TaxTMI 
TaxTMI 
2019 (2) TMI 2108
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....nal date of filing of the appeals, i.e. 21/07/2016. Accordingly, the appeals are considered as filed in time. 3. The first ground raised by the Revenue in all these appeals is with regard to deletion of addition made towards estimation of G.P. 4. The facts of the issue as narrated in ITA No. 326/Coch/2016 for assessment year 2007-08 are that the assessee is a partnership firm constituted on 12/07/2004. Shri Sunny Jacob and Smt. Maggy Sunny and Shri E.M. Joseph were its main partners. Master Jacob Sunny and Kumari Dona Sunny, minor son and minor daughter of Shri Sunny Jacob were admitted to the benefits of the partnership. The return of income for the AY 2007-08 was filed declaring total income of Rs. 31,380/-. A search under section 132 of the IT. Act was conducted at the business premises of the firm on 21/08/2007. On the basis of documents/books of account found and seized and information gathered during the course of search at its business premises on 21/08/2007, a notice u/s. 153A of the Act was issued to the assessee on 27/06/2008. In response to the above notice, the return of income for the assessment year 2007-08 was filed on 02.07.2009 declaring a loss of Rs. 26,62,920/-....
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..... manager of Kottarakkara show room could not give any explanation for the above under recording of sales while giving his statement on 21/08/2007 during the course of the search (Q.No. 4). 4.3 During the course of search at the premises of M/s. Sunny Jacob 916 show room, Pazhavangadi, Trivandrum, statements were recorded from its employees. A gist of their statements is given as below: a) "Shri Joshi Abraham, Cashier in his statement recorded on 21.08.2007 during the course of search at your premises have stated that you are issuing sales bill only for a part of sales and that the balance sales are effected in 'estimate slips'. He has also stated that while purchasing old gold ornaments, you are not issuing any purchase bills. He has further stated that when any customer selects an item for purchase the salesman gets estimate slip printed by the computer operator Shri Pintu Jacob. Shri Joshi Abraham is collecting cash as per the 'estimate slip' and handing over the ornaments to the customer. Shri Mathew Eapen, Floor Supervisor of your shop in his statement recorded on 21.08.2007, during the course of search, has stated that you are not issuing sales bills for al....
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.... debited: a) As per the cash book of the Kollam shop, an amount of Rs. 49,00,000/- was credited in the accounts on 06/07/2007 as amount received from the Kottayam shop. But on verifying the cash book of Kottayam shop, the amount withdrawn and debited was Rs. 49,000/- only. The assessee had explained that it was only a clerical mistake. b) Similarly an amount of Rs. 10,000,000/- was credited in the cash book of the Kollam shop as cash received from the Kottayam shop on 02/08/2007. But there is no such withdrawal debited in the cash book of Kottayam shop on that day. c) During the course of search at the business premises of the Kollam Branch, there was a shortage of cash of Rs. 23,359/-. Shri Sony Joy, the manager of the shop was not able to given any explanation for the cash shortage. d) Similarly, there was a credit of Rs. 10,00,000/- in the cash book of the Kottarakkara shop as amount received from the Kottayam shop on 02/08/2007. But there is no corresponding withdrawal from Kottayam shop on the above date. 4.7 The assessee could not offer any satisfactory explanation for the discrepancies. But during the course of hearing at the time of first assessment, the assessee p....
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....on 'estimate' on 16/08/2007 is in the possession of the Department. Assuming that there were only 31 estimate sales on that day, the accounting of the sale is only 6/37 i.e. 16.22%. More than 83% of the volume of business is unaccounted. 4.9.1 It was also found that while purchasing old gold ornaments, they were getting a margin of nearly 16% and while selling new gold ornaments also they are getting a margin of 15%. Considering the above instances of suppression of sales, the Assessing Officer concluded that the assessee was accounting only 30% of the real turn over in the books of accounts. 4.9.2 The Assessing Officer proposed to alter the profit from business vide letter dated 26/11/2009. In reply, the assessee explained that they were issuing sale bills for all sales and that estimate slips were issued only in cases where the customer did not make the final selection and where there was possibility of exchange or return subsequently. It was explained that estimate slips were entered in the sale bills on subsequent dates. The assessee wanted opportunity to cross examine the persons which was granted. On cross-examination and reexamination, the AO found that the stateme....
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.... the 5 business concerns also revealed that the assessee was making sales on estimate slips. Considering the above facts, it was concluded that the assessee was accounting only 30% of the sales in its accounts. In view of the above, the AO rejected the objections raised by the assessee against estimating the turnover by grossing up the admitted turnover which was found to be only 30% of actual turnover. 4.9.3 According to the AO, in the original assessment, the profit was adopted at 22% of the turnover fixed by above estimation. It was noticed that the assesses themselves were showing different gross profits ranging from 10% to 40% in their different shops at Kottayam, Kollam, Kottarakkara and Trivandrum during the past few years. It was noticed that M/s. Josco Jewellers, Kottayam and Josco Fashion Jewellers, Kottayam had declared gross profit of 25% for the AY 2005-06. M/s. Trichur Fashion Jewellers had declared gross profit ranging from 19% to 30% during 2005-06, 2006-07. Considering the average profit declared by the assessees themselves and taking into account the request of the assessee, the gross profit of the business was computed at 22% of the turnover in the original asse....
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....ars. It was submitted that the Commercial Taxes Department had also detected the suppression of sales during an inspection of 5 business concerns of the group which showed that the assessee was making sales on estimate slips instead of sale bills. While remitting the issue back to the AO, the Tribunal in its Order No. 690 to 696/Coch/2010 and 23 to 43/Coch/2011 had observed that the CIT(A) in his first appellate order was not justified in deleting the addition for AY 2006-07 to 2007-08 on the ground that there was no material evidence for these years. The Ld. DR submitted that the following case laws relied on by the assessee are not applicable to the facts of the assessee's case: a) K. Moidu alias Kunhiappa vs. ACIT (256 ITR (AT) 76 (ITAT, Cochin) b) Samrat Beer Bar vs. ACIT (76 ITD 19) (ITAT, Pune) c) Dr. RML Mehrotra vs. ACIT (68 ITD 288) (ITAT, All.) d) Anjenaya Brick Works vs. ACTT (74 TTJ Bangalore 921) e) Poornima Beri vs. DCIT (264 ITR AT 54) (Amritsar) f) CIT vs. Gupta Abushan Pvt. Ltd. (312 ITR 166) (Del) g) CIT vs. Padamchand Ramgopal (76 ITR 719) (SC) h) CIT vs. Ghodavath Pan Masala P. Ltd. (250 ITR 570) (Mum) 6.1 It was submitted that in the above ....
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.... do not use or resort to unfair means or III degree methods in recording oath statements and therefore whatever is confessed and admitted before them during the course of search operations or during the course of any proceedings before them then we think such statements, admissions and confessions are binding and cannot be retracted, unless and until we repeat unless and until it is proved by legally acceptable evidence such admission or a statement was involuntary or tendered under coercion or duress. No such circumstances existed or proved to have existed. In saying so we are supported by the observation of their Lordship of the Supreme Court in the case of Surjit Singh Chabra vs. Union of India (1997) 1 SCC 108. iii) Carpenters Classics (Exim) P. Ltd. vs. DOT (108 ITD 142) (ITAT, Bang.) iv) CIT vs. Durga Prasad More (82 ITR 540) (SC) v) V. Kunhambu & Sons vs. CIT (219 ITR 235) (Ker.) vi) Ravindra D. Trivedi vs. CIT 215 CTR 313 (Raj.) For retraction to be valid, threat or coercion has to be proved. 6.5 The next argument raised by the Revenue in these appeals is that the CIT(A) overlooked the findings of the AO that the income generated from the unaccounted sales was inve....
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....le purchasing old gold ornaments, they were getting a profit margin of 16% and while selling new gold ornaments, they were getting a profit margin of 15%, but the conclusion drawn by the Assessing Officer on this issue was applicable only for the assessment year 2008-09 and not for the relevant assessment years and therefore, no evidence was available to show that there was suppression of turnover. Regarding the purchase of immovable properties by Shri Sunny Jacob and Smt. Maggy Sunny, it was submitted that there is absolutely no evidence brought on record to substantiate the allegation that not a single incidence of purchase of immovable property or payment of unaccounted money and co-relation with the assessee-firm was indicated for the relevant assessment years. As far as the judgment of the Jurisdictional High Court in the case of CIT vs. Hotel Meriya (332 ITR 537) is concerned, it was submitted that there was clear admission by the Managing partner and the person in-charge of accounts that only 80% of the sales turnover was recorded in the books of accounts and in all that cases, estimate was made for earlier years, therefore, the reliance placed by the Assessing Officer on th....
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....ners of the assessee-firm and the assessee had followed uniform system of suppression of sales 8.1 We have carefully gone through the assessment orders wherein the Assessing Officer has recorded the reasons for assessment of income of the assessee as given in above paras. The books of accounts maintained by the assessee are not reliable. It is also admitted that for the assessment year 2008-09, the assessee came in appeal before this Tribunal in ITA No. 371/Coch/2016 and vide order dated 10/10/2018 confirmed the order of the Assessing Officer by observing as follows: "7. We have heard the rival submissions and perused the record. There was a search in the business premises of the firm on 20/08/2007. During the course of search, it was found that the assessee was maintaining its accounts in computerized form. The CPUs used for the purpose at Kottayam and Kottarakkara were seized during the course of search. From the Pazhavangadi, Trivandrum shop one pen drive was seized on the point that it was containing data relating to the accounts. The data thus stored in electronic devices have been obtained It was observed that the data in computers at Kollam, Kottarakkara and Trivandrum we....
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....are likely to be issued in such cases. But, the estimate slips handed over to the sales man for preparation of final bill, which according to the assessee, is written manually, is the final estimate slip where the purchases of the customer is recorded. If there is no likelihood of return or exchange of the ornaments immediately, a customer is issued a sale bill. He is not given estimate slip. But in case there is a possibility of exchange or return immediately instead of sale bill, the estimate slip with the seal of "cash received" is handed over to the customer with the jewellery. All the estimate slips other than those which are handed over to the customers are destroyed/thrown into the waste basket. Hence, a customer can have an estimate slip with him only if that purchase is one where the immediate exchange or return is expected. Though the assessee is printing estimate slips in the computer, the assessee is not saving the data in the computer. Also, the estimate slips other than those handed over to the customers are destroyed. Hence, it is evident that the assessee is particular that the data regarding estimate slips are not known to anyone else i.e., the accounts are not tra....
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....ed to by the AO is between 07.05.2007 to 11.05.2007. He has observed that it is very anomalous and gives more credence to the view that sale bill generated in the computer are made up for accounting purposes only and they do not reflect the actual sales. In Para 13(a), (b) and (c) some other discrepancies pointed-out for the Kollam shop, Kottayam shop and Kottarakkara Shop. Based on these discrepancies the AO has finally rejected the books of accounts invoking provisions of sec. 145(3) r.w.s. 144. 6. As regards assessee's ground relating to the invocation of sec. 144 r.w.s. 145(3) is concerned I do not agree with the appellant because the AO has first pointed-out various discrepancies and anomalies in the books of accounts maintained by the appellant and then only invoked provisions of sec. 145(3) r.w.s. 144. The appellant has submitted that the provisions of sec. 145(3) are not fully complied with, because no opportunity of being heard was allowed to the appellant before invoking these provisions. The appellant in submitting this Objection has not carefully gone through the Section, because as per second proviso to sec. 144(1) there is no necessity to give such opportunity i....
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....al available with the Department to show that there was suppression of income for those years and, therefore, there could not have been any additions. But for the year under consideration a pattern of suppression has emerged though restricted to only a small period, but it proves that there was suppression for this period and once there was suppression for a period of the year the estimate is possible for whole of the year as pronounced by various judicial forums. Hence for the assessment year 2008-09 I do not have any hesitation in holding that the appellant has concealed income to the tune of Rs. 47,34,209/- as per working given in the order for assessment year 2008-09. I therefore sustain the same. 7.3. In the revised assessment order, the Assessing Officer held as under: "The order giving effect to the order u/s. 263 of the I.T. Act by the Commissioner of Income-tax (Central), Kochi was passed on 20.03.2013 by making an addition of Rs. 26,80,305/- by recomputing the value of closing stock. The closing stock originally adopted was Rs. 1,21,83,206/-. Applying the ratio of the decision of the Hon'ble Supreme Court in the case of A.L.A. Firm, vs. CIT (189 ITR 285), the mark....
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....e practice from the very beginning. So, it was just and appropriate to presume that there was uniform concealment of income in all the assessment years during the block period. Hence the assessee was liable to be assessed during the block period at a uniform rate." In view of the above judgments of the Jurisdictional High Court, we are inclined to dismiss this ground of the assessee. The appeal of the assessee is dismissed." 8.2 Thus, it means that the seized material related to the assessment year 2008-09. The Assessing Officer made the assessments for the assessment year 2005-06 to 2007-08 on the basis of the assessment of income for the assessment year 2008-09. There was a clear finding of the Assessing Officer that the assessee firm had practiced suppression of sales for all the assessment years uniformly. When it was a clear case of suppression which was found during the course of search and seizure operations, it is to be reasonably presumed that for the previous assessment years i.e., 2005-06, 2006-07 and 2007-08, the assessee had done suppression of sales. The discrepancies found during the search on 21/08/2007 were brought to the notice of Mr. Sunny Jacob who in reply t....
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....tion, it was not possible for the officer to find out precisely the turnover suppressed and he could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him was not arbitrary and had a reasonable nexus with the facts discovered, it could not be questioned. It was wrong to hold that the officer must have material before him to prove the exact turnover suppressed. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's. The High Court cannot substitute the best judgment for that of the assessing authority." 8.4 Therefore, in our considered view, in this kind of assessment, which ....