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2019 (12) TMI 1227
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....partly allowed the appeal of the assessee for the assessment year 2003-04 and dismissed the appeal of the assessee for the assessment year 2007-08. 2. Against this, the Revenue carried the matter in appeal to the High Court for all the assessment years. The assessee also went in appeal before the High Court for the assessment year 2007-08, the details of which are as follows:- Sl. No. Assessment Year ITA No. before Tribunal Revenue Appeal before the High Court Assessee Appeal before the High Court 1. 2001-02 302/Coch/2010 145/2011 Dated 11/11/2016 2. 2002-03 303/Coch/2010 175/Coch/2011 -doITA 3. 2003-04 304/Coch/2010 1/2012 -do- 4. 2004-05 305/Coch/2010 181/2011 -do- 5. 2005-06 306/Coch/2010 168/2011 -do- 6. 2006-07 307/Coch/2010 188/2011 -do- 7. 2007-08 308/Coch/2010 182/2011 -do- 102/2011 Dt.11/11/2016 8. 2001-02 269/Coch/2010 11/2012 -do- 9. 2002-03 270/Coch/2010 12/2012 -do- 10. 2003-04 271/Coch/2010 13/2012 -do- 11. 2004-05 272/Coch/20....
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....ision of the Tribunal is vacated and this appeal is ordered remitting the case to the Tribunal for de novo decision in accordance with law and also taking into consideration the grounds that may be raised by the assessee and the Revenue" 5. Hence, all the fourteen appeals came up for hearing once again before the Tribunal for these seven assessment years. 6. The only issue for re-consideration in assessee's appeals in ITA Nos. 302 to 308/Coch/2010 (7 appeals)is with regard to to confirmation of addition on account of liquor sales in the absence of any incriminating material indicating undisclosed income. On the other hand, the issues for re-consideration in Revenue's appeals in ITA Nos. 269 to 275/Coch/2010 (7 appeals) is with regard to consideration of income of Kwality Restaurant in the hands of the assessee, though the assessee leased the restaurant to the third party on rental basis and deletion of additions made on account of estimation of undisclosed turnover from restaurant business (excluding sales of Kwality Restaurant) and undisclosed liquor sales. 7. The facts of the case as narrated in ITA No. 304/Coch/2010 for the A.Y. 2003-04 are that a search under section 1....
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....hin 30 days from the receipt of the notice. The said notice was served on the assessee on 14.02.2008. In response to the said notice, the assessee firm filed its return of income on 03.06.2008 declaring a total income of Rs. 58,800/-. The assessee firm had originally returned the same income in the return filed u/s. 139(1) on 20.11.2003. After processing the return filed u/s. 153A, a notice u/s. 143(2) was issued on 24.10.2008. On the same day a notice u/s 142(1) was also issued along with a questionnaire seeking various details. 7.4 Coming to the materials found during the course, of search, it was found that many books of account and other documents were seized during the course of search as listed in Annexure PC-I (containing two pages). The seized books of account and documents included daily statement sheets for the period 08.11.2002 to 17.12.2002 marked as Annexure PC- 1(22). This seized material is a bunch of 157 loose sheets: Pages 1 to 152 are 'daily statements' of Hotel Hill Park for the above mentioned period and pages 153 to 157 are price list of liquor w.e.f. 18.04.2002. A day book maintained by the assessee for the period 01.11.2002 to 31.03.2003 was also s....
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....also received from counters. From these details, I daily prepare a cash statement. The cash taken by the partners are also recorded in the daily statement received from counters. Usually, I don't handle cash. Cash balance will be available with the Manager. In the daily statements maintained, daily cash balance is arrived and this amount will be available with Manager. After each month end, statement of cash withdrawn by partners is prepared and is given to Paulson P. Varkey, Managing Partner. Original day book and ledger of M/s. Matha Enterprises is also written by me. In this day book, consolidated sales of bar section, sales of restaurant in bar section, sales of ordinary soda, special soda and soft drinks in bar section, room rent and luxury tax collected are entered. While recording daily sales of bar in the original day book, 20% of sales is reduced and only 80% of actual sales are entered as daily bar sales. An amount of around Rs. 5,000/- is entered as bar restaurant sales. The actual sales of ordinary soda, special soda and soft drinks and actual lodge collection are correctly entered in the day book. Almost all the expenses except for bribes paid and extra wages paid ....
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....ection as found in the daily statement for each day was correctly recorded in the day book but in the case of liquor sales and restaurant sales, the sales as per daily statements were not reflected fully as given in the table below. In the table, Col. 2 is the total of item shown as 'food' entered in the first sheet and 'restaurant sale' shown in the second sheet of the daily statements. The 'restaurant sales' shown in the first sheet of daily statement was not added to the restaurant sale as it was already included in the second sheet. Date Sales as per Daily Statement (PC-1(22) Sales as per Day Book PC-1(2) Restaurant (Food) (In Rs.) Bar (Liquor) (in Rs.) Wills (in Rs.) Restaurant (Food) (In Rs.) Bar (Liquor) (in Rs.) Wills (in Rs.) (1) (2) (3) (4) (5) (6) (7) 08.11.2002 19227 149754 1840 3940 119876 - 09.11.2002 22303 176494 0 3949 104658 - 10.11.2002 21528 1188347 3680 3981 110176 - 11.11.2002 21700 162868 1840 3384 104658 - 12.11.2002 19428 137779 1380 3719 109672 - 13.11.2002 1870....
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....onth. In terms of percentage, the suppression worked out to 385.93% and 37.32% of disclosed sales in respect of restaurant and liquor sales respectively. With reference to the actual sales the extent of suppression in sales worked out to 79.42% and 27.18% of actual sales for restaurant and liquor sales respectively. For sales of cigarettes, no sales were shown in the accounts as against sales of Rs. 61,050 as per seized records. It was observed that the figure of actual suppression of 27.1% of the sales of liquor on the basis of seized records was quite near to the stated suppression of sales by 20% as per the statement of the accountant and confirmed by the Managing Partner. Thus, the statement was based on approximations and memory and the actual figures on the basis of seized recordwouldbe more reliable. The above mentioned materials found and seized during the course of search in the form of daily sheets and the statements of the Accountant and the Managing Partner recorded on oath during the course of search, go to establish the fact that the firm had suppressed its sales on day-to-day basis. By way of Q. No. 7 of the annexure to the notice issued under section 142(1), the wor....
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.... receipts shown in the front office daily statements i.e. fourth sheet. These receipts tally with the receipts shown in the books of account on which the returns filed by the assessee were based which proved that daily statements were the primary documents based on which the day book was written. The fact that the daily statements of room rent receipts which tally with the receipts shown in the books of account of the assessee were also scored off like other daily statements, disproved the partner's claim that the documents were unreliable for the fact that these had been completely scored off in every page when the person who prepared would have realized that the statement were erroneous. The accountant himself had admitted that while recording daily sales of the bar in the original day book, 20% of sales were reduced and only 80% of the actual sales were entered as daily bar sales and only an amount of Rs. 5,000/- was entered as Bar Restaurant sales. Shri Paulson P. Varkey admitted that the facts stated by Shri K.A. Paul were correct. In his reply to Question No. 7, when requested to describe the entries in the pages, Shri Paulson replied that he did not know what it was and ....
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....ng the course of search which is not sustainable as it was not made soon after the statement was recorded, retraction was unsubstantiated and did not indicate any facts to prove inducement or compulsion when the statement was recorded. Since the facts mentioned above go to prove that the assessee firm's books were not correct and complete, the assessee's authorized representative was asked to show cause why in the circumstances of the case, the book results should not be considered to be incorrect and incomplete within the meaning of the provisions of section 145(3) of the Act and a notice u/s. 144(1) r.w.s. 145(3) of the Act was also issued to the assessee on 23.12.2008 to show cause why its assessment should not be completed in the manner provided under section 144. No explanation in this regard was given at the time of hearing or filed till today. As such, the Assessing Officer rejected the books of account of the assessee as they were not found to be correct and complete within the meaning of provisions of section 145 (3) of the Act and the assessment was made in the manner provided under section 144 of the Act. 7.9.4 In view of the above, the Assessing Officer made ....
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.... 385.93% of the disclosed sales. When this ratio is applied to the admitted sale of Rs. 12,81,996/-, total undisclosed sales and actual sales worked out to Rs. 49,47,607/-and Rs. 62,29,603/- respectively. The undisclosed sales of Rs. 49,47,607/- would not have been made from the cost of purchases debited at Rs. 7,07,077/- to the accounts in respect of disclosed sales of Rs. 12,81,996/-. In its accounts, the assessee had disclosed profit margin on sales at 35.5% of the sales. The undisclosed profit thus worked out to Rs. 17,56,400/- on undisclosed sales of Rs. 49,47,607/-. Since the indirect expenses were already debited to the accounts, the amount of Rs. 17,56,400 was added to the returned income as undisclosed profits from restaurant. Estimation of undisclosed Sales of Cigarettes : AY 2003-04 8.3 It was seen from the seized materials PC 1(22), PC 1(02) and the table drawn that the receipts from the sale of cigarettes were not reflected at all. The total sales of cigarettes for the period from 8.11.2002 to 30.11.2002 (23 days) and 02.12.2002 to 17.12.2002 (16 days) were found at Rs. 61050/- and the average sale of cigarettes worked out to Rs. 1565.38 per day. The annual sale ....
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....to the CIT(A), there was evidence of suppression of turnover in the period relevant to assessment year 2003-04 and 2007-08 and therefore, a reasonable presumption can be drawn that there was suppressed turnover even during the intervening period i.e. assessment year 2004-05, 2005-06 and 2006-07. These documents however do not establish any suppressed turnover for the period prior to AY 2003-04 and therefore hardly have any relevance for AY 2001-02 & 2002-03. 9.1 The CIT(A) observed that the assessee was not questioned about documents PC-I(2) & PC-I(22) during search action as well as during assessment proceedings except in thelast week of December, 2008. When Managing Partner was shown these documents during the course of search action, he simply disposed the question by stating that the Accountant Mr. K.A. Paul would know about the same. Mr, K.A Paul was, however, not confronted with these documents. Therefore, the CIT(A) found that there was no confession of the assessee with regard to these documents in contrast to PC-I(8) &PC-1(23) which have been duly confessed. The assessee had claimed these to be dump documents and according to the CIT(A), this claim of the assessee does ....
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....ales which broadly match with the suppression of around 26.9% revealed from the seized documents. PC-I(8) PC-I(23) when read with PC-I(5) A PC-I(6) pertaining to the period from 1st January, 2007 to 11th February,2007. This figure of suppression PC-1122) read with PC-I(2) pertaining to the period 8.11.2002 to 17th December, 2002, wherein suppression of bar turnover was indicated to the tune of around 37.3%. In a similar manner, in this deposition Mr. Paul had stated that only around Rs. 5000/- was shown as bar restaurant sales which too broadly matches with per day bar restaurant turnover indicated in seized day books PC-I(5) & PC-I(6). This figure also does not match with bar restaurant turnover of around Rs. 3900/- indicated in day book PC-I(2) pertaining to the period 8.11.2002 to 17th December, 2002. Thus, the CIT(A) found that there was easonable evidence to indicate that Mr. K.A Paul, Accountant of the assessee was elaborating the position as on the day of search. The affidavit of Shri K A Paul filed by the assessee was, therefore, needed to be considered judiciously for the reason that the Assessing officer did not give any specific opportunity to the assesseethat the statem....
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....l not be much difference." 9.4 According to the CIT(A), it is apparent that the above question was framed after a discussion regarding the period during which suppression in turnover in bar as well as restaurant, was taking place. It was observed that the managing partner had answered about the suppression in liquor turnover and was silent about the restaurant turnover. He, however, did state that the suppression was from Dec 2006 onwards and before that there would not be much difference. This was the only deposition wherein the assessee was questioned about the period during which suppression in turnover, was done. According to the CIT(A), there was no admission /confession on record regarding suppression of turnover during other period i.e. in the current year as well as in earlier years and the above deposition of the managing partner, Shri Paulson P Varkey, though has to be taken cognizance of but its veracity has to be judged with reference to other specific evidences gathered during the course of search itself. In the above deposition, though managing partner denies any suppression of turnover before January 2007, the daily statements seized and marked as PC-1(22), pertai....
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....ee's case. It was observed that the scope of provisions of section 153A was much wider which enable an Assessing Officer to take cognizance of the seized material, conduct further investigations to gather other relevant material and evidences and assessee income of the assessee after taking into account all relevant material. The scope of provisions of sec. 153 A was thus at par with provisions of sec. 143(3). With the evidences gathered during the course of search read with deposition of accountant of assessee Shri K A Paul, and managing partner, Shri Paulson P Varkey, and following the ratio of decision of apex court in the case of H.M. Esufali, H.M. Abdulali( supra), the CIT(A) held that that suppression of turnover in liquor sates as well as restaurant sales can be presumed to be in existence during the whole period relevant to AY 2003-04. The evidences in the form of daily statements PC I(22) established unaccounted turnover to the tune of 37.32 per cent of disclosed liquor sales and there was no specific admission by the assessee for this assessment year that whole of suppressed turnover in liquor constituted undisclosed income. Therefore, it was observed that undisclosed inc....
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....s but a substantial part of such income is spent towards expenses for which no evidence is kept and all such evidences are likely to be destroyed from time to time. Therefore, the CIT(A) held that identification of such unaccounted assets was though relevant but was not an essential ingredient as long as undisclosed income was determined in a judicious, fair and rational manner and is backed by reasonable evidences considered in totality and after taking into account, the normal human behavior of consistency in the intervening period between two specific periods where unaccounted activity is established. 9.8 According to the CIT(A), the deposition of Managing Partner Shri Paulson P Varkey that whole suppression of 20% of the turnover of liquor constituted income also has to be discounted for the reason that this statement was aimed at restricting the undisclosed turnover and income there from only for the period 1.1.2007 to 11.2.2007 which was not accepted by the Department and this statement was made by the assessee with reference to trading activity of liquor which was restricted item and was not available for free trade. According to the CIT(A), this aspect of the issue also ....
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....xpenditure and identification of source of corresponding income was not required under law. According to the CIT(A), seized documents PC-I(8) & PC-I(23) read with PC-I(22) established that the assessee was having undisclosed turnover during the period relevant to assessment year 2003-04 and assessment year 2007-08. According to the CIT(A) what was indicated in the documents is normal way of functioning of the assessee and with normal human behaviour it would be quite judicious and logical to hold that in all probabilities assessee functioned in a similar fashion at least during the whole period relevant to this assessment year. The CIT(A) observed that the ratio laid by Apex Court in the case of CST v. H.M. Esufali. H.M. Abdulali (1973) 90 ITR 271 wherein the Apex Court upheld the estimation of undisclosed turnover for the entire period of one year on thebasis of undisclosed sales detected for the period of 19 days was squarely applicable to the assessee for this assessment year. The CIT(A) observed that it can be reasonably presumed that assessee was having undisclosed turnover during the whole previous relevant to this year. According to the CIT(A), the suppressed turnover of Rs.....
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....g any evidence in assessee's premises. 9.9.2 The CIT(A) observed that the legal as well as logical position is that a liability can be created against the assessee only if positive evidence was found during search that the assessee was running Kwality Restaurant all along from A.Y 2001-02 to 2007-08 and no such evidence was recovered except the documents PC-I(8), PC-I(23) & PC-I(22). According to the CIT(A), the documents relevant to A.Y 2007-08 did not indicate that the restaurant was run by the assessee prior to 1.1.2007 and the documents relevant to A.Y 2003-04 i.e PCI( 22) in fact established that Kwality Restaurant was a separate entity. On perusal of these documents, the CIT(A) found that the nature of these documents were different from the documents PC-I(8) PC-I(23) relevant to A.Y 2007-08 and in PC-I(22),there was a separate sheet with different handwriting of restaurant sales (in contrast to one consolidated sheet in PC-I(8) and PC-I(23) for the AY 2007-08 which duly recorded food sent by Kwality Restaurant to customers in Hill Park Bar Restaurant of the assessee and what exact amount was due from the assessee on account of the same. The CIT(A) observed that for exampl....
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....of the assessee. The assessee not only placed on record affidavit of Mr. Prasi Paul who was running the restaurant during the period from 12.2.1999 to 2.10.2003, but also produced him before Assessing officer during remand proceedings. Mr. Prasi Paul during his deposition before Assessing officer duly confirmed that he was running Kwality Restaurant during above period and that he gave this name to the restaurant which was earlier named as "Adhithi". The CIT(A) found that he also effectively answered most of the question of the Assessing officer with regard to running of the Kwality Restaurant by identifying the names of the employees, jobs assigned to them the nature and turnover of the business etc. 9.9.5 According to the CIT(A), the discrepancies pointed out by the Assessing officer are either of trivial nature or are irrelevant to the basic issue. The claim of the Assessing officer that he was a person of no means does not appear to be correct with the fact on record that he got a consideration of Rs. 33 lakhs in lieu of agricultural land. The fact that he did not pay Income Tax on such income earned or he was engaging himself in employments with meager salary was not of muc....
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.... gross profit rate of 35.5% on suppressed turnover as the gross profit rate declared by assessee in respect of disclosed turnover is 35.5% for this assessment year which appeared to be logical and rational. Considering all relevant factors, the CIT(A) held that gross profit rate of 35.5 % can be reasonably and judiciously applied to the undisclosed turnover from restaurant business of the assessee without disturbing the gross profit rate shown by the assessee with reference to turnover disclosed in the books. 9.9.6 The CIT(A) found that as per seized documents PC-I(22 &PC-I(23), the turnover of Hill Park Bar Restaurant for the period 8.11.02 to 17.12.02 worked out to Rs. 2,39,748/- (excluding turnover of Kwality Restaurant) as against Rs. 1,43,536/- disclosed in regular books of accounts. The suppression in restaurant turnover accordingly worked out to Rs. 96,212/- at 67.03% of the disclosed turnover. For the previous year, the assessee had shown turnover of Rs. 12,81,996/- in Hill Park Restaurant and the suppressed turnover @ 67.03% thereon worked out to Rs. 8,59,322/-. The income thereon worked out to Rs. 8,59,322/-. The income thereon @ 35.5% as applied by the Assessing offic....
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....,84,15,603/- on which GP @ 20% was Rs. 96,83,121/- as against GP of Rs. 65,72,309/- returned by the assessee. The difference in GP at Rs. 31,10,812/- as against addition of Rs. 31,10,812/- as against addition of Rs. 1,78,19,693/- and remaining amounts were cancelled. The CIT(A) deleted the addition of income from Kwality Restaurant for the reason that Kwality Restaurant was another entity. In regard to income from restaurant, the CIT(A) applied the GP @ 32% which was at Rs. 3,30,315/- as against the Gp of Rs. 2,17,360/- declared by the assessee. Hence, the addition was restricted to Rs. 1,12,945/- . MATHA ENTERPRISES ITA No. 304/Coch/2010: Assessee's Appeal: AY 2003-04 ITA No. 271/Coch/2010: Revenue's Appeal: AY 2003-04 12. For the A.Y. 2003-04, liquor sales was at Rs. 1,78,19,693/- and from restaurant was at Rs. 17,56,400/-. Sale of cigarettes was at Rs. 54,785/-. The assessment was completed with total income at Rs. 1,96,89,560/-. The suppression of liquor sales was found at 37.32% of the declared sales. The disclosed sale was at Rs. 4,77,45,227/- and the suppressed sales was at Rs. 1,78,19,693/-. The full amount of suppressed sale was treated as undisclosed income. U....
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....1/-. 13.1 On appeal, the CIT(A) estimated GP at 23% of the suppressed turnover of Rs. 1,43,02,919/- which was fixed at Rs. 32,89,671/- as against the undisclosed sales turnover of Rs. 1,43,02,919/-. The CIT(A) granted relief of Rs. 1,10,13,248/-. Income from Kwality restaurant was not included in the income of the assessee since it was considered as a separate entity. The Hill Park Restaurant turnover was at Rs. 3,87,965/- against the amount of Rs. 15,77,781/-. MATHA ENTERPRISES ITA No. 306/Coch/2010: Assessee's Appeal: AY 2005-06 ITA No. 273/Coch/2010: Revenue's Appeal: AY 2005-06 14. For the A.Y. 2005-06, liquor sales was at Rs. 1,42,24,874/- and restaurant sales was at Rs. 19,09,072/- The assessment was completed with total income at Rs. 1,72,42,820/-. The suppression of liquor sales was found at 32.11% of the disclosed sales. The disclosed sale was at Rs.Rs. 4,43,00,449/- and the suppressed sales was at Rs. 1,42,24,874/-. The full amount of suppressed sales was treated as undisclosed income. Undisclosed restaurant sales was fixed at 517.82% of the disclosed sales and the disclosed sale was at Rs. 13,05,044/-. The total undisclosed sale was at Rs. 67,57,778/- and ....
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....08 16. For the A.Y. 2007-08, liquor sales was at Rs. 80,78,699/- and restaurant sales was at Rs. 22,37,322/-. The assessment was completed with total income at Rs. 1,03,34,021/-. The suppression of liquor sales was found at 26.9% of the disclosed sales. The undisclosed sale was at Rs. 99,93,052/- on disclosed sales of Rs. 3,71,48,893/- as per the day book and the actual total sales at Rs. 4,71,41,945/-. The sales for the whole year was estimated at Rs. 5,3,39,391/-. The assessee reported sale of only Rs. 4,49,6,632/-. Since all the purchases were from Beverages Corporation already entered in the books of accounts the undisclosed sale at Rs. 80,78,699/- was added as income u/s. 153A of the Act. The undisclosed sale was estimated at Rs. 79,19,725/- and considering the average profit at 28.2% the undisclosed profit was estimated at Rs. 22,37,322/-. 16.1 On appeal, after giving notice to the assessee, the CIT(A) proposed enhancement of income by Rs. 5,62,426/-. After rejecting the explanation filed by the assessee, confirmed the enhancement of income from this source to Rs. 86,41,125/- as against Rs. 80,78,699/-. The assessee objected to the enhancement that the renovation expens....
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....Paul and the working partner Shri Paulson P. Varkey, the assessment of undisclosed income may be cancelled. It was submitted that Kwality Restaurant was a separate entity till 31.12.2006. As per the decision of the CIT(A) and the Bench, it was submitted that the income from the Kwality Restaurant may not be included in the assessee's income. The Ld. AR submitted that as per the seized materials and as per the statement u/s. 132(4) by Shri K.A. Paul and the working partner Shri Paulson P. Varkey, there was suppression of sales turnover to the tune of 20% for three months for January, February and March, 2007. The assessee submitted that the suppression of income may be estimated on the basis of suppression detected during the period of search for three months during the year. It was submitted that in the absence of any evidence of suppression regarding the earlier period no estimate may be made on additional income on account of suppression. It was submitted that the decision of the CIT(A) with regard Kwality Restaurant may be upheld. 18.4 The Ld. AR relied on the following judicial pronouncements in support of his case in respect of both the assessees for the relevant assessment....
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....ge of these two years at 517.82% for the AY 2001-02 and worked out the undisclosed sale at Rs. 54,39,595/- and determined profit on it at 23.19% which worked out at Rs. 15,36,685/-. Thereafter, he estimated the net profit on the total turnover as follows: Net profit on liquor sales : Rs. 1,27,78,283/- Net profit on restaurant sales : Rs. 15,36,685/- He estimated the undisclosed sales from M/s. Kwality Restaurant at Rs. 54,39,595/- on the basis of sales recorded in the assessment year 2006-07 and 2007-08 and thereafter, he estimated the profit at 28.25%. on the undisclosed sales of Rs. 54,39,595/-. As seen from the assessment order, there was no seized material found during the course of search for estimating the suppressed liquor sales and restaurant sales and to consider the income from M/s. Kwality Restaurant. The material found during the course of search was not relating to the assessment year 2001-02. The Assessing Officer in this case considered the evidence gathered in the assessment years 2003-04 and 2007-08 so as to estimate the undisclosed income of the assessment year 2001-02. In our opinion, once the assessment is concluded and become final as on the date....
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....st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. There is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made under section 153A. The case of the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the revenue that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment under section 153A. In other words, these two assessments merge into one assessment. The second proviso does ....
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....e search. 19.5 The provision contained in section 132(1) empowers the officer to issue a warrant of search of the premises of a person where anyone or more of conditions mentioned therein is or are satisfied, i.e. (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, assessed as undisclosed income or property. The provision in section 132(1) does not use the word incriminating document: Clauses (a) and (b) of section 132(1) employ the words books of account or other documents: For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 19.6 Having held so, an assessment or reassessment under section 153A arises....
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....s of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results: (a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment under section 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer, (b) In respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search. 19.9 The interpretation is to be made considering the principles of literal interpretation and reading the relevant provisions together. This interpretation does not in any manner give results which can ....
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.... the abated assessment or reassessment can be made. The word 'assess' in section 153A was relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. Sixthly, insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment u/s. 153A merges into one. Only one assessment shall be made separately for each A.Y. on the basis of the findings of the search and any other material existing or brought on record of the Assessing Officer. Seventhly, completed assessments can be interfered with by the Assessing Officer while making the assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 19.9.3 In view of the above, when the original assessment for the AYs 2001-02, 2002-03, 2004-05, 2005-06 and 2006-07 already been completed or time limit to complete the assessment has been lapsed and no incriminating material found dur....
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....ecord, the Assessing Officer was completely justified in adopting those figures for the whole year and for the next year which was based on sound rationale, since from the statement on behalf of the assessee, the suppression was found to be continued. In view of the uncontroverted and admitted statement given on behalf of the assessee u/s. 133A and the documents impounded during the survey, which were also virtually admitted by the assessee, there was no error in the order of the Tribunal in accepting the materials on record in order to arrive at an assessment. However, in the present case, the managing partner, Shri Paulson P. Varkey in his sworn statement recorded on 13/02/2007 answered to Question No. 13 as follows: "Question No: 13:- You have stated in that, now, you are accounting 80% of bar sales and sales in restaurant are also not fully accounted. The daily statement prepared show that the actual receipts and the analysis of sales by applying peg/bottle rate on the stock sold are correct. Please state how the sales for the earlier periods are accounted." "Answer No. 13:- On 2006 December onwards we are not accounted 20% of actual sales. Before that there w....
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....lity Restaurant all along from A.Y 2001-02 to 2007-08. No such evidence was recovered except the documents PC-I(8), PC-I(23) & PC-I(22). The documents relevant to AY 2007-08 do not indicate that the restaurant was run by the assessee prior to 1.1.2007. The documents relevant to AY 2003-04, i.e. PCI( 22) in fact establish that Kwality Restaurant was a separate entity as has been rightly pointed out by the Ld. AR. A perusal of these documents indicate that the nature of these documents were different from the documents PC-I(8), PCI( 23) relevant to A.Y. 2007-08. In PC-I(22), there was a separate sheet with different handwriting of restaurant sales (in contrast to one consolidated sheet in PC-I(8) and PC-I(23) for the AY 2007-08) which duly recorded food sent by Kwality Restaurant to customers in Hill Park Bar Restaurant of the assessee and what exact amount was due from the assessee on account of the same. For example, on 5.12.2002, out of total sales of Rs. 13,814 of Kwality Restaurant, Rs. 4,800 were collected by Hill Park Bar Restaurant on account of food sent by Kwality Restaurant and further Rs. 106.50 was shown as receivable from M/s Matha Enterprises and partners. Had this res....
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....nd was not backed by any evidence and was of relevance in determining income tax liability of Mr. Prasi Paul and bringing to tax such income in his hands particularly when he also answered positively to question No.18 that if there was any Income tax payable with reference business of Kwality Restaurant he will pay the same. With regard to his seeking employment after running Kwality Restaurant, there is no certainty of earning an income from a business venture as calculated by the Assessing officer in a mechanical manner. As far as showing of meager salary is concerned, it appears that the same is kept low in official records to ensure that Income tax liability is not attracted in the hands of persons like Mr. Prasi Paul who otherwise appear to be having substantial agricultural income. Even the documents seized in the hands of the assessee do indicate that extra wages were paid in restaurant business over and above what was recorded in books. With regard to Mr. P.P Mathai in addition to lease agreements and other documents, the assessee had placed on record a copy of Income tax return filed by him for AY 2007-08, wherein Kwality Restaurant was claimed to have been run by him up t....
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....eal of the Revenue is dismissed. MATHA ENTERPRISES ITA No.305, 306 & 307/Coch/2010: Assessee's Appeal : AY 2004-05, 2005-06 & 2006-07 ITA No.272, 273 & 274/Coch/2010: Revenue's Appeal: AY 2004-05, 2005-06 & 2006-07 21. In these assessment years, as discussed in earlier para nos. 19 to 19.9.9 of this order, since there was no seized material found during the course of search and the assessments reached finality, the additions cannot be made. As such we are inclined to delete the additions made by the Assessing Officer and sustained by the CIT(A) for these assessment years. Hence, this ground of appeals of the assessee is allowed and that of the Revenue is dismissed. Thus, the appeals of the assessee are dismissed and the appeals of the Revenue are dismissed. MATHA ENTERPRISES ITA No.304/Coch/2010: Assessee'sAppeal:AY 2003-04 ITA No.271/Coch/2010: Revenue's Appeal: AY 2003-04 21. In this case, the AO estimated the suppressed liquor sales at 37.21% at Rs. 1,78,19,693/-, restaurant sales at 35.5% at Rs. 49,47,607/- and cigarette sales at 10% at Rs. 54,785/-. The Assessing Officer also considered the income of M/s. Kwality Restaurant as the assessee is running th....
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.... assessee is partly allowed and the appeal of the Revenue is dismissed. BEST BAKERY AND ICE CREAM PARLOUR 37. Appeals in ITA Nos.498/Coch/2010 and 499/Coch/ 2010 filed by Revenue and ITA Nos.507 to 513/Coch/2010 filed by the assessee, Best Bakery and Ice Cream Parlour originally came up for hearing before the Tribunal and the Tribunal disposed of these appeals vide its consolidated order dated 31.01.2012, by observing as under:- "4. We have heard the parties, and perused the material on record. Admittedly, no fresh facts or materials, i.e., other than those already considered by the tribunal in the case of Matha Enterprises (supra) has been brought to our notice. The decision by the co-ordinate Bench has a persuasive value, and has to be normally followed, even as in the instant case the facts and circumstances, as well as the materials relied upon are identical. In that case, the tribunal found PC(I) 22, being relied upon by the Revenue, to be a vital piece of evidence, though could be relied upon in the manner done in framing the assessment for A.Y. 2003-04. The observations and findings by the tribunal would be fully applicable and valid for the impugned assessmen....
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....e bench of the Tribunal in M/s. Matha Enterprises, Angamaly v. Commissioner of Income Tax, Ernakulam (ITA No.302/2010 and connected cases) have been sent back to the Tribunal for fresh consideration. The above appeal also deals with the very same subject matter. In such circumstances, the appeal is relegated back to the Tribunal along with I.T.A. No.115/2012 and connected cases, relating to the very same assessee, who is the respondent herein. Hence, the above appeal is also disposed of remanding the matter to the Tribunal and vacating the order of the Tribunal impugned herein." 40. The appeals of the Revenue before the Tribunal in ITA Nos. 498 & 499/Coch/2010 and the appeal of the assessee in ITA No.513/Coch/2010 were wrongly listed for hearing. Though there were no appeals filed by either parties before the High Court and there was no judgment of the High Court for setting aside these appeals to the file of the Tribunal, there is no requirement of adjudication of the issues in ITA Nos.498 & 499/Coch/2010 and 513/Coch/2010 for the assessment years 2001-02, 2002-03 and 2007-08 respectively. 41. The appeals in ITA Nos. 507 to 512/Coch/2010 (5 appeals) were listed for hearing o....
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.... by M/s. Matha Enterprises, M/s. Hotel Royale Park, a bar hotel at Alappuzha, M/s. Hotel Anjali Park, a bar hotel at Kottayam. M/s. P.A. Kuriakose Jewellers at Angamali, Best Bakery and Ice Cream Parlour at Angamali. Apart from the above group of concerns, Sri Paulson P. Varkey had a proprietory crushing unit at Manjapra named Popular Industries. He had also interest in Royal Cartons Pvt. Ltd., Angamali and Swagat Enterprises, Angamali. 45.1 P.A. Kuriakose Group consists of: Shri P.A. Kuriakose, his wife Mary Kuriakose, his sons PaulyKuriakose, his wife Tareena Poly Benny Kuriakose , his wife Sheena Benny JohnyKuriakose, his wife ReenaJohny; and PromyKuriakose Paulson P. Varkey group consists of: Paulson P. Varkey, his Mother KunjammaVarkey, his wifeMeena Paulson K.M.Mathai Group consists of: K.M. Mathai; and His sons Paul Mathew and Joby Mathew 45.2 The firm Best Bakery & Ice Cream Parlourconstituted as per deed dated 01.02.1995 consists of the following partners : Sl. No. Name of Partner Ratio 1. Paulson P. Varkey 35% 2. Jobby Mathew 14% 3. Paul Mathew 14% 4. JohnyKuriakose 15% 5. Benny Kuri....
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....02.2007. In answer to Q. No.2, which sought him to describe his duties to him as Accountant of M/s. Matha Enterprises, Shri K. A. Paul replied as follows: "M/s. Matha Enterprises - Hotel Hill Park is a firm with ten partners consisting of the families (1) Paulson P. Varkey group with 42% share (2) P.A. Kuriakose Group with 30% share (3) K.M. Mathai Group with 28% share. M/s. Matha Enterprises is the parent concern and under this Hotel Hill Park Restaurant section, Crystal bar - bar section and lodging section (no separate name) are functioning. Crystal bar has 4 counters. 3 counters in first floor and one a/c counter in 3rd floor. Restaurant, is functioning in first floor and 3rd floor. The ground floor restaurant, M/s. Kwality Restaurant, is in the name of P.P. Mathai. M/s. Best Bakery in the ground floor is owned by the same 3 groups who owns this Hotel but it is a separate firm. As the accountant of this firm, I receive daily statements from M/s. Best Bakery, M/s. Hill Park Restaurant, one consolidated statement from 3 bar counters in first floor, one statement from a/c. bar & restaurant in 3rd floor. Daily stock is taken at bar counters by the staff. The sales of M/s.K....
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....f the statement given by Shri K. A. Paul. In reply to Question No.4, Sri Paulson replied that he had read the statement and that the facts stated by Sri K. A. Paul are correct. He also stated that usually 80% of the sale value in Bar section were entered in the cash book and the quantity of sales and purchases were correctly entered. The seized document PC-I(22) was also shown to him and vide Question No. 7 he was requested to describe the entries in the pages. Sri Paulson, though, tried to evade a direct and correct response by saying that he did not know what it was and only his Accountant Mr. Paul would know the details, he did not controvert the correctness of the statement of Sri Paul. The above quoted extract of the statement of the accountant, which was read by the Managing Partner before answering the question, however, brings it out clearly that the details contained in these seized documents, contain details of actual sales of the firm. There was thus an implicit admission of the relevant facts in this regard in the answer to Q. No.7 by the Managing Partner. 45.7 PCI (22) is a document seized from the premises of Hotel Hill Park. This contains daily statement of Best B....
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....omparison revealed that the assessee firm had suppressed its sales at 83.86%.As a percentage of declared sales it works out to 517.28% .It was proposed to assess the undisclosed income at Rs. 1295051/- and objection to this proposal was called for. 50. The Ld. AR contended that PC - 1(22), picked up by the search team were erroneous statements and hence were scored off and were discarded. It was not a statement of purchase and sales but was a cash control point summary statement maintained by the earlier. The statements claimed by the Assessing officer as 'daily statements' for the financial year 2002-03 were in fact not so. It seems, this was written by some staff to have good control over cash in hand, i.e., as a cash control statement kept by a cash control point person. It also recorded cash received on various occasions from different counters during day time for control purposes. Cash paid to various counters were also recorded. This was evident from the fact that small figures were added to constitute the total. For example on 8.11.2002 against bar Rs. 34,115/- + Rs. 27,756/- + Rs. 81,883/- + Rs. 6,000/- shown in receipt column and Rs. 6,079/- shown in payment col....
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....ecords found as a result of search under section 132(4A). It provided that the books of account, other documents, money, bullion, jewelry or other valuable articles seized from the possession of the assessee shall be presumed to belong to the person in whose possession or control they are found in the course of search. A similar presumption was also enacted as to the truth of the contents of the books of accounts so found. So also, the signature and every other parts of the books of account may be presumed to be in the hand writing of the person by whom it was purported to have been written. If they are stamped, executed or attested, they shall be presumed to be stamped and executed or attested by the person by whom it purports to have been executed or attested. 50.3 The assessing officer observe that in the case of the assessee firm, the presumption as to the correctness of the daily statements seized as PC-1(22) was not rebutted by way of production of any evidence or material as discussed at Para 5 above. On the contrary, there was overwhelming material and evidence to support the correctness of the daily statements such as: (a) The fact that room rent sales recorded....
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....er framed the assessment of the assessee as discussed below:- Estimation of undisclosed Sales and Consequent Profits in AY 2003-04 50.7 The total sale for the whole year recorded in the books is Rs. 9,53,739/-. The undisclosed sales were found to be at 517.28% of the disclosed sales. When this ratio is applied to the admitted sale of Rs. 9,53,739/- total undisclosed sales and estimated total sales worked out to Rs. 49,33,501/- and Rs. 58,87,240/- respectively. The undisclosed sales of Rs. 49,33,501 would not have obviously been made from the cost of sales debited at Rs. 7,03,304/- to the accounts in respect of disclosed sales of Rs. 9,53,739/-. In its accounts the assessee had disclosed profit margin on sales at 26.25% of the sales. The undisclosed profit thus worked out to Rs. 12,95,044/- on undisclosed sales of Rs. 49,33,501/- Since the indirect expenses were already debited to the accounts, the amount of Rs. 12,95,044/-was added to the returned income as undisclosed profits from restaurant. Salary to Partners : A.Y 2003-04 50.8 At page 4 of the Partnership deed, (a copy of which was filed for the assessment year 2001-02), a clause regarding salary payable to partners....
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....sale was fixed at Rs. 42,47,767/- and the profit margin was fixed at 31.60% on the sales. As a result Rs. 13,46,117/- was added to the returned income. 60.4 For the assessment year 2006-07, undisclosed sale was fixed at Rs. 47,69,934/- and the profit margin adopted was 29.88% of the sales. The undisclosed profit was fixed at Rs. 14,25,256/-. All the estimates of sales were fixed on the basis of AY 2003-04. 61. On appeal, for the assessment year 2001-02, the CIT(A) observed that the addition made by the Assessing Officer on the basis of materials seized for the assessment year 2003-04 is not sustainable. The CIT(A) observed that the GP at 28% on the disclosed sale turnover of Rs. 9,40,564/- was fixed at Rs. 2,63,358/- as against the GP of Rs. 2,18,166/- declared by the assessee and as a result, he sustained only Rs. 45,192/- out of addition of Rs. 9,58,600/- made by the Assessing Officer. For the assessment year 2002-03, the CIT(A) cancelled the addition on the reason that the addition was made on the basis of seized materials for the AY 2003-04. The G.P was fixed at 28% on the disclosed sales turnover of Rs. 9,45,480/-. The GP was fixed at Rs. 2,64,734/- as against the GP dec....
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....pecifically queried by the Bench as to if any specific query in relation to the assessee was made by the Revenue in the statements of Accountant and partner under section 132(4) of the Act being relied upon, and to which she answered in the negative. 62.1 In view of the above it was submitted that it was abundantly clear that the statement u/s.132(4) taken from the accountant Shri K.A.Paul and the Managing Partner of M/s. Matha Enterprises were not supporting any assessments of any undisclosed income in the case of the assessee firm. The seized documents referred to in the assessment order were PC-I(22) relating the AY-2003-04 and PC-I(8) relating to AY-2007-08 which were relating to M/s.Matha Enterprises and not to the assessee firm. 62.2 In view of the above, it was submitted that the seized documents which were mainly referred to the assessment order of the firm were not relating to the assessee firm but relating to M/s. Matha Enterprises. Hence the assessment u/s.153C on the assessee firm was without any support of statement u/s.132(4) for any seized documents. 62.3 It was also submitted that satisfaction was not recorded on the basis of the seized documents to assess ....
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....ection 153C. The jurisdictional High Court of Kerala in the case of CIT (Central Circle) v. Promy Kuriakose in RP No.750 of 2016 in ITA No.296/2013 dated 29th August, 2016, observed that in the absence of search material, proceedings u/s 153C of the Act cannot be initiated by the Assessing Officer. In yet another case, the coordinate bench of the ITAT in the case of Shri Eldhose K.Varghese v. DCIT in ITA No.261 to 267/Coch/2016 dated 04.10.2017, had examined similar issue in the light of the decision of the ITAT Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. v. DCIT [(2012) 137 ITD 287 (SB) (Mum,)] and after considering various case laws, observed that it is quite significant to denote that in respect of completed or non-pending assessment, the Assessing Officer albeit duty bound to assess or reassess the total income, but if there is scope for additions in such assessment, on the basis of income unearthed during the search, he can make the addition. The sum and substance of the ratio laid down in these case laws is that the A.O. cannot make any addition towards completed / unabated assessment in the absence of any seized materials. In this case the fact with r....