TaxTMI 
TaxTMI 
2009 (11) TMI 663
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....n framed. The assessee is engaged in sale/purchase 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....
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.... search there cannot be any section 153A assessment and, hence, this assessment is invalid. The firm consists of two partners, namely, Anil Bhatia (HUF) and Sanjay 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 ....
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.... (b)That search under section 132 has been conducted on residential premises of karta's of partners of assessee-firm, viz., 31B/2, Rajpur Road, New Delhi. (c)That no search 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 i....
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....n the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. (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 assessme....
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....1 The case laws relied upon by the learned counsel for the assessee are all distinguishable on facts. We agree that for framing assessment under section 153A it is not sufficient that a search is only initiated but such 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....
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....details of G.P. and net profit rate from the assessment years 2000-01 to 2006-07 where the G.P. rate varies from 11.54 per cent to 15 per cent. In 2000-01, it has been 11.54 per cent whereas in 2006-07, it was 15 per cent. It was 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 ....
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....ved that there is a possibility of manipulation in respect of profit element declared by the assessee in all these years. She also placed reliance on the evidences found from the assessee in the course of action under section 132 and the 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....
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....pect of some sales made for which evidences are recovered from the assessee during search. Assessee did record two rates on the papers found whereas on the sale bills it accounted for only the lower rate. Even though these papers are relating 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 indu....
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....me rate of G.P. is taken in this case also, i.e., at the rate of 20 per cent which comes to Rs. 4,95,992. Thereby the difference of Rs. 2,02,179 is directed to be assessed as income of the assessee in respect of hing compound which represents 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 ....
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....eques and all the parties are identifiable. No enquiry at all is conducted with any of the customer before concluding that actual price realized is much more than billed. No excess cash/assets are found to suggest so. Therefore, there is no basis to adopt 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 Ass....
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....ssessed of was the figure of 19 days sale by the assessee not entered in their books of accounting. The Supreme Court held that in such situation it was not possible for the officer to find out precisely the turnover suppressed and he could only embark on estimating the 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 we....