone through the material relied on by the Assessing Officer in respect of page Nos. 19 to 26 as referred in the assessment order. There is no doubt that all these are relating to assessee-firm only. But the values mentioned therein are in terms of kattas but not in kilograms as assumed by the Assessing Officer. Hence, no serious consideration can be given to some of the pa....
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....ing to November 2005, but it reiterates the fact of assessee's conduct in suppressing the profit rate disclosed in the books. The fact of such practice was also admitted by the partners during search. Such established practice followed by the appellant would not allow the correct profits as per books of account. Thereby the book results deserve to be rejected. Hence it is reasonable to estimate the profit rate by considering various issues. Perusal of accounts reveals that considerable amount of personal expenses like telephone, vehicle, extending liberal financial assistance to family members of partners etc. are being accounted for in assessee's business. Further every member of family of partners are engaged in similar business as that of appellant. Most of common expenses are debited in assessee's accounts only. The facts the current case duly invites invoking of provisions of section 145 as it was conclusively proved that the assessee is indulged in recording lower sale prices than actually received. Hence, by rejecting the book results, which does not give correct profits, estimation of reasonable profits is necessary in the instant case. During the year the assessee has dis....
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....difference in the gross profit disclosed in the books by the assessee. Accordingly, the Assessing Officer is directed to delete the addition of Rs. 1,05,69,539 which represents the estimated sale value on hing compound and add the amount of Rs. 2,02,179, being the additional profits on hing compound. The last addition is in respect of Rs. 5,00,000 which is estimated as expenses in respect of processing of hing. It is the case of the Assessing Officer that the appellant did not show any expenditure which can be attributed to the manufacturing activity of the hing compound. I have examined the audit report of the assessee and found that the assessee has duly recorded the expenditure in respect of gum, starch, etc., for processing the hing to manufacture hing compound. It is not correct to state that there is no expenditure incurred for this purpose. By not recording these expenditure separately, it cannot be assumed that no expenses whatever has been recorded for the purpose. There is no base at all for the Assessing Officer to estimate a sum of Rs. 5 lakhs which is attributable to the processing charges of hing compound. Such estimated additions need some material/evidence to proce....
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....dopt higher turnover or excess price realization. The addition in this behalf are rightly deleted by Ld. CIT(A). 12. The principle applicable to aforesaid scenario has been aptly described in Allahabad ITAT ruling in Dr. R.M.L. Mehrotra v. Asstt. CIT [1999] 68 ITD 288 which has been affirmed on 2-9-2009 by Allahabad High Court in IT Ref. No. 88 of 2000 (Assessee's Paper Book Vol 2 - Pages 44 to 47) with detailed reference to Supreme Court ruling in H.M. Esufali H.M. Abdulali's case (supra). ITAT Allahabad extract - in aforesaid case held as : from Dr. R.M.L. Mehrotra (supra) : "One should not forget that it is a search case in which a search party is supposed and expected to find out all the incriminating documents, material as also undisclosed assets. A search assessment, much less a block assessment, therefore, stands on a footing different than a normal assessment much less an assessment based on the best judgment of an Assessing Officer. During search, firstly, no other diary or other record comparable to the note book marked as "B-1/23" were found by the search party for the remaining period, which normally would have been, were it being maintained and kept. Though such a r....
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....e suppressed turnover on the basis of the material before him, in which some amount of guess work was inevitable. In contradistinction to these facts, in the present case the assessee was searched (emphasis provided). During this search firstly, no other diary or other record comparable to the note book marked as "B-1/23" were found by the search party for the remaining period, which normally would have been, were it being maintained and kept. We are conscious that such a record have been destroyed also from time to time. But in such a situation also, if the assessees had actually made a fortune of similar receipts in respect of the remaining part of the year, they must be reflected by certain assets, movable or immovable ought to have been found during the course of search. No such assets, despite the extreme step of search which amounts to a serious invasion on the rights of subjects and which is perhaps the last weapon in the arsenal of the department, were found, which could be attributed to any such hypothetical receipts. In view of this, we are unable to concur with the department to the multiplication formula adopted by the learned Assessing Officer. Accordingly, we answer ....