TaxTMI 
TaxTMI 
2016 (11) TMI 211
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....ial of facts? Facts of the case 2. Search and seizure operation was carried out on 22nd March 2006 in the premises of M/s. Balajee Perfumes Group, which manufactures Gutka. The group belongs to the family of late Shri Bishan Sarup Gupta, survived by his sons- M/s Abhay Gupta, Anoop Gupta and Ajay Gupta. The three brothers, through the firms M/s Balajee Perfumes and M/s Assam Supari Traders, managed gutka manufacturing as well as sale and purchase of areca nut business. M/s. Balajee Perfumes is a partnership firm of Shri Varun Gupta S/o Shri Abhay Gupta and Smt. Deepa Gupta W/o. Shri Anoop Gupta. M/s. Assam Supari Traders is the business concern of Smt. Dayawanti (the late assessee- now represented by her legal heir), mother of the three said brothers. 3. The assessee along with other family members i.e her three sons and their wives namely Deepa Gupta, Sunita Gupta and Preeti Gupta, along with Varun Gupta, surrendered a sum of Rs. 3.5 crores at the time of the search, as additional income in respect of business carried on outside books of accounts in connection with production and sale of Gutka. Statement of the assessee Smt. Dayawanti proprietor of M/s. Assam Supari Trade....
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....o search warrant against Smt. Dayawanti. Therefore, the notice issued under Section 153A and all subsequent proceedings were void. This ground was rejected by the ITAT in the following terms: "In our opinion the aforesaid argument cannot be accepted. A search has been conducted on the assessee, once the proprietorship concern of the assessee has been searched. In any case the assessee was the proprietor of the concern on which the search was carried out u/s 132 of the Act. It is pertinent to add here that the premises at which the search was carried out was on the basis of warrant issued in the name of the proprietorship concern of the assessee and it was also the residential premises of the assessee. Therefore we find that there was a valid search on the assessee and as such, provision u/s 153A of the Act was rightly triggered and invoked thereafter." 6. There was no dispute about the above findings, based on an appreciation of facts. In the circumstances the facial challenge to the applicability of Section 153A notice as not preceded by a valid warrant is baseless and unmerited. The ITAT also rejected the plea principally urged by the assesses that since no material w....
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....rship concern of the assessee and sister concern Balajee Perfumes. In the said statement too the surrender was reiterated. The aforesaid surrender no doubt was not acted upon by the assessee, but the said fact cannot lead us from the irresistible conclusion that incriminating material was unearthed during search. No material has been placed before us to negate the aforesaid factual aspect as well as to support the claims of AR that the admission before the Revenue was not valid and hit by duress and coercion. Before we conclude this issue, we consider it appropriate to note that the ld AR, had also stated that no material Per-se was found pertaining to the year under consideration. However, this argument also does not hold any water because once Section 153A is triggered on account of unearthing of incriminating material during search, the AO is empowered to compute the total income for six assessment year prior to the year of search. There are no fetters or limitation under the statute, so as to curtail the jurisdiction of the AO." The ITAT also relied on Commissioner of Income tax v Anil Bhatia 352 ITR 493 (Del) where it was held by this Court as under:- "The other re....
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.... under:- i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evi....
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....r but was related to AY 2006-07 and not for the year under consideration. Therefore according to counsel no addition can be made for the year under consideration without any incriminating material being unearthed relating to this year. He further submitted that the department has not filed any appeal against the reduction of the addition. It was also stated that the excise department had accepted the sale for the year under consideration so there was no occasion to make the estimate in respect of turnover and increasing the GP rate without citing any comparable cases. It was further submitted that no cessation of liability and the trade creditors, which appeared in the books of account were paid in the subsequent years. Therefore the ITAT was not justified in enhancing the addition u/s 41(1) of the Act. It was contended that on merits also the addition cannot be sustained and the addition required deletion. 12. Mr. Kapoor also argued that the ITAT's decision is incorrect and not supportable on facts, because the imposition of a higher GP rate and the amount of profits calculated were entirely arbitrary, based on no materials. It was urged that the materials seized could at best ....
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....r of Income Tax (1995) 214 ITR 801 (SC). Mr. Shivpuri argued that the ITAT should have appreciated the documents seized during the search from the standard of preponderance of probabilities. Since Chapter XVI-B provides a special procedure of assessment in the case of search and seizure, it is essential to take into consideration all materials, including the statements made to assessing authorities. Counsel argued that for a valid and binding retraction, it is not enough that the assessee merely retracts it through an affidavit; the timing of the retraction and the explanation for the statement as well as retraction may be crucial and can be considered by the assessing authorities. Given the legislative object of getting at concealed income, which is secreted away in diverse and different ways, such statements or even documents, which may not be accurate or complete in themselves, have to be scrutinized in the backdrop of probabilities of human conduct. Counsel argued that perfect books of account and materials are not expected in search and seizure cases, which are clandestine income and would in all probabilities be kept outside the books for the shortest possible time. Reliance ....
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....intained by him. The Sales Tax Officer initiated reassessment proceedings and after rejecting the account books estimated the escaped turnover at Rs. 2,50,000/- under the MP General Sales Tax Act and further amounts under the Central Sales Tax Act, adopting the sale of Rs. 31,171/- as escaped turnover for a period of 19 days as the basis. The Supreme Court rejected the assessee's contention that the STO's action was arbitrary and that as he had no evidence of escaped turnover for the entire accounting period, he was not legally correct in estimating or inferring that the assessee would have indulged in sales outside the books of accounts for the entire accounting period. The Supreme Court held that: - "It is now proved as well as admitted that his dealings outside his accounts during a period of 19 days were of the value of Rs. 31,171.28. From this circumstance, it was open to the Sales Tax Officer to infer that the assessee had large-scale dealings outside his accounts. The assessee has neither pleaded nor established any justifiable reason for not entering in his accounts the dealings noted in the bill book seized. It is obvious that he was maintaining false accounts to ....
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....uation. It is his "best judgment" and not of anyone else. The High Court could not substitute its "best judgment" for that of the assessing authority. In the case of "best judgment" assessments, the courts will have to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. In the present case, there is no dispute that the assessee's accounts were rightly discarded. We do not agree with the High Court that it is the duty of the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales Tax Officer was a relevant one whether it was the most appropriate or not. Hence the High Court was not justified in interfering with the same." 17. The impugned order dealt with this aspect and concluded that the statement ....
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.... Q. No. 6......................... Q. No. 7. Please let me know whether all the purchases made by your family firms namely M/s. Assam Suprari Traders and M/s. Balaji Perfumes is entered in your regular Books of accounts and whether all the purchases, manufacturing and sales made by above two firms is disclosed to income tax department. Ans:- We and our family firms namely M/s Assam Supari Traders and M/s Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms. Q. No. 9 What are the books of account maintained by your firms? Ans:- To the best of my knowledge, both our firms maintained cash books, ledger, sales register, bills books and other general books of accounts. Q,. No. 10- I am showing your annexure A-3 (Page 60 and 61) found I seized from your residenc....
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....atement of Shri Abhay Gupta to question No. 2 (supra) that he has made the statement on behalf of others u/s 132(4) of the Act including the assessee. Moreover the aforesaid statement dated 18.04.2006 was followed by another statement on 03.05.2006, where too Shri Abhay Gupta represented himself as the authorized representative of the proprietorship concern of the assessee and sister concern Balajee Perfumes. In the said statement too the surrender was reiterated. The aforesaid surrender no doubt was not acted upon by the assessee, but the said fact cannot lead us from the irresistible conclusion that incriminating material was unearthed during search. No material has been placed before us to negate the aforesaid factual aspect as well as to support the claims of AR that the admission before the Revenue was not valid and hit by duress and coercion. Before we conclude this issue, we consider it appropriate to note that the ld AR, had also stated that no material Per-se was found pertaining to the year under consideration. However, this argument also does not hold any water because once Section 153A is triggered on account of unearthing of incriminating material during search, the AO....
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....nce. In fact, once there is a clear admission, voluntarily made, on the part of the assessee, that would constitute a good piece of evidence at the hands of the Revenue. 12. The learned counsel for the appellant also referred to the circular dated 11.03.2003 issued by the Central Board of Direct Taxes on the subject of Additional Income during the course of SearchandSeizure Operation. As per the circular, there is an observation of the Board that the focus of the search party should be on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. There is a further observation that, while recording statements during the course of search, seizure and survey operations, no attempt should be made to obtain confessions as to undisclosed income and that any action to the contrary would be viewed adversely. 13. We do not see how this circular would, in any way, come to the aid and assistance of the appellant. All that it shows is that the Income-tax Officers should not try to force a confession from an assessee. However, if an assessee voluntarily makes a surrender, the of....
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....ol of the business. She and all other family members made short statements and endorsed the statements under oath, of those who elaborated the trading and business operations relating to clandestine income. These statements under oath were part of the record and continued to be so. They were never explained in any reasonable manner. Their probative value is undeniable; the occasion for making them arose because of the search and seizure that occurred and the seizure of various documents, etc. that pointed to undeclared income. In these circumstances, the assessee's argument that they could not be acted upon or given any weight is insubstantial and meritless. This court also notices that the decision in CIT Vs. Anil Bhatia 352 ITR 493 (Del) which held that such statements are relevant, though noticed, has not been doubted in any later decision, including Kabul Chawla, which is the mainstay of the assessee's case. Consequently the first question of law is answered against the assessee and in the revenue's favour. Re Question No 2: 21. The assessee's argument on this aspect was that the lower authorities' approach in rejecting the books, estimating turn over and applying a high ....
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....tries made in books cannot be verified, therefore book result cannot be accepted. However quite strangely he has held in Para1 11.1.3 of his order that there is no justification for rejection of books of account by observing that AO has not placed any material on record to point out defects in books. The aforesaid finding is contradictory to his own finding reproduced above in this order at para 26 and therefore erroneous. Now coming to the estimation as noted above, AO had estimated sales at Rs. 1 crore and GP at 20%. Whereas, the ldCIT(A) has accepted the declared sales and estimated GP at 12%. In the instant case, it is crystal clear that each of the figures declared, be it sales or GP are unverifiable without supporting documents. Thus the question which remains is whether the estimation made by the AO is fair and reasonable on the facts on the case. We have already noted above while disposing of ground No. 1 to 3 that as a result of search, shri Ajay Gupta on behalf of assessee has admitted to unaccounted transactions outside regular books of accounts. It is also true that there is no material indicating unaccounted transactions particularly for the instant year unearthed duri....