TaxTMI 
TaxTMI 
2026 (9) TMI 985
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....submitted that this appeal has been filed with a delay of 612 days. In support of the petition for condonation of delay, the assessee has filed a notarized affidavit dated 14.07.2025 explaining the reasons which prevented him from filing the appeal within the prescribed period. It was stated that the assessee is about 77 years of age and is residing in a village. Being not well versed with taxation matters, he was dependent upon his tax consultant for pursuing the appellate proceedings. It is further submitted that the consultant's office is situated about 70 kilometers away from the assessee's residence and travelling to his (consultant) office takes considerable time owing to poor road conditions. The assessee has also explained that he has been suffering from various age-related ailments including high blood pressure and leg pain and had undergone implantation of a permanent pacemaker in the year 2019. According to the assessee, after the outbreak of the Covid-19 pandemic, he substantially restricted his movement and managed his affairs from home. 2.1 The assessee has further stated that upon receipt of the order of the Ld. CIT(A), he inadvertently failed to hand over....
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.... of the Ld. CIT(A) to his consultant in time. Subsequently, when the omission came to light, the order was downloaded from the ITBA portal, and the present appeal came to be filed. Considering the facts of the case and the explanation offered by the assessee, we are of the view that the delay in filing the appeal was due to reasons beyond the control of the assessee. While considering a similar issue, the Hon'ble Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji reported in 167 ITR 471 (SC) laid down the following principles: (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When....
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.... an appeal before the Ld. CIT(A). 10. Before the Ld. CIT(A), the assessee submitted that the AO erred in initiating and completing the assessment proceedings u/s 153C of the Act instead of under section 153A of the Act. The Ld. CIT(A), however, rejected this ground of appeal of the assessee by observing that the assessee did not provide a proper explanation towards this ground. 11. Aggrieved by the order of the Ld. CIT(A), the assessee filed an appeal before us. 12. The Ld. AR submitted that the assessment framed u/s 153C of the Act is without jurisdiction. It was contended that the residential premises of the assessee were admittedly covered during the search conducted u/s 132 of the Act and, therefore, the assessee assumed the character of a searched person. Consequently, if any assessment was required to be framed, the same could only have been initiated u/s 153A of the Act and not u/s 153C, which applies only to a person other than the searched person. It was further submitted that the assumption of jurisdiction u/s 153C is contrary to the scheme of the Act and, therefore, the impugned assessment deserves to be quashed. 13. On the other hand, the Ld. DR before us fi....
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....ization. It cannot be determined merely with reference to the ownership or occupation of the premises where the warrant was executed. 14.3 The provision of section 132 of the Act itself makes a clear distinction between the person and the place of search. The satisfaction contemplated under clauses (a) to (c) of section 132(1) is with reference to a person, whereas the authorization to search for a building, place or premises is based on the satisfaction contemplated under clauses (i) to (v) of section 132(1) of the Act. Therefore, the person against whom the search is authorized and the premises where the search is actually carried out are two distinct concepts. The identity of the person searched is to be determined with reference to the person against whom satisfaction is recorded, and not with reference to the ownership of the premises searched. 14.4 The distinction is important for the application of sections 153A and 153C of the Act. Section 153A applies where a search is initiated u/s 132 of the Act in the case of a person. Thus, the person contemplated by section 153A is the person against whom the search authorization has been issued. On the other hand, section 153C ....
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....that may be undertaken pursuant to such authorization, including the place or premises where the search is to be carried out and the consequential steps that may follow. 7.4 Thus, while the "reason to believe" is person-centric, the execution of the authorization extends to the premises where the competent authority has reason to suspect that the specified materials are kept. 7.5 When satisfaction is recorded for the issuance of a warrant of authorization for search, the competent authority is required to specify the details of the building, place, vessel, vehicle, or aircraft in respect of which it has reason to suspect that books of account, documents, money, bullion, jewellery, or other valuable articles or things are kept. 7.6 A close reading of clauses (a) to (c) and clauses (i) to (v) of Section 132(1) indicates that the satisfaction contemplated under clauses (a) to (c) is in relation to a person, whereas the authorization under clauses (i) to (v) pertains to the premises or locations where the search is to be carried out. The provision does not mandate that the premises to be searched must necessarily belong to the person referred to in clauses (a....
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....n the person searched and the other person whose material may be found during the search. In CIT v. Calcutta Knitwears, reported in [2014] 43 taxmann.com 446 (SC), the Hon'ble Supreme Court emphasised that the machinery provisions relating to search assessments must be applied in accordance with the statutory scheme and the conditions prescribed therein. The relevant observation of the Hon'ble Supreme Court reads as under: 37. It is the duty of the court while interpreting the machinery provisions of a taxing statute to give effect to its manifest purpose. Wherever the intention to impose liability is clear, the Courts ought not be hesitant in espousing a commonsense interpretation to the machinery provisions so that the charge does not fail. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT v. Mahaliram Ramjidas [1940] 8 ITR 442 (PC), Indian United Mills Ltd. v. CIT [1955] 27 ITR 20(SC), and Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC); CWT v. Sharvan Kumar Swarup & Sons [1994] 6 SCC 623; CIT v. National Taj Traders [1980....
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....d from the search authorization, and the satisfaction recorded u/s 132 of the Act. 14.10 Therefore, in the facts of the present case, the mere fact that the residential premises of the assessee were subjected to search cannot lead to the conclusion that the assessee was a "searched person". The relevant test is not where the search was conducted, but in whose case the search was initiated and in whose name the warrant of authorisation was issued. Since the warrant in the present case was issued against a third party, namely M/s Ramakrishna Credit Co-Operative Society Limited, the assessee was an "other person" for the purposes of section 153C of the Act. Consequently, we hold that the proceedings initiated against the assessee u/s 153C of the Act cannot be held to be without jurisdiction in the given facts and circumstances, as the assessee was not the searched person. In view of the above discussion, we reject the assessee's contention that the assessment ought to have been framed u/s 153A of the Act. Accordingly, Ground Nos. 2, 3 and 4 raised by the assessee challenging the assumption of jurisdiction u/s 153C of the Act are hereby dismissed. 15. Coming to the issue rais....
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....of the Act, and the assessee confirmed the correctness of the accountant's statement and explanation. The assessee also agreed to declare additional income of Rs. 2,38,23,240/- for the year under consideration. However, in the return of income filed subsequent to search and survey, the assessee did not declare the additional income. 17.5 During the assessment, the AO also noted that the assessee has maintained books of account for only 1 liquor outlet out of 7, meaning thereby no books of account were maintained for 6 liquor outlets. 17.6 The AO, after examination of all the impounded materials in relation to the assessee's liquor business, prepared a statement of computation of sales, cost of goods sold, gross profit, revenue expenses and net profit, GP ratio and NP ratio for each outlet. The working statement is available at pages 26 and 27 of the assessment order. As per the AO's working, the combined GP Ratio of the assessee's liquor business stands at 21.98%, and the NP ratio stands at 15.15%. Accordingly, the AO, applying the NP ratio of 15.15% on the total turnover of Rs. 22,75,69,739/-, arrived at net profit of Rs. 3,44,76,479/-. As the assessee had al....
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....0 Salary 53,63,500 Packing Materials Expense 2,52,411 Printing & Stationary Expense 78,550 Damage & Breakage (6 Months) 92,775 Advertisement Expense 3,09,500 Repaires & Maintenance Charge 1,41,050 Transportation 23,61,746 Other Administrative expenses 6,00,000 Car fuel and repair charges 1,50,000 Incentive of the Staff 18,42,500 Depreciation 10,08,071 Interest 2,60,603 Total 2,34,53,777 19.3 Accordingly, the learned CIT(A) worked out the assessee's net profit from liquor business at Rs. 1,60,28,959/- (GP Rs. 3,94,82,736 - Exp Rs. 2,34,53,777). Accordingly, the learned CIT(A) directed the AO to make an addition based on the net profit of Rs. 1,60,28,959/- only. 20. However, the AO, in order giving effect, made an addition of Rs. 70,39,659/-. As such, the AO added the difference between the net profit calculated by the learned CIT(A) and the NP declared by the assessee, which is of Rs. 35,04,574/- and further made an addition of Rs. 35,35,085/- being the sum of indirect expenses not allowed by the learned CIT(A) in the computation of net profit. 21. Being aggrieved by the order of the learned CIT(A....
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....arious decisions of different Benches of the Tribunal wherein NP rates ranging from 3% to 5% in liquor business have been accepted. It was also submitted that similar relief was granted by the learned CIT(A) in the subsequent A.Y. 2017-18 and the Revenue accepted the same without filing any appeal. Accordingly, it was prayed that the profit declared by the assessee be accepted and the entire addition be deleted. 23. The learned DR, on the other hand, strongly supported the order of the AO to the extent challenged by the assessee. He submitted that the assessee had not maintained proper books of account for six out of seven liquor outlets and the materials found during the search and survey indicated higher profitability from the liquor business. 23.1 The learned DR further submitted that the learned CIT(A) had already granted substantial relief after considering the assessee's submissions and supporting documents. The expenses which were supported by evidence were allowed, whereas only those expenses aggregating to Rs. 35,53,085/- for which proper supporting evidence was not furnished were rejected. Therefore, according to the learned DR, no further relief was called for and ....
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....e liquor business at such a high rate. This assumes further importance because even in his original statement the accountant had clearly acknowledged that indirect expenses of approximately 8% to 9% of turnover had not been considered in the working. 24.5 We also find merit in the assessee's contention regarding the gross profit computation. Before the learned CIT(A), the assessee demonstrated that its purchases were from the Government agency and, on the basis of the Government record in Form 27D, worked out the GP rate at 17.35%. The learned CIT(A), after examining the material, accepted the gross profit of Rs. 3,94,82,276/-, being approximately 17.35% of the turnover. Thus, the GP rate of 21.98% adopted by the AO did not survive after the learned CIT(A) 's examination. 24.6 The next and more important issue concerns indirect expenses. The assessee had explained before the learned CIT(A) that the indirect expenses were approximately 11% to 12% of turnover, whereas the AO had effectively allowed expenses only to the extent of approximately 7%. The assessee furnished an income statement along with supporting materials and claimed that the actual NP worked out to appro....
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....Though the principle of res judicata does not strictly apply to income-tax proceedings, consistency assumes importance where the nature of business and material facts remain substantially the same. The Revenue cannot ordinarily accept a particular factual approach in one assessment year and take a materially different position in another year without demonstrating any distinguishing feature. In view of the above, we are of the opinion that the revenue's appeal in the given facts deserves to be dismissed. 24.11 Moving ahead with respect to the assessee's appeal regarding the allowances of the indirect expenses not accepted by the learned CIT(A), or to say allowances of profit declared by the assessee. 24.12 Having regard to the peculiar nature of the assessee's business, we are of the view that outright rejection of these expenses is not justified. The assessee was admittedly operating seven liquor bars and wine outlets at different locations. In a business of this nature, expenditure on staff batta, minor repairs and maintenance, consumable items, and expenses relating to managers and sales, including discounts, is normal and commercially plausible. The absence of com....
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....onsideration of the facts on record, we find that the assessee has requested to estimate his income at 1 or 2% of his turnover, while AO has estimated the income at 24% of the cost of goods sold. The assessee had raised an objection before the CIT (A) stating that the AO has erred in resorting to estimation of sales at 124% of the value of stock put to sale during the year and making the addition of Rs. 31,33,969 on the basis of such estimated sales and in estimating the value of sales. During the course of the hearing of the appeal, assessee submitted that the AO's estimation of sales at 124% of the cost of goods is on the higher side and is not practical. It was further submitted that, as held by the Hon'ble High Court of Andhra Pradesh in the case of CIT vs. Mekala Bal Reddy in ITTA No.28 & 29 of 2013, dated 30.07.2013, the reasonable profit rate to be adopted is 5% of the goods put to sale. The CIT (A) has considered this submission of the assessee to hold that the income of the assessee is to be estimated at 5% of Rs. 4,75,90,534 i.e. the sale reported by the assessee. We find that the AO has estimated the sales to be at 124% of the cost of goods sold and therefore, has ar....
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....lation made by the AO was itself not true and rightly not accepted by the learned CIT(A). Further, the disputed indirect expenses are broadly consistent with the nature and scale of the business, and their complete disallowance would result in an unrealistic estimation of profit. 24.18 Considering the totality of the facts and circumstances, we are of the considered opinion that the net profit of approximately 5.5% declared by the assessee represents a fair and reasonable profit from the liquor business. Accordingly, we hereby direct the AO to accept the same. Consequently, the addition sustained on account of indirect expenses not accepted by the learned CIT(A) are directed to be deleted. Hence, the ground of appeal of the assessee is hereby allowed, whereas the grounds of appeal raised by the Revenue are dismissed. 25. The next issue raised by the assessee through Ground No. 5 of the appeal is that the learned CIT(A) erred in confirming the addition of Rs. 4,60,808/- by treating the same as non-agricultural income. 25.1 At the outset, we find that the learned CIT(A) dismissed this ground by recording that the issue was not pressed before him. Even before us, the learned ....
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....peals by the revenue. Accordingly, in the interest of substantial justice, we condone the delay and admit the Revenue's appeals for adjudication on merits. 29. At the outset, we note that the identical and common facts are involved in the captioned revenue appeals for A.Y. 2012-13 to 2015-16. Hence, for the sake of brevity, we have consolidated these 4 appeals and set out a common finding here underneath. 29.1 The common issue raised by the Revenue across the captioned assessment years is that the learned CIT(A) erred in deleting the additions made by holding no incriminating material found. 30. The relevant facts are that on 1st February 2017, a search proceeding under section 132 of the Act was carried out on M/S Ramkrishna Credit Cooperative Society, in which the respondent assessee was trustee. In connection with the impugned search proceeding, the residential premises of the assessee were also searched. Further, on the same day, i.e. 1st February 2017, survey proceedings u/s 133A of the Act were carried out at the business premises of the partnership i.e. M/s Rai Associates, in which the respondent assessee was a partner. In consequence of the search & survey proc....
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....ng suppressed income across A.Ys. 2011-12 to 2017-18. Accordingly, the learned DR contended that the learned CIT(A) erred in deleting the addition and quashing the entire assessment for A.Y. 2012-13 to 2015-16 by holding the same was an unabated assessment and in the absence of incriminating materials. 35. On the other hand, the Ld. AR before us reiterated that A.Ys. 2012-13 to 2015-16 were unabated assessment years on the date of search. No incriminating material pertaining to these years was found during the search. In fact, the Revenue itself has admitted in the Grounds of Appeal that the materials found during the search pertained to A.Y. 2016-17 only. Therefore, such materials cannot be extrapolated to the earlier assessment years merely on assumptions. The Ld. AR further submitted that the statement recorded during the search, without any corroborating incriminating material, cannot form the sole basis for making additions in completed assessments. Accordingly, relying upon the judgment of the Hon'ble Supreme Court in Abhisar Buildwell (P.) Ltd., the Ld. AR submitted that the order of the learned CIT(A) deserves to be upheld. 36. We have heard the rival contentions ....
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....iminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 36.3 In the present case, there is an important factual aspect which, in our considered view, goes to the root of the Revenue's appe....
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....4-15 or 2015-16 was found during the course of search. On the contrary, the Revenue's own case is that the seized material pertains to A.Y. 2016-17. 36.6 The next contention of the Revenue is that during the course of search the assessee and his accountant, in their sworn statements, admitted suppression of income for A.Ys. 2011-12 to 2017-18. In our considered view, this contention also does not improve the case of the Revenue in the absence of any corroborating incriminating material pertaining to the assessment years under consideration. A statement recorded during the course of search is undoubtedly an important piece of evidence and cannot be simply ignored. However, a statement or admission, standing alone, cannot serve as a substitute for incriminating material when the law requires the existence of such material to disturb an unabated assessment. An admission must be appreciated in light of the surrounding facts and supporting evidence. The Revenue must demonstrate some material nexus between the admission and the undisclosed income sought to be assessed for each particular year. 36.7 The instructions issued by the CBDT in its letter F. No. 286/2/2003-IT(Inv.II) d....
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....ings of the learned CIT(A). Thus, the grounds of appeal raised by the Revenue for all these assessment years being A.Y. 2012-13 to 2015-16 are hereby dismissed. 37. In the result, all the appeals filed by the Revenue for A.Ys. 2012-13 to 2015-16 are hereby dismissed. Coming to the Revenue appeal in ITA No. 2551/Bang/2025 for the A.Y. 2016-17. 38. At the outset, we note that the grounds of appeal raised by the revenue in the appeal filed for A.Y. 2016-17 have been adjudicated along with the assessee's grounds of appeal in ITA No. 820/Bang/2025 for the A.Y. 2016-17. The assessee's grounds of appeal for the A.Y. 2016-17 have been adjudicated by us vide paragraph No. 24 of this order, wherein we have decided the issue in favour of the assessee and against the revenue. Hence, the grounds of appeal raised by the Revenue are hereby dismissed. 39. In the result, the appeal of the revenue is hereby dismissed. Coming to ITA No. 821/Bang/2025, an appeal filed by the assessee for the AY 2017-18. 40. At the outset, we note that the assessee has filed the present appeal with a delay. Since the facts, explanation offered by the assessee and the reasons for the delay are iden....