TaxTMI 
TaxTMI 
2014 (10) TMI 391
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....case are that the assessee is a partnership firm doing the business of chitty. The assessee filed its original return of income along with audit report u/s 44AB of the Act.There was a search operation at the business premises as well as the residences of its partners on 26th March 2008. There was no search or survey operation conducted in the business premises of the assessee's sister concerns i.e. M/s Edassery Ceramics, ET Decvassy & Sons Edassery Jewellers, St Francis Clay Works, St Francis Clay Décor Tiles and St Francis Tile Industries on the same date. The funds of the assessee firm and its partners are intermingled with the funds of other sister concerns mentioned above. During the course of search operation an amount of Rs. 50,000/- and FD receipts worth Rs. 5,48,787/- were seized from the entire group. Subsequent to the search, the AO issued notice u/s 153A on 12.3.2009 and in response, the assessee filed return of income on 27.8.2009 showing Rs. 17,380/- as income.Due to certain reasons beyond the control of the assessee, the assessee could not file certain details before the AO on time. Accordingly, the AO made certain additions and completed the assessment in the ....
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....n the evidence and material voluntarily furnished by an assessee in support of his appeal and the evidence / material requisitioned from an assessee by the first appellate authority with a view to proper disposal of proceedings before him. In our opinion while the provisions of rule 46A apply to the former, the same have no application to the latter. 8.1. Rule 46A of I.T. Rules has been inserted by the Income-tax (Second Amendment) Rules, 1973 with effect from 01-04-1973. This rule provides that an assessee shall not be entitled to produce before the first appellate authority evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the assessing officer. Rule however enumerate certain exceptional circumstances such as where the assessing officer has refused to admit evidence which ought to have been admitted or where the assessee was prevented by sufficient cause from producing the evidence he was called upon to produce by the assessing officer or which is otherwise relevant to any ground of appeal taken by the assessee or where the assessment order itself is made without giving sufficient opportunity to the assessee ....
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....ulgated with effect from 01-04-1973 were challenged as being ultra vires to the provisions of Sections 250 and 251 of the Act in the case of Smt. Mohinder Kaur v. Central Government 104 ITR 120 (All). After consideration of the provisions of Sections 250 and 251 of the Act as well as Rule 46A of I.T. Rules the High Court arrived at the conclusion in the following words: Sub-rule (1) of the said rule lays down the circumstances in which alone the assessee is entitled to produce additional evidence. Sub-section (4) preserves the power of the Appellate Assistant Commissioner to make further inquiry as contemplated by Section 250 of the Act. Thus, it is clear that no part of rule 46A whittles down or impairs the power to make further inquiry conferred upon the Appellate Assistant Commissioner by Section 250 of the Act. Similarly, Sub-section (5) of the said section confers a power on the Appellate Assistant Commissioner to permit the assessee to raise a fresh point. This power has not been even touched by rule46A. The Appellate Assistant Commissioner could permit the production of additional evidence if he thought it was necessary to enable him to dispose of the appeal, or if he though....
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....the discretion exercised by the first appellate authority in admitting the additional evidence. In the words of the High Court "It is true, as was contended by counsel for the assessee, that the Appellate Assistant Commissioner has very wide powers and in the interests of justice he can make further enquiry and he can admit new ground of appeal. He can also give deductions not claimed by the assessee. As was held by the Calcutta High Court in the case of Union Coal Co. Ltd. v. Commissioner of Income tax reported in 70 ITR 45 (Cal). In this case counsel for the revenue also did not dispute that in certain circumstances the Appellate Assistant Commissioner had jurisdiction to admit new grounds if it was necessary to admit new evidence. The point in this case is not whether the Appellate Assistant Commissioner is entitled to admit new ground or evidence either suo motu or at the invitation of the parties. In this case it is apparent that the Appellate Assistant Commissioner was not acting suo-moto in admitting additional evidence. If the Appellate Assistant Commissioner was acting on being invited by the assessee, then there must be some ground for admitting new evidence in the sense ....
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....evidence in rebuttal or otherwise. The reason is self evident. It stands to reason to presume that the ITO took his decision not to remain present because he considered it unnecessary to do so in the context of the existing record. He could not have anticipated or reasonably foreseen that the record was going to be augmented by adducing fresh evidence. Besides, he had a right to object to the production of additional evidence. Since something adverse to the ITO was sought to be done in the course of the appeal by way of augmenting the record, the ITO ought to have been heard and given an opportunity to meet with the additional material by way of cross examination, counter evidence and urging submissions in the context of the augmented record. Of course, if the appeal was going to be decided on the basis of the existing record of which he had notice, no such question could arise and no grievance could be made as the ITO had failed to exercise his option to remain present. He has no notice of the application for additional evidence as no notice was issued. When a prayer for additional evidence was made, it was an independent and substantive application seeking a new right. Notice of ....
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....6A and observed as under: "On a plain reading of rule 46A, it is clear that this rule is intended to put fetters on the right of the appellant to produce before the Appellate Assistant Commissioner any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the Income-tax Officer, except in the circumstances set out therein. It does not deal with the powers of the Appellate Assistant Commissioner to make further enquiry or to direct the Income-tax Officer to make further enquiry and to report the result of the same to him. This position has been made clear by Sub-rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the appellant would not affect the powers of the Appellate Assistant Commissioner to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Under Sub-section (4) of Section 250 of the Act, the Appellate Assistant Commissioner is empowered to make such further inquiry as the things fit or to direct the Income-tax Officer to make further inquiry and to report the result of the same to him. ....
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.... first appellate authority to direct the production of any document or examination of any witness to enable him to dispose of the appeal or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the assessing officer. 9. In the instant case the entire additional evidence has come on the record of the first appellate authority because the first appellate authority decided to examine the facts of the case in depth and adjudicate upon the matter on the basis of evidence and material thus gathered. The learned CIT(A) was empowered to do so under the provisions of Section 250(4). The results of enquiry conducted by him could either go to further cement the case made out by the assessing officer or to help out the assessee against the findings of the assessing officer. The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the learned CIT(A). The learned CIT(A) has confronted the assessing officer with the evidence thus received and the material thus gathered and allow the assessing officer t....
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....stment in own chits by taking the percentage growth of such investment from the AYs 2003-04 to 2004-05 as the basis of projection. The AO further estimated the profit earned from own chits @ 10%. 11.2 Before the CIT(A), it was submitted that the assessee firm was investing in own chits for business convenience. It was submitted that the AO was not correct in presuming that there will always be profit in respect of investment in chits. It was further submitted that the profit/loss in respect of own chits was based on the seized materials and accordingly, the total profit/loss in respect of various terminated own chits for the AYs 2004-05 to 2008-09 was a loss ofRs. 19,88,116/-. 11.3 After considering the submissions made by the assessee the CIT(A) observed that for the AY 2002-03, the addition on account of profit from own chitty investments was made purely on estimate basis and there is no evidence to suggest the addition.The ld CIT(A) placed reliance on the decision of the Special Bench of the Tribunal in the case of All Cargo Logistics Ltd reported in 137 ITD 287 (Mum)(SB wherein it has been held that: "66. We find that the solitary decision in this case by any High Cour....
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....s made by the firm was seized during the course of search. The AO worked out the yea-wise investments in respect of own chits and further estimated profit from the same at 10% on the assumption that usually subscribers invest in chits because it was more profitable than investing in banks or other financial institutions. Accordingly, the ld AR submitted that the investment in own chits are made not with a view of profit but under certain compelling circumstances. It was explained that sometimes certain kuries which are announced for commencement may not be fully subscribed and in that event, the assessee firm has to subscribe the unsubscribed tickets, otherwise the chit could not be commenced and it will affect the reputation of the firm. In certain cases, the subscribers who have paid certain installments may opt out due to various reasons and in that event, the assessee has to take over the same for the smooth progression of the chit. It was also pointed out that the assessee firm was mainly doing financing business which earns around 18% interest income and the presumption of the AO that the assessee was investing in own chits with profit motive was not correct in view of the fa....
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....e fee of Rs. 2,204,464/- for a period of 6 months from Oct 2006 to March 2007. The AO further projected the kuri late fee collected for 6 months to the full year and to other AYs on the assumption that percentage growth of kuri late fee collection was @ 10%. 14.2 On appeal, the CIT(A) observed that no incriminating materials relating to the income from kuri late fee were found/seized during the course of search.The CIT(A) observed that the AO has not verified whether the amount of Rs. 2,04,464/- is disclosed by the assessee in the return of income and madeand estimated addition of Rs. 4,08,928/- for AY 2007-08.. The CIT(A) observed that in the remand report, the AO admitted that the assessee has disclosed a sum of Rs. 3,83,968/- in the return of income under the head "kuri late fee". Accordingly, the CIT(A) was of the view that no addition was warranted for the AY 2007-08 on account of income from Kuti late fee.He further observed that in respect of estimated additions made for the AYs 2002-03 to 2005-06, the assessee's case was squarely covered by the decision of the Special Bench of this Tribunal in the case of All Cargo Logistics Ltd (supra). Accordingly, he deleted the addit....
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....rdingly, he found that the disallowance was made on the basis of presumption and not on the basis of any material relating to the nexus between the borrowed funds and advances to sister concerns during the relevant years. Since there was no material detected or found during the course of search, which even remotely suggest that the advances made to the sister concerns are out of the borrowed funds, the AO was not justified in disallowing a portion of interest claimed on the borrowed funds in the AYs 2002-03 to 20067-07.Accordingly, he deleted the addition of Rs. 10,94,280/- for the AY 2002-03, Rs. 9,06,025/- for the AY 2003-04, Rs. 9,06,025/- for the AY 2004-05 and Rs. 16,32,612/- for the AY 2005-06. Against this, the revenue is in appeal before us. 17. We have considered the rival submissions and perused the relevant material. In this case, the addition was made by the AO without referring any seized material and the addition was only on presumption without any material to show that borrowed funds have been advanced to sister concerns during the relevant assessment years. In the absence of any material to suggest that the advance made to sister concerns were out of borrowed fun....
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.... of the loans availed by the assessee firm. In the absence of any material to suggest the benefits derived by the partners in a personal capacity, we are not in a position to accept the claim of the revenue. Accordingly, this ground raised by the revenue is rejected. 20. In the result, all the appeals filed by the revenue in ITA nos 539 to 545/Coch/2013 are dismissed. 21 Now we will take up the Cross Objections filed by the assessee. Cross Objections Nos 112 to 118/Coch/2013 : 22 The first common ground raised by the assessee in all these cross objections is regarding no search warrant and hence assessment is bad in law. 23 At the time of hearing, the ld AR of the assessee has not pressed this ground and accordingly, the same is dismissed as not pressed. 24 The next common ground in the Cross Objection relates to assessment of profit from own chits. 25 This ground came before us while adjudicating the appeals of the revenue wherein we have confirmed the order of the CIT(A) on this issue. Being so, the ground raised by the assessee in the Cross Objection has become infructuous and hence the same is dismissed for all the AYs. 26 Next common ground in cross obj....
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....l year so as to compute the interest income, which is an accepted method of assessment of income and advances when the day-to-day balances of loan is not available, The findings of the CIT(A) in para 35.3 as under: "35.3 I have considered the arguments of the ld AR as well as the AO and the material available on record. The appellant firm is doing money lending business. The AO applied the rate of interest i.e. 20.56% on the balance as on the closing day i.e. 31st March, of every financial year. I find that this method is totally unfair, sinc4 the total advances vary day by day de to sanctioning of the new advances and closure of existing advances. It is the normal practice that if the day to day balances are not available for computing interest income on product method, the average of the opening and (i.e. 1st April) closing i.e. 31st March) balance of the financial year is taken for application of interest. In the present case also, rue income can be estimated only by following average method. The contention of the AO that if this method is followed, in certain years the income disclosed will be more than the income estimated is devoid of any merit. In that case, no addition t....
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....spect of certain chits as taken by the assessee and the seized documents, which was still explained. The AO further stated that the assessee could not furnish any convincing explanation regarding the heavy fall in the foreman's commission during the relevant year compared to the earlier year. Accordingly, the AO stated in the remand report that the income from foreman's commission as computed in the assessment for the AY 2008-09 may be sustained. 29.3 In the rejoinder before the CIT(A), the ld AR submitted before the CIT(A) that the working based on which the AO arrived at the figures of foreman's commission receivable was only received by the assessee now along with the copy of remand report and on verification, he found certain errors in the working for the AY 2002-03 as given by the AO. According to the AR, the figure admitted by him was the correct one and the assessee also furnished a detailed chart with evidences in support of its argument. In respect of AY 2008-09, the AR submitted that the working given by the AO was not fully correct and the foreman receivable during the year was Rs. 23,63,326/- as against Rs. 26,04,095/- as computed in the asst order and Rs. 17,05,250/....
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..... 21,57,720 and for The AY 2008-09, it was Rs. 23,63,326/-.Accordingly, he sustained the addition towards undisclosed foreman commission at Rs. 8,800/- for the AY 2006-07 and Rs. 16,06,951/- for the AY 2008-09.The assessee could not controvert the above findings of the CIT(A). Being so, we are not in a position to disturb the above findings of the CIT(A) and addition sustained by the CIT(A) is confirmed. Accordingly, the ground taken by the assessee in its Cross Objection is rejected. 31 Next common ground relates to disallowance u/s 40(a)(ia) of the Act. 31.1 Facts of the case are that the AO noticed that for the AY 2007-08, the assessee has paid canvassing commission without deducing tax at source.Before the CIT(A), the ld AR submitted that the assessee has not deduced tax at source in respect of the canvassing commission payments. 31.2 After considering the submission and the admission of the ld AR, the CIT(A) observed that there was no dispute in respect of the disallowance of Rs. 83,608/- u/s 40(a)(ia) and accordingly, the same was sustained. 32 After hearing both the parties and perusing the relevant material on record we do not find any infirmity in the order of ....
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....is report and after considering the remand report and other relevant materials, the CIT(A) found that the AO made the addition on the basis of the decision of the Hon'ble jurisdictional High Court in the case of Guruvijaya Kuri Co Ltd., cited supra. The CIT(A) observed that even though the decision was rendered by the Hon'ble High Court in the case of penalty proceedings u/s 271(1)(c), of the Act, while delivering the judgment, the Hon'ble High Court observed that outstanding balance in respect of forfeited kuries which have been terminated long back cannot be treated as a liability and shall be assessed as income. The CIT(A) further observed that in the list provided by the AO, he has included kuries which have been terminated and those which have not been terminated. According to the CIT(A), the decision of the Hon'ble jurisdictional High Court is applicable only to outstanding balances in respect of kuries which have been terminated log back where the subscribers are not entitled to the amount under the law of chits which is existed at the relevant point of time. From the list of 412 subscribers as provided by the AO, the assessee extracted the outstanding balance in respect of ....
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.... ground in ITA Nos 532, 533, 534 and 535 relates to estimate profit based on seized material. 38.1 The assessee has raised legal issue regarding initiation of proceedings u/s 153A of the AYs 2002-03 to 2005-06. The ld AR submitted that since the assessment for the AYs 2002-03 to 2005-06 were concluded as on the date of search and no proceedings are pending, the scope of assessment u/s 153A for these assessments years was restricted to the incriminating materials relating to those years found during the course of search.The assessee further submitted that since no incriminating materials relating to these years were found or seized during the course of search, the AO has not jurisdiction to initiate proceedings u/s 153A of the act for these AYs. 38.2 In the remand report, the AO has stated that in this case, incriminating documents in the form of day book and ledger relating to AYs 2006-07 to 2008-09 were found and seized from the business premises of the assessee firm. The AO further stated that since material belong to the assessee firm were found and seized in the course of a search and seizure operation conduced u/s 132 of the I T act, the AO was bound to issue notices to ....
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....e further observed that the word pending occurring in the second proviso to sec. 153A is significant and it is further qualified by the words 'on the date of initiation of the search'. According to the CIT(A), such assessments which are pending as on the date of search are liable to abate and the assessments which are not pending i.e. completed assessments as on the date of search would hold their base and would not abate. He further observed that the scope of assessment u/s 153 in the case of assessment that are abated and in the case of assessments that have been attained finality as on the date of search, which has been settled by the decision of the Special Bench of the Tribunal in the case of All Cargo Logistics Ltd (supra) wherein the Special Bench held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction u/s 153A for which assessment shall be made for each assessment year separately.Thus, in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. The CIT(A) further observed that in other case the Special Bench held that the assessment u/s 153A will be made ....
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....railway or by trucks in containers. Thus, the issue is no longer res-integra. Respectfully following this decision, it is held that a CFS is an inland port whose income is entitled to deduction u/s 80-IA(4). Question No. 2 is answered accordingly. 67. Now the matters of the assessee will go before the Division Bench which shall dispose of the appeals in the light of this Order. In the case of interveners, all the appeals will go back to the respective Division Benches who shall decide their grounds having regard to the facts of those cases and the findings given herein on the disputed issues to the extent the same are found relevant in the cases before them." Accordingly, the ground taken by the revenue in all the appeals is dismissed. 41 The ground taken in ITA NO.536, 537 and 538/Coch/2013 for the three years relates to profit computed by AO from seized materials. 41.1 On comparison of the books of account seized during the course of search with the results shown in the return of income, it was found that these two sets of accounts do not tally. According to the AO, practically all the figures in the seized books of account are higher than the figures given in the ret....
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.... The assessee further furnished evidences in support of its arguments regarding the quantity and value of opening stock as on 1.4.2005 and also in respect of the percentage of value addition to be made towards making charges.The assessee further submitted that in respect of the profit and loss account prepared by the AO for the financial year 2007-08, expenditure towards depreciation and interest was not provided. The assessee also furnished detailed working regarding proportionate interest to be allowed while arriving at the net profit for the relevant financial year.The assessee further submitted that a capital receipt viz collection under Swaran Prabha Scheme amounting to Rs. 2,30,656 was treated as direct income in the profit and loss account for the financial year 2007-08. 41.3 The CIT(A) forwarded the submissions of the assessee to the AO for his report. 41.4 The CIT(A), after considering the assessment order, submissions made by the assessee, remand report of the AO and the relevant material available on record observed that during the search in the premises of M/s Edassery Jewellers, books of account in the form of day book and ledger for the AYs 2006-07 to 2008-09 we....
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....ed, the assessee submitted that according to Bombay Bullion Association, the licensed dealers margin of profit in retail jewellery business was 3%. The assessee further submitted that the net profit ratio as per the regular accounts for the AYs 2006-07, 2007-08 and 2008-09 was 1.14%, 2.08% and 3.35% respectively.Accordingly, considering the totality of the facts and circumstances of the case, and keeping in mind the provisions of sec. 44AF of the I T Act which contains the special provisions for computing profits and gains of retail business, the CIT(A) was of the view that if the net profit rate at 5% on the turnover is adopted, it would meet the ends of justice. Accordingly, the AO was directed to estimate the net income of the assessee's business at 5% for the AYs 2006-07, 2007-08 and 2008-09. Further, considering the income admitted by the assessee in the return of income, the net addition was restricted to the following amount to the respective asstt years: Asst Year Total income estimated(Rs) Income returned (Rs) Addition (Rs) 2006-07 12,47,888 1,03,809 11,44,079 2007-08 15,00,921 1,37,483 13,63,438 2008-09 15,08,894 1,05,898 14,02,996 Acc....
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....ext ground in Cos no. 54, 55 & 56/Coch/2013 relates to estimate of profit at 5% which is on higher side. 49.1 The revenue was in appeal before us on this issue.Since we have confirmed the order of the CIT(A) while deciding the revenue appeals, therefore, the ground taken by the assessee in its cross objection is dismissed as infructuous. 50 In the result, all the cross objections filed by the assessee in Cross Objections nos. 50 to 56/Coch/2013 are dismissed. ITA NOS. 592 & 593/Coch/2013 ITA Nos.587 to 591/Coch/2013 ITA No.525 to 531/Coch/2013 ITA No. 594 to 600/Coch/2013 ( by the revenue) &CROSS OBJECTIONS NOs. (by the assessee) Cross Objection Nos.121 to 122/Coch/2013 Cross Objection Nos. 119 & 120/Coch2013 Cross Objection Nos. 110 & 111/Coch/2013 Cross Objection Nos. 107 to 109/Coch2013 51 The first ground in all these appeals relates to admission of additional evidence in violation of Rules 46A(1) of the IT Rules 1962. 52 Identical issue was considered in the case of New Kerala Investment & another while deciding the appeals in ITA No. 539 to 545/Coch/2013 where we have decided the issue against the revenue and in favour of the assessee. I....
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....TA No. 580 to 586/Coch/2013 & ITA No. 612 TO 618/Coch/2013 (by the revenue ) CROSS OBJECTIONS Nos: CO nos. 57 to 63/Coch/2013 - CO nos.100 to 106/Coch/2013 CO nos. 79 to 85/Coch/2013 - CO nos. 86 to 92/Coch/2013 CO nos. 93 to 99/Coch/2013 - CO nos. 72 to 78/Coch/2013 & CO nos. 65 to 71/Coch/2013 (by the assessee) 62. The first common ground in I.T.A Nos. 518 - 524; 631-637; 638-644; 573-579; and 566-572, 580-586 and 612-618/Coch/2013 is with regard to admission of additional evidence by CIT(A) without satisfying the conditions of Rule 46A(1) of Income Tax Rules, 1962. 63. After hearing both the parties, we find that this issue came up for consideration in the Department appeals in I.T.A. Nos. 539 to 545/Coch/2013 in the case of New Kerala Investments and we have discussed the issue in the foregoing paras 8 to 10 and decide the issue in favour of the assessee.Accordingly, following our findings in the case of New Kerala Investments (supra), we dismiss the ground taken by the revenue in all these appeals also. 64. The next ground in I.T.A. Nos. 518 - 524, 631-637, 638-644, 573-579 and 566-572, 580-586 and 612-618/Coch/2013 is with regard to treatment of agricultural in....
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.... 6,00,00050,0005,50,000 2004-05 7,00,00055,0006,45,000 2005-06 8,00,00065,0007,35,000 2006-07 10,00,00080,0009,20,000 2007-08 11,00,00090,000 10,10,000 2008-09 12,50,000 1,00,000 11,50,000 65.2 Before the AO, it was submitted by the assessee thathe owns 4.38 acres of paddy field and 22.20 acres of other agricultural properties cultivated with coconut, arecanut, nutmeg, plantain etc. Details of the extent of paddy field and other agricultural land cultivated by the assessee and income derived therefrom during the Assessment Years from 2002-03 to 2008-09 are tabulated as under : Assessment Year Paddy field (in acres) Dry land (in acres) Total Agricultural income claimed 2002-03 1.66 12.46 14.125,00,000 2003-04 2.15 13.65 15.806,00,000 2004-05 4.38 13.66 18.047,00,000 2005-06 4.38 13.77 18.158,00,000 2006-07 4.38 22.20 26.58 10,00,000 2007-08 4.38 22.20 26.58 11,00,000 2008-09 4.38 22.20 26.58 12,50,000 65.3 The details of the Agriculture holdings of the assessee including Date of Acquisition, Property Purchase Document Particulars, Location of the property with survey no. and vil....
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....ust 2010 in order to prove that the assessee is carrying out agricultural operations in a large scale subsequent to the search also.The Assessing Officer carried out detailed investigations on the fresh evidences furnished by the assessee. 65.5 In the remand report, the Assessing Officer has stated that the written submissions filed by the assessee along with five paper books in respect of the whole group of individual cases and one paper book in the case of the assessee were verified. According to the AO, these were fresh evidences filed by the assessee before the appellate authority and none of them were filed during the course of assessment proceedings. The AO made detailed investigations made on the fresh evidences placed by the assessee on record. Regarding the agriculture income, the AO has stated that inspector attached to this Circle was deputed to inspect the various agricultural land holdings of the assessee and to verify the genuineness of the bills produced as fresh evidences claimed by the asssessee. According to the AO, as per the report dated 23.2.2011 submitted by the inspector, he had visited the agricultural lands held by the assessee on 22.2.2011 and given his....
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....this fact in the written submissions and these details were furnished only for the purpose of proving the fact that the assessee is basically an agriculturist. According to the Ld. AR, from the remand report, it can be seen that the Assessing Officer has no dispute with the extent of agricultural land owned by the assessee and the agricultural income estimated by the expert authorities from the agricultural holdings. 65.7. On appeal, the CIT(A) observed that the assessee and his family members consisted of his wife and children, claimed that they own 70 acres of paddy field and 47 acres of other agricultural land.He further observed that most of these properties are joint properties which are cultivated together. The assessee further claimed that in addition to the agricultural properties mentioned above, the family owns 26 acres of landed properties which were mainly used for industrial purposes i.e. factory premises and properties used for mining clay in the 90's before the ban imposed by the government.In support of the claim of the assessee regarding the extent of land owned by the assessee group (Paddy Field - 70.49 acres, Dry Land - 46.80 acres and Industrial Land - 26.67 ....
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....90,000 9.73 5,40,000 Vadakumbhagam 1.07 35,000 7.06 5,95,000 8.13 6,30,000 Kallur Thekkemuri 8.47 3,00,000- - 8.47 3,00,000 West Chalakkudy 40.24 16,00,000 2.85 2,75,000 43.09 18,75,000 Kallur Vaddakkummuri 6.99- 13.28 13,00,000 20.27 13,00,000 Irinjalakuda-- . 9695,000 .9695,000 Thorapalli Agraharam, Hosur (Tamil Nadu)-- 12.0510,84,950 12.05 10,84,950 Bodichipally Anusohai Kelamangalam, (Tamil Nadu-- 1.451,46,500 1.451,46,500 Perambra-- . 53 55,000.53 55,000 Illayanayakananphal (Manamadurai, Tamil Nadu) -- 2.64 -2.64 - Total 70.4946.80117.29 65.10.The CIT(A) observed that the AO after verification of the above details and evidences stated in the remand report that the assessee Shri E.T. Devassy, held approximately 26 acres of cultivatable land in different villages out of which 4 acres are paddy filed, as claimed in the submissions before the CIT(A).It was further observed that In the case of the family members also, the Assessing Officer has no dispute with the extent of agricultural land cultivated by them. The CIT(A) noticed that the remark of the Assessing officer in the assessment order that the land hol....
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....rl/Village officers have inspected the properties and certified the yield during the F.Y. 2009-10 and the assessments under consideration are from A.Y. 2002-03 to 2008-09. On this issue, the assessee submitted before the CIT(A) that the annual agricultural income per acre as certified by the Government authorities, from paddy fields belonging to the assessee group was Rs. 37,648/- against which the assessee has claimed only Rs. 24,343/- for the A.Y. 2008-09 and in respect of other crops, the annual agricultural income per acre as certified by the Government authorities was Rs. 92,092/- against which the assessee has claimed only Rs. 50,405/- for A.Y. 2008-09. The CIT(A) noticed that the annual agricultural income per acre claimed by the assessee group for the A.Y. 2002-03 to 2008-09 ranges from only Rs. 17,150/- to Rs. 24,343/- in the case of paddy and Rs. 36,402/- to the normal effect of price increase for the agricultural products year by year. The CIT(A) further observed that according to the assessee,if the agricultural income of the earlier years are extrapolated by applying the inflation index published by the CBDT, taking the certified income for the F.Y. 2009-10 as the base....
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....ssment period, needs to be considered. 65.14.Regarding the understatement of agricultural income in the original returns of income, the assessees submitted that it was under the wrong advice that if agricultural income was declared in the return, it would be taxed indirectly and tax liability would be more. Regarding the understatement of agricultural income in the statement taken at the time of search, the assessee explained that it was under the fear of being further interrogated about the deployment of agricultural income. Regarding the contention of the Assessing officer that the appellants are not assessees under the Kerala Agrl. Income Tax Act, the Ld. AR pointed out that as per section 3 of The Kerala Agrl. Income Tax Act, 1991, no agricultural income tax is payable by any person other than a company or a firm where the total extent of landed properties from which agricultural income is assessable, do not exceed 5 hectares. The agricultural income assessable do not include any income derived from cultivation of crops such as paddy, tapioca, plantain, ginger, vegetables, pineapple, turmeric, etc. The Ld. AR submitted that in the case of Shri E.T. Devassy, excluding the ext....
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....therefore, we do not find any reason to interfere with the findings of the CIT(A), which is confirmed as the reasons advanced by the assessee also bonafide for variation in the agricultural income claimed in the original return filed after the search action.Accordingly, this ground in the above Revenue appeals is dismissed. 67 Since the facts and circumstances in other revenue's appeals in ITA Nos 631-637, 638-644, 573-579 and 566-572, 580-586 and 612-618/Coch/2013 are similar; therefore, by applying the above ratio, we are inclined to dismiss the similar ground in these appeals of the revenue also. 68. The next ground in I.T.A Nos. 518- 524, 631-637, 638-644, 573-579 and 566-572, 580-586 and 612-618/Coch/2013 is with regard to the deletion of disallowance of receipt from sale of trees. 68.1 For the sake of brevity, we consider the facts of the case as narrated by the CIT(A) in I.T.A. No. 518/Coch/2013. In the cash flow statements, the assessee claimed receipt from sale of trees for AY 2002-03 at Rs. 4 lacs and AY 2003-04it was at Rs. 6 lacs. The AO did not accept the receipt from sale of trees claimed by the assessee for the following reasons: i) The properties of the ....
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....m regarding receipt from sale of trees. The only issue pointed out by the Assessing officer, according to the CIT(A), was that these evidences were not furnished at the assessment stage. The CIT(A) further observed that the tree sale agreement properly described the name and address of the purchaser, the nature of trees and conditions of sale, schedule of payments and the data-wise receipt of payments by the assessee. The CIT(A) found that evidences furnished by the assessee, in support of his claim, were in order. According to the CIT(A), since the trees sold were naturally and spontaneously grown, no question of taxability of the receipt arises.Accordingly, considering the facts and circumstances of the case, the CIT(A) concluded that the Assessing officer was not correct in disallowing the receipt of Rs. 4,00,000/- for the A.Y. 2002-03 and Rs. 6,00,000/- for A.Y. 2003-04, from sale of trees as claimed by the assessee. Therefore, the CIT(A) deleted the addition of Rs. 4,00,000/- for the A.Y. 2002-03 and Rs. 6,00,000/- for the A.Y. 2003-04. Against this, the revenue is in appeal before us. 69. We have heard both the parties and perused the record. .The assessee was having lande....
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....ed by the Assessing Officer in the Assessment Order for each Assessment Year and offered explanation for not including certain deposits in his personal cash flow statements, which are tabulated as under: A.Y. 2007-08 Name of the bank Deposit No. Amount (Rs.) Explanation SCB, Kuruvallaserry 3760 45,000 Shown in the cash flow statement of Asstt. Year 2007-08 " 3762 40,000 " " 4827 45000 " Total 1,30,000 A.Y. 2004-05 Name of the bank Deposit No. Amount (Rs.) Explanation SCB,Vennoor 10367 40,000 Accounted in the books of the firm M/s. New Kerala Investments during the Asstt. Year 2004-05 " 11058 40,000 &n....
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....p; " 13084 50,000 " Total 6,00,000 A.Y. 2007-08 Name of the bank Deposit No. Amount (Rs.) Explanation SCB,Vennoor 14736 50,000 Accounted in the books of the firm M/s. New Kerala Investments during the Asstt. Year 2007-08 " 14737 50,000 " " 14736 50,000 Duplication Entry " 14737 50,000 Duplication Entry CSB, Palayamparambu 20070059 3,281 Shown in the cash flow statement of Asst. Year 2007....
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....bsp; " " 20070093 50,000 " " 20070094 50,000 " Total 6,46,276 A.Y. 2008-09 Name of the bank Deposit No. Amount (Rs.) Explanation CSB, Palayamparambu 20050029 35,789 Shown in the cash flow statement of Asst. Year 2009-09 " 20050218 29,291 &nb....
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....sfied with the explanation of the assessee regarding the source of fixed deposits.Being so, in the absence of any contrary evidence furnished by the Revenue, we are not in a position to reverse the findings of the CIT(A) and the same is confirmed. Accordingly, this ground in the above Revenue appeals is dismissed. . 73 Since the facts and circumstances in other revenue's appeals in ITA Nos 631-637, 638-644 and 580-586/Coch/2013 and in ITA No. 566 to 572/Coch/2013 are similar; therefore, by applying the above ratio, we are inclined to dismiss the similar ground in these appeals of the revenue also. 74. The next common ground in I.T.A. Nos. 518-524, 631-637,638-644, 566-572 and 612-618/Coch/2013 is in respect of investment in immovable properties. 74.1For the sake of brevity, we consider the facts as narrated by the CIT(A) in I.T.A. No.518/Coch/2013. The assessee had accounted for investments in immovable properties only to the extent of Rs. 7,73,436/-in the cash flow statements as against Rs. 3,10,17,490/- as worked out by him. The Assessing Officer treated the difference viz. Rs. 3,02,44,054/- as undisclosed investment in immovable properties and added the same to the tota....
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....bsp; 3,43,033 70010 2,73,023 2005-06 1,23,672 30387 93385 2006-07 54,00,178 497583 5001595 2007-08 81,56,865 - 8156865 2008-09 1,11,14,790 - 11114790 Total 3,10,17,490 7,73,436 30244054 74.5 The assessee also listed out all the investments in immovable properties which are mentioned by the Assessing Officer in the Assessment Order for each Asst. Year and offered explanation for not including certain ....
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....u, Benny 19,600 6,533 " 07.03.2003 644/03 67 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 28,000 9,333 " 07.03.2003 645/03 66 cents Devassy E.T., Lilly, Jaison, Sabu, Salu, Shaju, Benny 28,000 9,333 " 17,63,090 A.Y. 2004-05 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 2003 2273/03 53.625 cents Devassy E.T., Lilly, Shaju & others 22,405 7,468 Accounted in the books of St. Francis Clay Décor Tiles 16.05.2003 1353/03 38.5 cents Devassy E.T., Lilly, Shaju & othres 15,120 5,040 Accounted in the books of M/s. St. Francis Clay Décor Tiles 19.07.2003 2569/03 3 acre 27.5 cents Devassy E.T. & Joy Mandakan 1,40,021 70,011 ....
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....66,278 Shown in the cash flow statement. 54,99,178 A.Y. 2007-08 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 06.06.2006 Shop Room Devassy E.T. 6,75,000 6,75,000 Shown in the unaccounted cash flow statement of New Kerala Investments 16.06.2006 2506/06 1 acre 33.407 cents Devassy E.T. (M/s. St. Francis Tile Industries) 10,50,765 10,50,765 Accounted in the books of M/s. St. Francis Tile Industries 28.07.2006 4.41 acres Devassy E.T. (Annai Tile Works) 37,00,000 37,00,000 Shown in the cash flow statement of E.D. Jaison and E.D. Sabu. Investment of the appellant group is only Rs. 11,75,334/- 13.09.2006 24 cents Devassy E.T. 36,000 36,000 shown in the cash flow statement 26.09.2006 53 cents Devassy E.T. 95,400 95,400 " 02.12.2006 13 cents Devassy E.T. &nb....
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....sees before him. According to the CIT(A), the Assessing officer has taken the entire investments in the hands of the assessee and hence there is huge difference between the investments admitted by the assessee and that worked out by the Assessing officer. The CIT(A) further found that certain investments in immovable properties were accounted as fixed asset in the regular books of account of the firms in which the assessee is a partner and hence the same are excluded from the cash flow statements. The CIT(A) also noticed that in certain cases, there was difference of opinion between the Assessing officer and the assessee regarding the quantum of purchase consideration and the assessee has satisfactorily explained the difference. It was also observed by the CIT(A) that certain unexplained investments were admitted by the firms and the same were reflected as outgoing in their unaccounted cash flow statements. Considering all these facts, the CIT(A) was of the opinion that the assessee had properly explained the investments in immovable properties during the Asst. Years from 2002-03 to 2008-09. On this issue, the CIT(A) noticed that the Assessing officer, in his report, had not rebutt....
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....79-85, 86-92, 93-99, 72-78 and 65-71/Coch/2013 is with regard to treatment of agricultural income as income from other sources. 79. We have heard both the parties and perused the relevant material on record. We find that the identical issue came up for our consideration in the Department appeals wherein we have confirmed the order of the CIT(A) while deciding the appeal in the case of E T Devassy & others in ITA No. 518 to 524/Coch/2013 & others in the foregoing paras nos. 65 to 66.Accordingly following our findings in paras 65, the ground raised by the assessees has become infructuous in all these cross objections and accordingly, dismissed. 80 The next common ground in C.O. Nos. 57-63, 79-85 and 86-92/Coch/2013 is with regard to addition towards personal drawings. 81For the sake of brevity, we consider the facts of the case as narrated by the CIT(A) in I.T.A. No. 518/Coch/2013 are that the drawings admitted in the cash flow statement are too low taking into account the size of the assessee's family and the style of his life. The Assessing Officer estimated the drawings for the family of the assessee (which includes the family's of E.D. Salu, E.D. Sabu and E.D.Benny as gi....
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....peal, the CIT(A) observed that the summary of drawings admitted by the assessee and his family members and that estimated by the Assessing Officer is as under:- Asst. Year Drawing Admitted by the assessee and family members (Rs.) Drawing estimated by the Assessing Officer (Rs.) 2002-03 132000 204000 2003-94 141600 210000 2004-05 192000 216000 2005-06 204000 222000 2006-07 216000 228000 2007-08 &....
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....rawings. Considering the drawings estimated by the Assessing Officer, the CIT(A) observed that for the assessment year 2005-06 to 2008-09, there is no necessity of any addition as the drawings admitted by the assesses is reasonable as there is drawings by other members of the family namely Lilly, Shju, Jaison, Sabu, Salu and Benny. For the assessment years 2002-03 and 2004-05, the CIT(A) modified drawings and sustained certain additions on this count. In our opinion, the drawings estimated by the CIT(A) is justified and accordingly, the same is confirmed. Being so, the ground in the above Cross Objections is dismissed. 83. The next common ground in C.O. Nos. 57-63/Coch/2013 is with regard to investment in residential house. 83.1 For the sake of brevity, we consider the facts as narrated by the CIT(A) in ITA No. 518/Coch/2013. The Assessing Officer adopted the cost of construction of the residence of E.D. Jaison (son of the assessee) based on the report of the Departmental Valuer, at Rs. 19,34,100/- and added the same to the total income as given below: Asst. Year Amount (Rs.) 2003-04 644700 2004-05 644700 2005-06 644700 Total 1934100 ....
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....onstruction of the residential house. According to the Ld. AR, from the remand report it is also clear that the Assessing Officer had no objection with regard to the explanation offered by the assessee for not including certain expenditure on account of residential house in the cash flow statement of the search assessment period. 83.8. On appeal, the CIT(A) observed that the Assessing Officer has no dispute with the fact that cost of construction of the residence of Shri E.D. Jaison to the extent of Rs. 15 lakhs is properly explained. The dispute is with regard to remaining investment of Rs. 6,27,510/- (i.e. valuation as per departmental valuer Rs. 19,34,100/- + cost of furnishing Rs. 1,93,410/- = Rs. 21,27,510/- less investment admitted in cash flow statements Rs. 15,00,000/-). According to the assessee, expenditure worth Rs. 1,60,544/- which are included in the valuation of the department valuer were in fact incurred subsequent to the search and may be excluded from the valuation. The assessee furnished evidences for the purchase of tiles in the form of bills dated 31-10-2009, 03-11-2009 and 05-11-2009 and for purchase of gate in the form of invoice dated 10-11-2009. The CIT(A....