TaxTMI 
TaxTMI 
2019 (1) TMI 891
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....to a Private Limited Company; also coming under the said group. 2. The issues arising from the assessment order as challenged by the assessee before the Tribunal were on the question of undisclosed investments as also the undisclosed income detected under four separate heads of under-invoicing, undisclosed sales, investments in unaccounted purchases, and interest income. The AO found that the undisclosed income was in excess of the undisclosed investments. An assessment, hence was carried out bringing to tax Rs. 1,50,83,279/- for the block period as undisclosed income. Out of this, the NRE gifts and loans, amounting to Rs. 15,19,000/- disclosed in the block periods, in the returns of the Directors and one of the firms was reduced. The total income thus brought to tax was Rs. 1,36,64,279/- as undisclosed income. 3. On first appeal, the Commissioner of Income Tax considered the grounds raised on the undisclosed investments as also the undisclosed income. The excess stock, found of Rs. 20,61,480/- was found to be more or less correct, since the assessee had not seriously challenged the quantity of excess stock, but for the contention raised with respect to broken and cracked mat....
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.... amount and no enquiry has been conducted to that end. The entire amounts said to have been invested for development of land was set aside. The total undisclosed investment, as confirmed by the first appellate authority, was found to be Rs. 23,22,200/-. 4. The first appellate authority then looked at the undisclosed income as found by the AO. The AO had found suppression of sale to the extent of 10% on the sales returned in each of the assessment years of the block period. The first appellate authority held that there was no material found in relation to under-invoicing of sale for the assessment years 1996-97 to 1999-2000. The materials recovered, pointing to under-invoicing on sale, was confined to the financial year in which the search and seizure operations took place. The reply given by the assessee with respect to the allegation of under-invoicing of sale was elaborately dealt with by the first appellate authority. The assessee had contended that the AO has absolutely no power to estimate income on the basis of the available seized incriminating documents. The appellate authority has to confine such estimation, if at all made, to the year for which the documentary evidence....
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....etermined the unaccounted purchases for the year 1996-97 at Rs. 28,66,305/-. The defence of the assessee was that the balance-sheet was submitted to the Bank to procure Overdraft of Rs. 60 lakhs. There was also a contention raised that the document as obtained from the SBT, Angamaly Branch was not admissible in the block assessment proceedings for the same having not been recovered in the process of search and seizure under Section 132. The first appellate authority found that the assessee having started the business in December, 1994; carried on the same only for three months in the financial year relevant to the assessment year 1995-96. The assessee had made only purchases during the said period coming to Rs. 10 lakhs shown as closing stock as on 31.03.1995. Referring to the balance-sheet submitted to the Bank as on 30.08.1995 and the closing stock of Rs. 60 lakhs, it was found that the total purchases made during the period was of Rs. 32.08 lakhs as against the sale of Rs. 21.92 lakhs. The discrepancy with respect to the balance-sheet as framed on the close of the assessment year 1995-96 and that produced before the Bank was found to support the contention of the assessee. It wa....
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....nd and property as restricted by the first appellate authority at Rs. 1,51,000/- was upheld by the Tribunal, rejecting the Revenue's appeals. The scaling down of gifts and loans as asserted to be from non-residents was also confined to that allowed in first appeal, being Rs. 84,000/-. On the undisclosed investment of Rs. 1,25,720/-, as noticed by the first appellate authority, there was no serious objection raised by the assessee. On the question of investment for development of property at Kottakulangara, the issue was found in favour of the assessee and the first appellate authority's order was confirmed to that extent. We have to find that there could be no serious dispute raised on the computation of undisclosed investments as modified by the first appellate authority and confirmed by the Tribunal. We find that the exercise has been done on the basis of the facts as available in the records. We also notice that 25% allowance for breakage was granted by the Tribunal on a discussion of the normal practises in the business. We do not find any perversity in the said finding on the question of undisclosed investment. We perfectly agree with the orders passed by the appellate....
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....in a totally perverse manner in deleting the additions made by the A.O? 10. The learned Senior Counsel appearing for the assessee-respondent heavily relied on the judgments of the Bombay, Rajasthan and Delhi High Courts to contend that Chapter XIV-B of the Act lays down a special procedure for assessment and it has to be treated differently from the regular assessment carried out under Section 143(3). It is the contention of the learned Senior Counsel that there could be no best judgment assessment carried out and there could be no estimation made to determine the undisclosed income. The undisclosed income has to be determined from the materials recovered on search. The computation of undisclosed income of the block period as spoken of in Section 158BB is specifically referred to. The undisclosed income can only be determined "on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence". The words employed in the provision would specifically indicate that there could be no estimation made, is the compelling argument. Th....
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.... the possibility of the professional fees remaining static for the entire 10 years being remote, the refund having been effected to candidates found unfit at the initial stage who were charged only a nominal fee and so on and so forth. The arbitrariness was insofar as the Department having applied the peak income rate of 1993 period to the entire block period. In fact, on the question of estimation, the division Bench held so: "We agree with the contention advanced on behalf of the Department that in matters under Chapter XIV-B the Assessing Officer is required to estimate the undisclosed income. We agree with the contention of the Department that this estimation involves guess work. However, the Assessing Officer under Chapter XIV-B cannot act arbitrarily while estimating the undisclosed income". Hence, it cannot be understood that the Division Bench was of the opinion that there could be no estimation made when a block assessment is carried out. The concluding remarks on Chapter XIV-B having laid down a special procedure for assessment of search cases also cannot have any significance insofar as the present case is concerned. The difference noticed was insofar as the ....
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....vidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. Evidence found as a result of search is clearly relatable to section 132 and 132A". 15. What is discernible from the aforesaid decisions of the various High Courts is that the AO while carrying out block assessment is definitely entitled to proceed on best of judgment and make estimations for the block period. However, such estimation has to be made only on aspects which have a direct correlation to the materials, transactions and aspects which were detected in the search carried out under Chapter XIV-B. We would also emphatically state that there is no restriction in so far as the estimation being permitted only on the basis of the materials recovered at the search. It could be on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. 16. To counter the argument regarding the estimation made for the prior years without any material for that years having been recovered, the learned St....
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....n arose as to whether there was a mandate to collect information and evidence for each and every one of six previous years. Therein also, estimate slips were collected from the jewellery, which recorded price lower than that actually received from the customers. The Manager of a show room, a Cashier in another business premises and a Computer Operator made statements; based on which as also the estimate slips, an estimation was carried out for the six years. The Division Bench relied on Hotel Meriya, though it was specifically noticed that they were not concerned with a block assessment. Based on the estimate slip recovered from five business concerns as also pre-search enquiry purchases made in two concerns and the note books seized from one of the business concerns, it was held that there could be an estimation made for the previous six years also despite the fact that the materials recovered were only with respect to the year in which the search was conducted. 19. It is in this background, we have to look at the instant order of the Tribunal which has been challenged before us by the Revenue. As in Hotel Meriya, we notice that the finding on facts with respect to the suppress....
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....extent of suppression, the computer printout of sales tax report, product-wise and purchase reports were referred to. In the assessee's business premises, on 01.03.2000 the actual sales as per the daily statement seized as sheet No.36 in the bunch marked "AMA-14" indicated it to be Rs. 2,20,442/-, while what was accounted was Rs. 18,090/-. Sri.Lijo Joseph, who submitted that more or less sale price was shown in the sale bills, when confronted with a bill and estimate with respect to one another show room, admitted that the estimate showed only Rs. 48,857.60 while the actual price was Rs. 1,43,668.93. The Director, who was examined in the course of the search in the business premises of the respondent-assessee, also could not explain the various other documents with which he was confronted. Further, it was found that there was a Customer Care Scheme with Prize Coupons issued by the assessee. As per the Scheme, for every purchase of Rs. 50,000/-, one coupon was given to the customer with a lottery being held on the expiry of the Scheme; offering a Tata Indica motor car to the winner. Verification revealed that coupons were given to customers far in excess of their purchase price ....
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....was made. Though it was alleged that the employees had made their statements under duress, they were not produced for cross-examination. Some of the specific instances of under-invoicing mentioned in the pre-assessment notice were not controverted and on the others, the explanation offered was not satisfactory. The purchasers, who were granted Customer Care Scheme Prize Coupons far in excess of the sales price invoiced were cross-examined without any avail. They stood by their statements and also established the source from which they made the purchases. In a block sale made to Beemapally Mosque, there was no sale accounted. It was also found that there were reputed institutions like Parumala Seminary and Taj Garden, Kumarakom, who made purchases from the group concerns, in which purchases the sale price was correctly invoiced. Taking an overall view of the under-invoicing carried out, a fair estimation at 10% of the declared sales was confirmed by the AO as against the proposal of 50%. The 10% estimation was made on the respective turnover of each of the prior years. We do not find any reason for the appellate authority or the Tribunal to have interfered with the same. 23. We h....
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.... assessment. In this context, we notice our own judgment in I.T.A.Nos.28 and 29 of 2010 dated 14.08.2018 [P.A.Ahamed v. C.I.T.]. Therein the assessee was in appeal against re-assessment proceedings alleging it to be on a mere change of opinion. A search and seizure was conducted in the office of the assessee, a practising Advocate, and certain Bank statements were recovered. In pursuance of the search, the AO called for the details of the accounts from the Banks. The details of the accounts were made available by the respective Banks to the AO. The AO, at the first instance, looked into the Bank accounts and there was a proposal to treat the Bank accounts as professional receipts. The objection filed was considered and some of the credits were found to have been explained. The AO then found the Bank credits to be part of the professional fees and was found to be inclusive of the professional income. When determining the undisclosed income, the unexplained expenditure/investment made by the assessee alone was taken. Hence, a conscious decision was taken not to determine the undisclosed income based on the credits in the Bank accounts as revealed from the Banks' statements. Later....
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....le making the block assessment. 11. In the present case also, the block assessment indicates that certain details were obtained at the time of search and more details were called for from the respective branches of the Banks in which assessee maintained accounts. These details were available with the AO before the block assessment was made and there would have been absolutely no difficulty in relying on them, since it is an information available with the AO relatable to the material discovered on search. The cited decision, in fact, would help the assessee to contend that the AO at the time of block assessment having not made any addition on that count, after having specifically noticed the transactions, and decided to treat them as inclusive of professional receipts, a new incumbent cannot take a different stand which would lead to the subsequent order being vitiated for reason of it being a mere change of opinion". 25. The balance-sheet was one submitted by the assessee before the Bank admittedly for the purpose of availing a loan. The Bank normally would have conducted an inspection based on the balance-sheet to ascertain the stock maintained by the assessee. There i....