TaxTMI 
TaxTMI 
2017 (8) TMI 119
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....search initiated against M/s. Abdul Gadhafi and others, said to be his business associates in other ventures. Thereafter, the authorities issued notice under section 153A read with section 153C to the appellant (the assessee). In response, he declared his income for the assessment year 2002-03 as Rs. 2,32,840. 3. Relying on the documents allegedly found during search, especially, a bill book relating to the period from April 1, 2006 to July 30, 2007, the authorities estimated the assessee's income as follows : (a) undisclosed business income : Rs. 8,89,348 ; (b) agricultural income treated as income from other sources : Rs. 50,000 ; and (c) income from other sources (interest on lending) : Rs. 2,34,000. 4. The authorities, after issuing a notice to the appellant under sections 143(2) and 142(1), and after considering his explanation, through annexure A order dated December 30, 2009, assessed the appellant's income for that assessment year at Rs. 14,06,190. For the rest of the years, too, the assessment was made on the same lines. Appeal before the Commissioner of Income-tax (Appeals) : 5. Aggrieved, the appellant filed an appeal before....
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....ded that the Assessing Officer and the appellate authorities have failed to consider that under the scheme of Income-tax, each assessment year is independent and separate. 10. Drawing our attention to sections 68 to 69C of the Act, the learned senior counsel has contended that the assessee's unexplained loans or gifts, unaccounted for assets, investments, or expenses are liable to be brought to tax under deeming provisions in the financial year of such investment or expenditure as found. Identification of the source of corresponding income, contends the learned senior counsel, is required under law. He has also submitted that the levy of interest under section 234B is illegal, unsustainable, and contrary to the relevant statutory provisions. 11. The learned senior counsel has placed reliance on CIT v. Padamchand Ramgopal [1970] 76 ITR 719 (SC) and State of Kerala v. C. Velukutty [1966] 60 ITR 239 (SC). On the proposition laid down in Hotel Meriya, relied on by the Revenue, the learned senior counsel in his reply submits that it was decided based on the assessee's admission. Revenue's : 12. Sri P. K. Ravindranatha Menon, the learned senior counsel for the Rev....
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....s of account, are furnished in the following table : Assessment Turnover (Rs.) Suppressed turnover estimated by the Assessing Officer (Rs.) Revised suppressed turnover estimated as per remand report and followed by the CIT(A) (Rs.) 2002-03 13,44,729 1,36,40,319 1,15,43,534 2003-04 6,69,175 1,51,55,910 1,28,26,149 2004-05 7,10,199 1,68,39,900 1,42,51,277 2005-06 11,23,463 1,87,11,000 1,58,34,752 2006-07 19,98,934 2,07,90,000 1,75,94,169 2007-08 19,15,914 2,31,00,000 1,95,49,077 2008-09 53,96,593 2,54,10,000 2,15,03,985 Declared income, assessed income, and demanded tax : AY Income declared initially (Rs.) Revised AO's reassessment (Rs.) Total tax demanded 2002-03 1,05,314 2,32,480 14,06,190 7,12,610 2003-04 1,00,605 1,88,800 24,55,550 11,87,940 2004-05 1,24,140 2,54,470 53,54,340 27,78,570 2005-06 1,35,372 2,13,990 52,97,530 26,42,860 2007-08 92,550 92,250 26,94,770 12,06,820 2008-09 - 4,09,450 28,82,220 10,15,100 16. The above tabulation would show that as against the declared t....
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....ivil Procedure, 1908. The powers concern (a) discovery and inspection, (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath, and (c) compelling the production of books of account and other documents. More importantly, section 132 of the Act confers on the Income-tax authorities wide powers of search and seizure. Here it needs no elaboration for, concerning the search conducted in the assessee's house, there is no issue raised about its legality. 21. The Explanation to section 132(4) of the Act clarifies that the evidence so collected would be relevant for any investigation connected with any proceeding under the Act. A person's examination is not only regarding any books of account, other documents, or assets found because of the search, but also regarding all matters relevant to any investigation connected with any other proceedings under the Act. 22. Now we may get down to brass tacks. Once a search is conducted under section 132, the Assessing Officer will issue a notice calling on the assessee to furnish the return of income for each assessment year falling within six assessment years "immediately precedi....
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....ed before the search or requisition, those assess ments will form the basis ; (b) If returns of income have been filed under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148, but assessments have not been made till the date of search or requisition, the assessment must be based on the income disclosed in those returns ; (c) If the due date for filing a return of income has expired, but no return of income has been filed, the following are the options : (A) based on entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition, if those entries result in the computation of loss for any previous year falling in the block period ; or (B) based on entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition, if the income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period ; . . . (d) if the previous year has not ended or the date of filing the return of income under sub-....
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....o other assessment years. The court has felt that the method Income-tax Officer adopted for determining escaped income to be highly capricious. It is pertinent to note that, on facts, the court has observed that none of the authorities have found any mistake in the accounts relating to other accounting years. 31. In C. Velukutty, the apex court has quoted with approval the Privy Council decision in CIT v. Laxminarain Badridas [1937] 5 ITR 170, 180 (PC) to exposit the expression "to the best of his judgment" under section 12(2)(b) of the Travancore-Cochin General Sales tax Act, 1125 M.E. (XI of 1125) (page 244 of 60 ITR) : "He (the assessing authority) must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the mat ter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and pro....
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....ith facts discovered, it cannot be questioned. In the very nature of the things, the estimate made may be an over-estimate or an under-estimate. But that is no ground for interfering with the Assessing Officer's "best judgment". The court, however, cautions that the basis adopted by the officer should relate to the estimate made. 36. Let us examine H. M. Abdulali deeper. On facts, Abdulali holds that the assessee has neither pleaded nor established any justifiable reason for his not entering in the accounts the transactions noted in the bill-book seized. In such a situation, it was not possible for the Sales Tax Officer to find out precisely the suppressed turnover ; he could only estimate it based on the material before him. 37. H. M. Abdulali disapproves of an approach that insists on the assessing authority's having material before him to prove the exact turnover suppressed. If it were insisted upon, there would be no "best judgment" assessment. The assessee cannot be permitted to take advantage of his own illegal acts, for it is his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the ....
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....nd 725/Coch/2010 involving Mr. Ashraf. As the issue is identical, the findings rendered in ITA No. 724/Coch/2010 and batch, the Tribunal has felt, that the assessment by the Assessing Officer and the order of the appellate authority could not be sustained. This finding, too, has attained finality. 42. The bill-books found during the search pertain to the period from April 1, 2006 to July 30, 2007. From them the Assessing Officer found the total sales to be at Rs. 2.31 crores. Since the assessee had not included the sales in the trading account filed along with the return of income, the Assessing Officer reassessed the sales backwards in the entire block period from the assessment year 2002-03. Estimation of turnover of sales-net profit-addition of 5 per cent. 43. The learned senior counsel for the assessee has emphasised that during the search the authorities found no discrepancy in the stock. Further, he has brought to our notice the defence set up by the assessee : The impounded bills were adjustment bills issued by the assessee for the sales effected to dealers in Kerala. Compared with Kerala, Mahe (Pondichery) has a low tax-rate. So dealers in Kerala get bills from Mah....
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....Tribunal has sustained the net profit rate at 5 per cent. of the turnover. We reckon that the method of calculation and the procedure adopted by the authorities arriving at the undisclosed income has accorded with the statutory mandate under sections 68 to 69C of the Act. We, therefore, find no reason to interfere with the Tribunal's confirming the Assessing Officer's adopting the undisclosed income at 5 per cent. on the revised suppressed turnover. For the assessment year 2008-09 : 47. Now we may focus on another issue : the agricultural income taken as income from other sources, for the assessment year 2008-09. The appellant owns 21 cents of land on which a house, too, exists. The Commissioner of Income-tax (Appeals) has agreed with the Assessing Officer's findings. The finding is that the assessee has claimed no agricultural income in the return, but showed it in the statement of account filed during assessment proceedings. Indeed, the assessee's claim seems to be against the established practice of reckoning income from agricultural activities. Excluding the house, whatever remains of 21 cents may not be, as has been concurrently held, sufficient to genera....
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....9;s assessment and the adjudicatory authorities' findings are, perhaps, matters of fact. But the facts to fructify into findings need the application of law. If that application of law is flawed, this court can interfere, without causing violence to the established principle of law that there needs no interference on the questions of fact. 53. Even going by the ratio of H. M. Abdulali, we reckon that the Assessing Officer's findings on this issue are on unsure foundations. The speculative aspect overshadows the aspect of the established business practices. Given the assessee's explanation, we hold that he ought to have been given the benefit of doubt. In other words, there can be no quarrel on the Assessing Officer's conclusion that Rs. 25,63,500 is an unexplained investment, but on his calculating interest, we feel that it is without basis. We, therefore, set aside the Tribunal's findings for the assessment year 2004-05 concerning addition of interest ; as a result, we allow the assessee's appeal for the assessment year 2004-05. Similarly, the Assessing Officer's conjecture on the interest component for the assessment years 2005-06, 2006-07, and 2007....