TaxTMI 
TaxTMI 
2001 (4) TMI 53
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....es practised by the assessee-firm in the form of loose slips, which were not brought to the accounts of the assessee-firm. The search has also resulted in the seizure of unaccounted cash as well as unaccounted transactions in respect of various investments. During the course of investigation the assessee-firm also admitted an undisclosed income of Rs. 7.38 lakhs. As the search was conducted after june 30, 1995, proceedings were initiated under Chapter XIV-B for framing of the assessment for the block period from April 1, 1985, to November 13, 1996, till the date of search. Accordingly, the assessee was asked to file a return for the block period as a result of the search conducted by the Department and the assessee-firm filed its return declaring an undisclosed income of only Rs. 7 lakhs. The Assessing Officer thereafter conducted the enquiry in the matter and framed the assessment determining the undisclosed income at Rs. 63,08,120. The said amount was arrived at by the Assessing Officer basing on the loose slips recovered from the assessee during the course of search, representing the unaccounted sales and by estimating such suppressions for the assessment years 1996-97 and 1997-....
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.... at Rs. 29,78,920 the break up of which was given by the Tribunal ' in paragraph 14 of its order. Aggrieved by the said order of the Tribunal, the assessee is before this court. In the appeal the following substantial questions of law, are said to arise out of the order of the Tribunal for consideration of this court : "1. Whether, on the facts and circumstances of the case, the Incometax Appellate Tribunal was correct in law in ignoring the seized material entirely and in determining the alleged income of the appellant for the block period on the basis of conjectures and hypotheses ? 2. Whether, on the facts and circumstances of the case, the Incometax Appellate Tribunal was correct in upholding in part an assessment, which is based on assumption, and without any factual support ? 3. Whether, on the facts and circumstances of the case, the Incometax Appellate Tribunal was correct in law in sustaining an addition of Rs. 8,39,579 representing the alleged income of the appellant, during the financial years 1987-88 to 1995-96, without an iota of evidence having been gathered at the time of search with respect to the said period ? 4. Whether, on the facts and circumstances ....
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....98 (till the date of the search). This suppression was for a period, of 15 days from October 23, 1996, to November 8, 1996. Apart from the said material recovered at the time of search, sworn statements of the partners were recorded by the Department, wherein one of the partners has admitted in his statement before the officers that the assessee-firm was practising suppression of sales from day-to-day basis throughout the assessment years not only during the assessment years 1996-97 and 1997-98 but also during the earlier assessment years from 1986-87 to 1995-96. Basing on the seized material and the admissions of the partner in the sworn statement, the Assessing Officer worked out the average daily suppression at Rs. 1,43,175 during the assessment year 1996-97 and by multiplying for the entire year by 279 days (number of working days), the Assessing Officer estimated the suppressed turnover at Rs. 3,99,45,825 and thereafter adopted a gross profit at the rate of 7.35 per cent. and determined the undisclosed income for that year at Rs. 29,36,018. Similarly, for the assessment year 1997-98, the Assessing Officer worked out the average daily suppression at Rs. 1,96,615 and multiplied ....
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.... a period of 24 days during the assessment year 1996-97 and 15 days for 1997-98 and also that the suppressions were on a day-to-day basis and the evidence recorded from the partners shows that the same method was adopted throughout the assessment years for the entire block period. In the light of such evidence recovered from the assessee at the time of search, together with the admission of the partner, there is absolutely no justification for the assessee to contend that there is no evidence on record. Learned counsel also, at the time of hearing, contended that for the assessment year 1996-97, the Tribunal adopted six times addition ; whereas for 1997-98 only three times, which goes to show that such adoption is without any basis. Here also we are unable to appreciate the contention of learned counsels The said contention is without reference to the basic facts referred to by the Tribunal in its order. For the assessment year 1996-97, the assessee carried on the business for the entire year (279 working days), whereas for the assessment year 199,7-98 the assessee carried on the business till the date of the search and the estimation is confined only for that period (178 days). Th....
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....uld have nexus to the materials on hand. In the present case before us, the Assessing Officer has estimated the sales suppression for all the working days, of the relevant years at the daily rate of sales suppression. We are of the view that this is an extreme case of estimation, following a mechanical approach. Business graph cannot be straight throughout a period, and one cannot presume that the assessee firm invariably followed suppression on every day at a given rate in the entire business year. The Assessing Officer's estimation is a rigid one with out giving scope for fluctuations. So we are of the view that the estimation done by the Assessing Officer has to be modified. At the same time, we are not in agreement with learned counsel for the assessee that the decision of the Tribunal on the point of estimation in the case of Shri Padamchand Jain applies to the facts of the present case. In that case, the Tribunal has estimated the probable sales suppression at 50 per cent. for financial year 1995-96 and at 25 per cent. for the financial year 1996-97 of the actual sales suppression found out in the course of search, and the profit rate was adopted at 4 per cent. of the turnove....
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.... there was a continuous pattern of suppression followed by the assessee, and corresponding independent unaccounted transactions have also been found expos6d in the course of search. Considering all these matters, we proceed to make a reasonable estimate of the sales suppression and undisclosed income in relation thereto, for the financial years 1995-96 and 1996-97 as follows : Financial year 1995-96 Actual suppression of turnover detected in the course of search worked out to Rs. 34,36,213. For arriving at the estimated suppression for the full financial year, excluding the actual suppression noticed, in our view, a multiple of six would be reasonable. On the suppressed turnover thus arrived at, net profit, viz., undisclosed income, should be worked out applying a rate of six per cent. Undisclosed income of this year would thus be worked out in the following manner :  ....
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....ofit, viz., undisclosed income, has to be reasonably estimated for this year also at six per cent. On the basis of these guidelines, undisclosed-income in relation to the suppressed turnover for this year would be as follows : Rs. Actual suppression detected 29,04,751 Add : Estimated suppression for the remaining period of the fractional financial year 1996-97 till the date of the search Nov....
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....t years 1986-87 to 1995-96, no doubt there is no material but it is admitted by the partner of the assessee-firm that the assessee had practised suppression of sales turnover. Taking the quantum of business that was carried on by the assessee-firm, the Assessing Officer estimated the suppression at 20 per cent. and adopted the gross profit rate that was returned by the assessee. The Tribunal felt that there is no unreasonableness in adopting such estimation. In our view also there is absolutely no unreasonableness or arbitrariness in adopting such estimation. The evidence of the partner clearly shows that the firm has suppressed the turnover even in those years also. Therefore, the authorities below are justified. In the light of the above, there is no case for the assessee to contend that the estimation is not based on any material. According to the various decisions including the decision of the Supreme Court, there must be some material, before the Income-tax Officer on which to base his estimate, but no hard and fast rule can be laid down by the court to define what sort of material is required on which his estimate can be founded. It was pointed by the House of Lords in Sun....