TaxTMI 
TaxTMI 
2013 (10) TMI 510
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.... from jewellery business Turnover 2000-01 Rs. 1,05,528 Rs. 4,81,524 2001-02 Rs. 89,702 Not available 2002-03 Rs. 93,776 Rs. 6,52,019 2003-04 Rs. 92,897 Not available 2004-05 Rs. 93,887 Not available 2005-06 Rs. 1,10,614 Not available Assessee never returned any income from its money lending business in regular returns. 3. Subsequent to search, notices were issued under Section 153C of the Act requiring the assessee to file returns for impugned assessment years. In the returns filed in pursuant to such notices, additional income declared by the assessee were as under:- Assessment Year Admitted for unexplained investment in loan against PN (Rokas) called as business loans or Sahukhari Byaj (Rs. ) Admitted for unexplained cash credit/ loans (Rs. ) Admitted for inadequacy of drawing (Rs. ) Admitted for additional interest on loan against Rokas or business loan (Rs. ) 2005-06 53,17,500 Nil 1,00,000 5,38,500 2004-05 Nil Nil 1,00,000 1,78,325 2003-04 Nil 50,000 1,00,000 1,97,750 2002-03 7,00,000 Nil 1,00,000 71,890 2001-02 Nil Nil 1,00,000 ....
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.... assessee was having two types of money lending business. One was called Sahukhari Byaj Investment, which were loans given on security of promissory notes or Rokas and the other was loans given on the security of gold jewellery, which was called Girivi Byaj business. The debtors and creditors as on 08.11.99 mentioned above pertained to the Sahukhari Byaj business. After netting the debtors and creditors, and a few other miscellaneous credit balances, Assessing Officer determined the unexplained investment in the Sahukhari Byaj business at Rs. 74,45,523/- for assessment year 2000-01. Though the assessee filed fund flow statement and argued that debtors and creditors were netted over a period of time and the actual investment of Rs. 76,42,159/- stood admitted over various years in the returns filed after the search, Assessing Officer was of the opinion that such unexplained investment ought have been disclosed in the return for assessment year 2000-01 itself. According to him, an addition of Rs. 74,25,523/- was required to be made in the said assessment year. A.O. also relied on a statement recorded from the assessee on 29.9.2005 for coming to the conclusion that assessee had investm....
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....in assessment year 2005-06 itself. Additions made under various heads in the assessments completed under Section 153C read with Section 143(3) are summarized hereunder:- Assessment Year For unexplained investment in loan against PN (Rokas) / Sahukhari Byaj business ( ) For inadequacy in drawing ( ) For undisclosed interest on loan against Rokas or business loan ( ) For undisclosed income from jewellery business ( ) For excess stock in gold Jewellery business ( ) 2005-06 8,12,000 42,282 8,61,500 24,90,595 95,48,810 2004-05 Nil 98,011 19,21,675 25,22,686 Nil 2003-04 Nil 1,00,627 19,02,250 26,48,421 Nil 2002-03 5,25,000 1,16,794 20,28,110 42,18,044 Nil 2001-02 13,659 1,54,436 20,86,500 25,00,000 Nil 2000-01 2,74,000+74,45,523 1,11,134 20,86,500 25,00,000 Nil 10. Assessee moved in appeal before the CIT(Appeals) for all the assessment years, assailing the additions made. Insofar as addition made for investment in Sahukhari Byaj business, argument of the assessee was that what was considered for addition for assessment year 2000-01 was the openin....
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....d that value of excess stock was shown by him in his return for assessment year 2006-07. As per the assessee, this could not have been considered as undisclosed income for assessment year 2005-06, since search was on 3.8.2005. 14. CIT(Appeals) was appreciative of these contentions. According to him, the addition of Rs. 74,45,523/- made for investment in Sahukhari Byaj business, for assessment year 2000-01, was not at all called for. The said amount represented only opening balance. Nothing was found during the course of search to show that it represented the investment of the assessee during the relevant previous year. Further, according to him, the statement recorded on 29.9.2005 and the admissions therein could not be considered for making additions, since these were retracted by the assessee. 15. As for the addition for undisclosed income from jewellery business estimated by the A.O., ld. CIT(Appeals) was of the opinion that this was solely based on the statement recorded from the assessee and not based on any search materials. In this view of the matter, he deleted the addition for income from jewellery business also. 16. Insofar as the addition for interest on Sahukha....
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....00/-. The opening balance of debtors in assessee's Sahukhari Byaj business as on 8.11.2009 itself came to Rs. 1,24,35,708/-. That assessee was earning substantial interest income came out from the records seized at the time of search, which included books of accounts of Sahukhari Byaj business for two Diwali years. Assessee, therefore, could not say that it was not having income from Sahukhari Byaj business. Assessing Officer had estimated the interest income considering these aspects and also considering admission of the assessee. In the statement recorded, assessee had mentioned that he was earning Rs. 20 lakhs to 22 lakhs as interest since very many years except for two years wherein the incomes were Rs. 13 lakhs to 15 lakhs. Assessing Officer had made the addition considering such admission as well as volume of the Sahukhari Byaj business carried on by the assessee. Further, as per learned D.R., there was no evidence for retraction of the statement given by the assessee at the time of search. Even if it was presumed that there was such a retraction, no corroborating evidence was filed by the assessee. Statement recorded from the assessee was more than one and a half months afte....
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....fore, additions on these were not at all warranted and rightly deleted by the CIT(Appeals). 22. Further, as per the learned A.R., additions made for interest income and gold jewellery business were purely estimates and not based on any records found at the time of search. Without incriminating material, an addition of that nature could not have been made. Therefore, as per learned A.R., these additions were rightly deleted by the CIT(Appeals). Learned A.R. pointed out that only material found at the time of search pertained to previous year relevant to assessment year 2000-01. Such material had relevance only for assessment year 2000-01. For assessment done pursuant to the search, as per learned A.R., existence of seized material was a sine qua non and for this reliance was placed on the decision of Hon'ble jurisdictional High Court in the case of CIT v. G.K. Senniappan (284 ITR 220). Thus, according to her, CIT(Appeals) was justified in deleting the additions and there was no reason to interfere with the orders of CIT(Appeals). 23. We have perused the orders and heard the rival submissions. In the returns filed prior to search, admittedly, assessee had only shown income from....
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....ast six years. In the last two years it has come down to Rs. 13 lakhs to Rs. 15 lakhs. Q.78: What is the rate of interest you charge on sahukari loans? Ans: The rate of interest charged by me on the Sahukari loans range between Rs. 1.20 to Rs. 1.40 per hundred per month. For the last two years the interest varies between Rs. 1 to Rs. 1.30. Q.79: I am showing you page 43 & 47 of seized material in Annexure MPB/B&D/S.15. Go through the same and explain? Ans: I have gone through the page 43 & 47 of seized material of Annexure MPB/B&D/S-15 shown by you and the same is explained as under:- Page No.43 contains the monetary transactions with S.K. and page No.47 contains the monetary transactions with V.J. These are the two major persons from whom I give and take money as and when required. But I cannot divulge the full details. Q.80: I am showing you page No. 145 to 182 of seized material in Annexure/MPB/B&D/S-15. Go through the same and explain? Ans: I have gone through the pages 145 to 182 of seized material in Annexure/MPB/B&D/S-15 and the same is explained as under:- These are details of Potli transactions pertaining to the period 1999 to 2002 and the balance o....
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....y deleted by the CIT(Appeals). However, the additions made by the Assessing Officer for interest earned by the assessee in such business for various years were, in our opinion, unjustly deleted by ld. CIT(Appeals). Such additions are reinstated. Order of the CIT(Appeals) to this extent is set aside. 25. Coming to the aspect of addition made for income from jewellery business, admittedly, a cash book was found at the time of search and seized as per Annexure MPB/B&D/S-24. Assessee was required to explain such cash book and in answer to question No.51 in the statement recorded from assessee on 29.9.2005, it was mentioned by the assessee as under:- "Q.51: I am showing you the Cash Book found during the course of search on 3.8.2005 in your residence at No.12, Moulana Abdul Kalam Azad Street, Red Hills, Chennai-52 and seized as per Annexure MPB/B&D/S-24 dated 3.8.2005. Please go through the same and explain? Ans: This books is the Cash book for the period 1.4.2000 to 31.3.2001 maintained by me in respect of purchase and sale of gold jewellery, silver articles, pawn broking business and Potli loans. These cash transactions are in respect of my jewellery business (M/s Amrath Jewe....
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....rnover for the last six years? Ans: I do admit that my actual sale turnover of gold jewellery and silver articles for the last six years starting from financial year 1999-2000 to 2004-2005 was in the range of Rs. 1.8 Crores to Rs. 2.25 Crores per annum. Q.69: Do you accept then that your profit by adopting a barest minimum of 10% gross profit also was in the range of Rs. 18 lakhs to Rs. 22.5 lakhs? Ans: Yes I do accept that the minimum gross profit at 10% of sales turnover was ranging between Rs. 18 lakhs to 22.5 lakhs in the last six years. Q.70: It means that the maximum gross profit at 20% was also possible? Ans: The gross profit margin normally varies between 10% to 15%. Q.71: If the minimum gross profit per year of Rs. 18 lakhs to 22.5 lakhs is taken for the last six years your profit from jewellery business alone works to Rs. 108 lakhs 135 lakhs for the last last six financial years from 1999-2000 to 2004-2005. Is it not? Ans: Yes I do agree with the computation that by adopting a minimum of 10% of gross profit also my total income from jewellery business for the financial years 1999-2000 to 2004- 2005 alone works out to Rs. 1.35 crores." In answer to ....
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....inion that CIT(Appeals) was not justified in deleting such additions. These additions are reinstated. However, the A.O. is directed to exclude the income of Rs. 1,05,528/- and Rs. 89,702/- returned by the assessee for assessment year 2000-01 and 2001-02 respectively, in the regular returns while reinstating the additions. 26. Coming to last addition, which was deleted by the CIT(Appeals), pertaining to excess stock of gold and silver jewellery for assessment year 2005-06, there is no doubt that such excess stock was found at the time of search. The date of search fell in previous year 2005-06 relevant to assessment year 2006-07. Assessee had admitted value of such stock in his return for assessment year 2006-07. Assessing Officer had made the addition for assessment year 2005-06, but nevertheless, deleted such amount admitted by the assessee in his return for assessment year 2006-07. We are of the opinion that CIT(Appeals) was justified in taking the view that the excess stock found at the time of search could have been considered for assessment only in the previous year in which the search was conducted. Hence, it was assessable only for assessment year 2006-07 and admittedly, ....