TaxTMI 
TaxTMI 
TaxTMI 
2014 (4) TMI 1108
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....ttempt to look into the probable gross collections basing on the answers to Question No. 4 and 5 (which give the amount of fee for each class and number of students) and Question No. 6 (telling the fact that some of the collections of fees are through cheques), in the very 'statement' relied by the CIT to verify and judge the correctness of the appellant's claim that the offer of the Managing Partner as an Answer to Q. No. 8 was gross receipts and not net income. 4. The learned CIT failed to appreciate the fact that the claim of the appellant is based on evidence on record and the findings of the CIT are based on mere suspicion. 5. The learned CIT is not justified in holding that the ITO completed the assessment without applying his mind to the 'substantial variation of income disclosed during survey and the income shown in the return'. 6. The learned CIT is not justified in invoking the provisions of section 263 based on only wrong assumption and suspicion. 7. The learned CIT is not justified in setting aside the assessment for redoing the same de novo, after fixing the figure of income to be assessed. 3. Brief facts of the case are that in this c....
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....ons and answers: Q. 4: What are the fees charged by you for regular courses and for crash courses? Ans.: We charged Rs. 5,000 for 8th standard, Rs. 6,000 for 9th standard and Rs. 7,000 for 10th standard in the F.Y. 2005-06. This included general material supplied by us. Crash courses are charged at Rs. 2,000 per student. Q. 7: Now, I am showing you, two short note books, which were found and impounded from your office premises. (Annexurised as A/EC/1 & A/EC/2). Please explain the contents. Ans.: A/EC/1: Page Nos. 31 to 63 indicate total receipts so far in respect of Nallakunta Branch. A/EC/2: Page No. 1 to 51 indicate total receipts so far for Marredpally branch. These receipts are for the F.Y. 2005-06. We indicate the actual amounts received by omitting two 00's. For example, Rs. 5,500 is written as '55 '. In addition we have receipts from sale of applications and crash courses also, which are in the tune of Rs. 3 lakhs, at present. Q. 8 On verification of returns of income filed by you, for the A.Y. 2005-06 and bill books for the corresponding period it is observed that there is clear suppression of receipts. Moreover, books of account were not produced....
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....he surrounding circumstances, declined to accept the assessee's retraction on account of inordinate delay and lapse of time between original statement during search and its subsequent retraction. To quote: "This inordinate delay on his part, without any explanation therefore, has devalued his explanation to a greater extent". There was delay of 68 days in that case whereas, in the present case, the delay is as much as one & half years. Hence, the retraction by the assessee in the present case is nothing but ingenious product of afterthought. (ii) It has to be appreciated that the Survey Team comprised of responsible public servants and officials. Under Section 114 (e) of the Indian Evidence Act, there is a built-in presumption in favour of proper discharge of functions by judicial and quasi-judicial authorities that such functions must have been discharged in a regular manner. (iii) It is not disputed by the assessee that when the Survey Team arrived at the premises, the assessee had not maintained proper books of account. This part of the admission has never been disputed by the assessee. It is further admitted that books of account came to be prepared subsequent to survey ....
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....noticed that the books, purported to be A/EC/1 has written pages missing from I to IO which is inferable from the thin margins left over from torn off pages numbering IO. In view of these findings, the said books produced by the Authorised Representative cannot be taken as authentic or contemporary. Further, no year is mentioned in any of the two books. Only months and numbers. " (iv) Further, it is noticed that in one book i.e., A/EC/l written pages are missing from 1 to 10. In view of these facts and circumstances what the AR produced i.e., two note books, alleged to be impounded materials, cannot be considered as authentic or genuine. There is no evidence on record to give credence to the claim of the Authorised Representative that the condition of missing pages existed during the visit of survey team i.e., 27.3.2006. Further, it is disturbing to note that, in the contemporary statement recorded, the assessee had clearly admitted that it was in the habit of not disclosing the full fee, that it was omitting two zeros from the figures written in the two books, which were impounded. Any evidence to be reliable has to be contemporary and authentic. In account books prepared with ....
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....stance. 5. Accordingly, he directed the AO to redo the assessment in terms of the above direction. Against this, the assessee is in appeal before us. 6. This appeal was filed by the assessee with a delay of 296 days. The assessee filed a petition for condonation of delay stating that the CIT vide order dated 26.3.2010 set aside the assessment order directing the AO to redo the same in the light of the directions given by him. Because of this, the assessee understood that the AO would redo the assessment afresh in the light of the observations of the CIT and it could file appeal consequent to passing of order by the AO. However, he came to know that the CIT observations and findings were in the nature of directions binding on the AO and the AO, though directed to redo the assessment afresh, he had no discretion and he is bound by the CIT findings in his order passed u/s. 263 of the Act. Being so, it is warranted to file appeal against the order passed by the CIT u/s. 263 of the Act with a delay of 296 days and it has filed the appeal on 21.2.2011 before this Tribunal with the material after receipt of assessment order passed by the AO u/s. 143(3) r.w.s. 263 of the Act on 31.12.20....
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....n of gross receipts for the financial year 2004-05 (AY 2005-06). A statement on oath was taken from the partner, T. Srinivasa Rao basically a science teacher. Question Nos. 4 and 5 referred to the no. of students and the fees structure as indicated in the impounded material. Question No. 8 posed by the IT officials refers to the suppression of receipts for the F.Y. 2004-05 with reference to bill books, impounded by the survey party not with reference to the F.Y. 2005-06 i.e., A.Y. 2005-06, which is under dispute. The partner in reply referred to receipts and admitted the suppression at Rs. 20 lakhs for the AY 2005-06 and Rs. 50 lakhs as income for A.Y. 2006-07. Subsequently the books were prepared based on the impounded material, got audited u/s 44AB and the return of income for A.Y. 2006-07 was filed on 30.11.2007 admitting the gross receipts at Rs. 46,30,950 and net income at Rs. 3,33,660. The receipts admitted are nearer to the figure of Rs. 50 lakhs referred to in Question No. 8. The Assessing Officer during the course of assessment proceedings noticed the income returned at Rs. 3,33.660 and issued a letter dt. 30.11.2007 requesting the assessee to clarify as to why the income ....
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.... books produced before him are not genuine and has no evidentiary value. The Assessing Officer has completed the assessment without applying his mind. The CIT is of the opinion that Rs. 50 lakhs should be the income to be assessed. The CIT directed to Assessing Officer, to bring the balance of Rs. 45 lakhs to tax after deducting the income already assessed. 14. The AR submitted that the order of the CIT is not correct on two counts i.e., jurisdiction and merits. In the light of the detailed letter dt. 30.11.2007 issued by the Assessing Officer and explanation filed before him, it cannot be said that the Assessing Officer has not applied his mind. The Assessing Officer is fully aware of the variance in the admission and the income returned. He called for the explanation and was fully satisfied with the explanation filed by the assessee. The Assessing Officer has also taken into cognizance the books of accounts duly audited by a Chartered Accountant, and hence has taken a conscious decision with regard to the facts of the case. The reference to 'receipts' and 'income' in the sworn statement was also within his knowledge. Hence he submitted that as the Assessing Offic....
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....erits and on facts. Mere statement cannot be the sole basis for an assessment. Even their statement was fully substantiated as referring to receipts only. It is not correct to state that only two books were impounded. List of impounded material placed at page 3 to 7 of paper book indicates that the finding of CIT is factually not correct. The assessee cannot have control over the style of functioning of the survey officials. Why no initials were made on those books is beyond assessee's control. According to section 133A, no such procedure is prescribed for the books impounded. Even at the time of survey there is no reference whatsoever to the pages 1 to 10 of the impounded material - A/EC/1. The reference is to pages 31 to 63 of this book in question No.? This indicates that they (page 1 to 10) are not there even at the time of impounding. Probably the assessee may be using the old books after removing the unrelated papers used in earlier years. If the disclosure is income to the tune of Rs. 50 lakhs, the survey officials would have got a commitment for payment of advance tax, considering the date of survey i.e. almost end of the Financial Year. There is no such commitment in t....
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....learly decoded the entries written in the impounded documents and was able to speak about the nuances of business very coherently and properly. Being the Managing Partner he fully knew the affairs of the business as well as the amounts he was earning and had been earning over a period of time. It is only with this background and after examination of the seized documents that the Managing Partner admitted additional income. It was a well thought out statement given on his own free will and based on facts. 17. Further he relied on the order of Calcutta Bench of this Tribunal in the case of Sri Tilakraj Shroff in ITA No. 1606/Cal/ 1983 (A.Y. 1981-82) wherein held that when there is inordinate delay in retracting the sworn statement without any explanation, the retraction should be considered as an afterthought and assessment could be dated on the original statement given by the assessee and the retraction has to be rejected. Finally he relied on the order of the CIT(A). 18. We have heard both the parties and perused the material on record. In the case of CIT vs. Gabrial India Ltd. (supra), it was held by the Bombay High Court that an order could not be termed as erroneous unless it ....
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....and the AO was well aware of this, that at the same time, the assessee having found that there were some omissions on its part, offered certain amounts as additional income for the years in question and gave a written offer to the Addl. CIT, that it was after verifying the account books and various materials gathered in the survey and after considering the offer made by the assessee that the AO had exercised a judicial discretion in the matter while completing the assessment, that in the light of the voluntary disclosure in the letter given in writing by the assessee the facts given by it had been verified with the books of account and it was only after consideration of the various aspects of the matter and related facts that the AO accepted the offer made by the assessee, that in such circumstances, the view taken by the AO could not be said to be prejudicial to the Revenue nor could it be said to be erroneous. 21. In the case of Malabar Industrial Co. Ltd. vs. CIT [243 ITR 83 (SC)], the Supreme Court held that the phrase "prejudicial to the interests of the Revenue" had to be read in conjunction with an erroneous order passed by the AO, that every loss of revenue as a consequenc....
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....only one bank account with State Bank of Hyderabad in the financial year 2005-2006. The copy of Bank statement is enclosed. 2. The books of account of the firm for the financial year 2005-2006 are submitted. 3. The bills and vouchers of the expenditure claimed are enclosed, whereas the receipt books for this year have been in the possession of the Income-tax department. . 4. The gross receipts for the financial year were Rs. 46,30,950-00 only. (Rupees Forty Six Lakhs Thirty Thousand and Nine Hundred Fifty only). I offered a sum of Rs. 50.00 lakhs as an additional income at that time in the state of utter confusion. In fact our total receipts for the year were Rs. 46,30,950-00 only. We did not know the difference between total receipts and income, because of our inadequate knowledge as far as accounting terminology was concerned. Hence, I request your honour to consider actual receipts of the firm to arrive at taxable income after allowing all admissible expenditure for the financial year 2005- 2006. 5. As mentioned in paragraph 4, my turnover for the year was exceeded the amount of Rs. 40.00 lakhs which was attracted to the provisions of Sec. 44AB. The books of accounts....