TaxTMI 
TaxTMI 
TaxTMI 
2010 (11) TMI 863
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....rms. The assessee firm conduct its operation from Hyderabad. Mr. M. Sarat Babu, the Managing Partner of the firm, controls the day to day business activities of the firm from Hyderabad. Sri C.D.S. Prakasa Rao, the father-in-law of Mr. M. Sarat Babu is another key partner of the firm. The other partners are the family members of Shri C.D.S. Prakasa Rao and Shri M. Sarat Babu. 3. The assessee firm filed its return of income for all the impugned assessment years. Search and seizure operation u/s 132 were conducted in the premises of C.D.S. Prakasa Rao, the partner of the assessee firm. During the course of search, incriminating materials related to the assessee was found and seized from the above mentioned business premises of Mr. C.D.S. Prakasa Rao. Since the incriminating material referred above related to the assessee, a notice u/s 153C was issued. In response thereto, the assessee filed its return of income declaring some additional income therein. Subsequently, notice u/s 143(2) and 142(1) were issued requiring some more informations and explanations with regard to the seized material. During the course of search, statement of Mr. C.D.S. Prakasa Rao and Mr. Sarat Babu were recor....
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.... accounts or not) if such expenditure is mentioned in the seized document and to deduct the said expenditures from the receipt. But he did not follow the said system. He simply worked out the suppressed sales without giving a credit of the expenditures. 6. In the statement the major expenditures were shown to be the commission payment and it is an allowable deduction. The A.O. was of the view that expenditures not recorded in the books of accounts would be the undisclosed income and hence the amount is not allowable as a deduction. In the instant case, there are unaccounted receipts and excess of expenditures including the commission payments. The commission payments should not have been disallowed only for the reasons that its source of funds are not available. It was also explained before the CIT(A) that a substantial amount was given to the partners to meet the expenditures and this amount was debited in the books of accounts under the head `Expenditures' and this aspect was not considered by the A.O. 7. The CIT(A) re-examined the issue in the light of assessee's contentions and has allowed 15% of the commission shown in this statement of the seized material as an allowable le....
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....s though allowable is also not recorded in the books of account since the entire amount is kept outside the regular books of account. Under such circumstances, in view of seized documents, non-filing of details and nature of business, it will meet ends of justice, if 15% of commission paid is allowed on estimate as legitimate business expenditure. The Assessing Officer is accordingly directed to compute the commission allowable for each of the years and allow accordingly. The appellant has claimed that certain expenditure has been made through the partners and accordingly partners' withdrawals should reflect the same. However, I do not find much evidence for the said claim. It has not been demonstrated how the particular withdrawal is related to expenditure for the appellant and the evidence that such expenditure is not reflected in the books of account. Further, no reasons have been given for this kind of modus operandi. In view of the same, this claim of the appellant cannot be entertained as devoid of merit." 8. Dissatisfied with the order of the CIT(A), the revenue as well as the assessee preferred their appeals before the Tribunal. 9. During the course of hearing of the app....
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.... orders of the authorities below, documents placed on record, and certain incriminating material, showing the statements of profits and details of expenditures, found during the course of search, we find that initially these computer generated statements were denied by the assessee but later on it was admitted and the assessee has offered certain additional income having accepted that certain sales were suppressed. The main document which has generated all controversy is annexure-III in which a statement of profit for the period 1.4.1997 to 31.3.2002 was prepared. In this statement, total sales were shown and certain expenditures were also claimed. Out of these expenditures one of the major expenditures is on account of commission payment which did not find place in the regular books of accounts of the assessees. While computing this total profit, the assessing officer has worked out the suppressed sales and excess expenditures claimed in the books of accounts and made the addition of both to the total income of the assessees in all impugned assessment years. He neither relied upon the books of accounts of the assessees nor the statement found during the course of search. The appro....
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....supported by evidence, the true profits of the assessees cannot be worked out and in this type of situation, instead of picking figures from here and there, the right course is to reject the books of accounts of the assessees and to estimate the income on the basis of sales disclosed or found during the course of search. Admittedly, in the seized documents, the assessee has declared more sales than the sales disclosed in the regular books of accounts of the assessees. In the seized material, the total sales was disclosed at Rs.16,27,36,575.50 ps. for the period of 1.4.1997 to 31.3.2002 but the assessment years involved are from 1999- 2000 to 2002-03. Therefore, the sale for the assessment year 1998-99 is to be excluded from the total sales for determining the net profit of the assessees. During the course of hearing the assessee has furnished a chart declaring therein that how much profit was declared by the assessees having offered the additional income. From this chart, the net profit shown by the assessee is between 2.38% to 9.56%. The mean of the profit comes to 5.85%. The assessee has also furnished the details of the additions if particular percentage is adopted to determine ....