P K SASIDARA SARMA, Kottayam V. DCIT, Kottayam

CO 17/COCH/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7589 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 26-07-2011
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: R BALAKRISHNA PAI
• Keywords: Search and seizure; Principle of natural justice; Revised return
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 242-246/COCH/2011 ASSESSMENT YEARS : 2003-04 TO 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTTAYAM. VS. SRI SASIDHARA SARMA, PAREMADOM, KUDAMALOOR P.O., KOTTAYAM. [PAN: AJDPP1100E] (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) C.O. NOS. 17-21/COCH/2011 (ARSG. OUT OF I.T.A. NOS. 242-246/COCH/2011) ASSESSMENT YEARS : 2003-04 TO 2007-08 SRI SASIDHARA SARMA, PAREMADOM, KUDAMALOOR P.O., KOTTAYAM. [PAN: AJDPP1100E] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTTAYAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) I.T.A. NO. 247/COCH/2011 ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTTAYAM. VS. SRI RATHEESH SARMA, PAREMADOM, KUDAMALOOR P.O., KOTTAYAM. [PAN: AXOPS 9304E] (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) C.O. NO. 22/COCH/2011 (ARSG. OUT OF I.T.A. 247/COCH/2011) ASSESSMENT YEARS : 2003-04 TO 2007-08 SRI RATHEESH SARMA, PAREMADOM, KUDAMALOOR P.O., KOTTAYAM. [PAN: AXOPS 9304E] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTTAYAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 2 REVENUE BY SMT. A.S. BINDHU, SR. DR ASSESSEE BY SHRI R. BALAKRISHNA PAI, CA DATE OF HEARING 23/07/2012 DATE OF PRONOUNCEMENT 07/09/2012 O R D E R PER BENCH: THE APPEALS FILED BY THE DEPARTMENT IN THE CA SE OF SRI SASIDHARA SARMA AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY LD CIT(A)-I, TRIVANDRUM AND THEY RELATE TO THE A SSESSMENT YEARS 2003-04 TO 2007- 08. THE APPEAL FILED BY THE DEPARTMENT IN THE CASE OF SRI RATHEESH SARMA AND THE CROSS OBJECTION FILED BY THAT ASSESSEE ARE ALSO DIR ECTED AGAINST THE ORDER PASSED BY LD CIT(A)-1, TRIVANDRUM AND THEY RELATE TO THE ASSESSM ENT YEAR 2006-07. SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATU RE AND ALSO BASED ON IDENTICAL SET OF FACTS, THESE APPEALS WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS COMMON ORDER. 2. WE SHALL FIRST TAKE UP THE APPEALS FILED IN THE CASE OF SRI SASIDHARA SARMA. IN THE APPEALS FILED BY THE REVENUE, FOLLOWING ISSUES ARE URGED IN ALL THE YEARS. (A) WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING THE INCOME OF FAMILY MEMBERS, WHICH WERE CLUBBED WITH THE ASSESSEE. (B) WHETHER THE LD CIT(A) IS JUSTIFIED IN ENHANCIN G THE ESTIMATE OF ALLOWABLE EXPENSES FROM 5% OF PROFESSIONAL RECEIPTS TO 50%. (C) WHETHER THE LD CIT(A) IN REJECTING THE WORKI NGS OF NET ACCRETION OF ASSETS COMPUTED BY THE AO. 3. IN THE CROSS OBJECTION, THE ASSESSEE IS ASSA ILING THE DECISION OF LD CIT(A) IN PARTIALLY SUSTAINING THE DISALLOWANCE OF EXPENSES. ON OTHER ISSUES, THE ASSESSEE IS SUPPORTING THE ORDERS OF LD CIT(A). I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 3 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS AN EMPLOYEE OF TRAVANCORE DEVASWOM BOARD AND WORKING AS TANTRI. HE IS ALSO AN ASTROLOGER AND DERIVES INCOME FROM ASTROLOGY RELATED WORKS LIKE GA NITHAM (JATHAKAM) PRASNNAM, JYOTHISHAM, ASTROLOGY, NAVARATNA SASTRAM, VETTILA S ASTRAM, PERFORMING OF REMEDIAL AND PREVENTIVE POOJAS AND HOMAMS. ACCORDING TO THE ASSE SSEE, HIS WIFE SMT LEELAMONI SARMA AND HIS SONS SHRI RATHEESH SARMA AND SRI RAKE SH SARMA ARE ASSISTING HIM IN THE PERFORMANCE OF VARIOUS POOJAS/HOMAMS AND THEY ARE A LSO GETTING FEES/RECEIPTS SEPARATELY FROM THE CLIENTS. THE DEPARTMENT CARRIE D OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEE ON 18-09-2006. IT IS STATED THAT THE ASSESSEE AND ALL THE THREE FAMILY MEMBERS WERE FILING RETURN OF INCOME P RIOR TO THE DATE OF SEARCH ALSO. 5. IN THE SWORN STATEMENT TAKEN FROM THE ASSESS EE U/S 132(4) OF THE ACT, HE STATED THAT HIS FAMILY MEMBERS DID NOT HAVE INCOME AND THA T THE RETURNS OF INCOME IN THEIR NAMES WERE FILED TO EXPLAIN THE SOURCES OF THE ASSE TS PURCHASED IN THEIR NAMES. HE FURTHER STATED THAT THE FIXED DEPOSITS MADE IN THE NAME OF HIS WIFE AND MOTHER IN LAW WERE MADE FROM HIS INCOME. 6. AFTER THE SEARCH OPERATIONS, THE FAMILY MEMB ERS FILED THEIR RESPECTIVE INCOME BY DECLARING ADDITIONAL INCOME ON THE PLEA THAT THE WI FE AND SONS OF THE ASSESSEE ARE ASSISTING HIM IN VARIOUS POOJAS/HOMAMS CONDUCTED BY HIM AND THEY ARE GETTING SEPARATE FEE FROM THE CLIENTS. SINCE THE ADDITIONA L INCOME OFFERED BY THE FAMILY MEMBERS ARE IN CONTRADICTION TO WHAT WAS STATED BY THE ASSESSEE IN THE SWORN STATEMENT TAKEN U/S 132(4) OF THE ACT, THE AO ENQUI RED ABOUT THE WORK PERFORMED BY EACH OF THE FAMILY MEMBERS. THE AO HAS NARRATED A BOUT THE REPLIES GIVEN BY THEM AS UNDER IN THE ASSESSMENT ORDER RELATING TO THE ASSES SMENT YEAR 2003-04:- 4.3 THE REPLIES GIVEN BY SMT. LEELAMONI SARMA IS AS UNDER I WISH TO STATE THAT I HAVE NOT CHANGED BY STAND. I WISH TO EXPLAIN MY ROLE IN THE PROCESS OF HIS JOB. FOR INSTANCE, WHILE PERFORMING POOJAS OR HUMANS, I HAVE TO SIT FOR HOURS NEAR HOMAGNI. BEING A LADY IT REQUIRES SOME PREPARATIO N. MY PERSONAL SERVICES ARE HONOURED BY CLIENTS AND THEREBY I RECEIVE FEES DIR ECTLY FROM THEM. MAIN WORK IS I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 4 PERFORMED BY HUSBAND, MY SERVICES ARE AUXILIARY TO HIM SHE GOES ON TO ADD ALONG WITH MY SON, I STARTED INTERACTING WITH CLIE NTS WHILE HUSBAND WAS IN TEMPLE. THOUGH THEIR REQUIREMENTS WERE BEING PERF ORMED AND DONE BY HUSBAND, IN MAJORITY OF CASES SON AND MYSELF COLLECTED THE FEES DIRECTLY. IT BECAME FEES FOR OUR PROFESSIONAL SERVICES. 4.4 THE REPLIES OF RATHEESH SARMA WAS AS UNDER M Y PERSONAL SERVICES INCLUDE ACQUIRING REQUISITE POOJA ITEMS, PREPARING PRASADAM , MAKING AVAILABLE MATERIALS AS AND WHEN DEMANDED BY FATHER WHILE PERFORMING POO JAS ETC. SINCE FATHER IS BUSY WITH HIS DUTY AT TEMPLE, MOTHER AND MYSELF REN DERED AUXILIARY PERSONAL SERVICES WITHOUT WASTING HIS TIME. IN THIS PROCESS WE DIRECTLY INTERACTED WITH CLIENTS AND GOT FEES OR OUR SERVICES WHICH CONSTITU TE MY PROFESSIONAL RECEIPTS. (IN SUBSEQUENT YEARS, IT IS STATED THAT SHRI RATHEE SH SHARMA IS ALSO MANAGING THE ASTROLOGICAL WORKS DONE BY HIS FATHER THROUGH T HE INTERNET). 4.5 RAKESH SARMA REPLIES AFTER SCHOOLING I STARTE D ASSISTING FATHER IN HIS PROFESSIONAL JOB. SUCH JOBS ARE ASSOCIATED WITH H IS MAIN JOB WHICH INCLUDES CLEANING, MAKING GARLANDS, DRAWING KOLAMS, SETTING UP OF MANDAPS. I PERFORMED THESE JOBS FOR WHICH I RECEIVED FEES DIRECTLY FROM CLIENTS. I ALSO STUDIED SPECIAL POOJAS UNDER GUIDANCE OF FATHER AND PRACTICED WITH HIM. 4.6 SHRI SASIDHARA SARMA EXPLAINED IN HIS REPLY T HAT EACH OF THE FAMILY MEMBERS HAVE CONTROL OVER THE MONEY THEY DERIVE AND THEY U TILIZE THEIR FUNDS TO MAKE THEIR OWN INVESTMENTS. IN THIS WAY THEIR SOURCE O F INCOME IS LINKED TO HIS MAIN FUNCTION. 7. THE AO, HOWEVER, DID NOT ACCEPT THE SAID CON TENTIONS FOR THE DETAILED REASONS STATED IN THE ASSESSMENT ORDER AND ACCORDINGLY PROC EEDED TO ASSESS THE INCOME OF THE FAMILY MEMBERS IN THE HANDS OF THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION. THE LD CIT(A), HOWEVER, DELETED THE SAID ADDITIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORD. THE AO HAS DISBELIEVED THE SUBMISSIONS MADE BY THE ASSE SSEE MAINLY ON THE FOLLOWING GROUNDS:- (A) THE FAMILY MEMBERS ARE DOING ONLY SUPPORTING ACTIVITIES ONLY. (B) THE CLIENTS COME ONLY FOR THE SERVICES OF THE ASSESSEE. HENCE THE PRESENCE OF WIFE BEING PART OF POOJA OR SONS HELPING IN THE CONDUCT OF POOJAS IS IMMATERIAL. THE PRESENCE OF WOMAN IS REQUIRED ONL Y FOR SPECIFIC POOJAS AND NOT FOR ALL POOJAS. I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 5 (C) THE PAYMENT IS MADE BY THE CLIENTS TOWARDS PO OJA TO THE ASSESSEE ONLY. (D) EVEN IF SOME DAKSHINA IS PAID TO THE FAMILY MEMBERS, THEY MAY NOT BE TO THE EXTENT CLAIMED BY THE FAMILY MEMBERS IN THEIR RESPECTIVE RETURNS OF INCOME. (E) EACH OF THE FAMILY MEMBERS AGREES THAT THEY DE RIVE RECEIPTS ONLY ON ACCOUNT OF MAIN ACTIVITY OF THE ASSESSEE. (F) THE BANK ACCOUNTS OF FAMILY MEMBERS SHOW ONLY CASH DEPOSITS; WHERE AS THE ASSESSEE RECEIVES CHEQUES/DEMAND DRAF TS/ACCOUNT TRANSFERS FOR CONDUCTING POOJAS. SOME TIMES THE CLIENTS ARE NOT PRESENT FOR THE POOJAS. THE PRASADAMS ARE SENT TO THEM BY POST. (G) THOUGH THE FAMILY MEMBERS HAVE FILED THEIR RES PECTIVE RETURNS OF INCOME FOR EARLIER YEARS, THEY HAVE NOT BEEN SCRUTINIZED BY TH E DEPARTMENT. WHEN THERE WAS AN ENQUIRY U/S 133(6) OF THE ACT, THE RETURNS O F INCOME OF THE FAMILY MEMBERS WERE REVISED TO EXPLAIN THE ACCRETION OF AS SETS IN THEIR NAMES. SUBSEQUENT TO SEARCH OPERATIONS, THEIR RETURNS OF I NCOME HAVE AGAIN BEEN REVISED. HENCE THE ASSESSEE IS JUST SPLITTING HIS INCOME IN ORDER TO CREATE SEPARATE SOURCES IN THE HANDS OF THE FAMILY MEMBERS . THE ASSESSEE COULD NOT BRING ON RECORD ANY EVIDENCE TO SUBSTANTIATE THE RE CEIPTS IN THE HANDS OF FAMILY MEMBERS. 9. BEFORE THE LD CIT(A), THE ASSESSEE CONTESTED THAT THE DEPARTMENT DID NOT UNEARTH ANY INCRIMINATING MATERIAL IN SUPPORT OF THE CONCLU SIONS REACHED BY THE AO. IT WAS FURTHER SUBMITTED THAT EACH OF THE FAMILY MEMBERS A RE RENDERING SPECIFIC SERVICES AND FURTHER EACH OF THEM ARE REGULARLY ASSESSED TO INCO ME TAX. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED THE RETURNS OF I NCOME FILED BY THE FAMILY MEMBERS SHOWING ADDITIONAL INCOME AND HENCE THE ASSESSMENT OF THE VERY SAME INCOME AGAIN IN THE HANDS OF THE ASSESSEE LEADS TO DOUBLE TAXATION. THE ASSESSEE FURTHER SUBMITTED THAT HE HAS OFFERED THE ENTIRE INCOME AS FOUND IN T HE SEIZED RECORDS AND HENCE THERE IS NO BASIS FOR PRESUMING THAT THE ASSESSEE WAS SPLITT ING HIS OWN INCOME BETWEEN THE FAMILY MEMBERS. THE LD CIT(A) WAS CONVINCED WITH TH E CONTENTIONS MADE AND ACCORDINGLY DIRECTED THE AO TO DELETE THE ADDITION OF INCOME/RECEIPTS RELATING TO THE FAMILY MEMBERS. I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 6 10. THE DETAILS OF INCOME PERTAINING TO THE FAM ILY MEMBERS WHICH WAS CLUBBED IN THE HANDS OF THE ASSESSEE AND THE DETAILS OF INCOME ASS ESSED IN THE HANDS OF THE FAMILY MEMBERS ARE TABULATED BELOW:- ASST. YEAR : 2003-04 2004-05 2005-06 2 006-07 2007-08 (A) FAMILY MEMBERS RECEIPTS INCLUDED THE HANDS OF ASSESSEE 2,16,303 12,00,664 13,09, 366 47,68,860 44,66,057 ====== ====== ====== ====== ======= (B) ASSESSED IN THE HANDS OF FAMILY MEMBERS (***): (A) WIFE 1,00,418 10,06,050 7, 38,347 13,90,487 20,34,441 (B) RATHEESH 79,885 1,32,141 2,7 1,019 29,98,373 19,37,292 (C) RAKESH 36,000 62,473 3 ,00,000 3,80,000 4,94,324 ------------- ------------- ----------- - ------------ -------------- 2,16,303 12,00,664 13,09,366 47,68 ,860 44,66,057 ======= ====== ====== ====== ===== == (C) PROFESSIONAL RECEIPTS SHOWN BY THE ASSESSEE 12,63,370 27,19,971 69,89,6 82 64,72,615 70,45,769 ======= ====== ====== ======= ===== = (***) COMPILED FROM THE INFORMATION AVAILABLE FROM THE ORDERS OF LD. CIT(A). ACCORDING TO THE ASSESSING OFFICER, EACH OF THE FAM ILY MEMBERS HAS CLAIMED EXPENSES AGAINST THEIR FEE RECEIPTS AND HENCE IT IS NOT CLEA R WHETHER THE INCOME SHOWN IN ITEM (B) IS ONLY NET INCOME OR GROSS INCOME. 11. WE NOTICE THAT THE LD CIT(A) WAS MAINLY GUI DED BY THE FACT THAT THE FAMILY MEMBERS ARE REGULARLY ASSESSED TO INCOME TAX PRIOR TO SEARCH AND HENCE THE ASSESSMENT OF THE SAME INCOME IN THE HANDS OF THE A SSESSEE RESULTS IN DOUBLE TAXATION. BESIDES THE ABOVE, THE LD CIT(A) WAS CONVINCED THAT THE SUPPORTING ACTIVITIES PERFORMED BY EACH OF THE FAMILY MEMBERS JUSTIFIES R ECEIPT OF SEPARATE FEES TO THE EXTENT SHOWN BY THEM. I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 7 12. HOWEVER, THE QUESTION THAT ARISES FOR CONSI DERATION IS WHETHER THE QUANTUM OF INCOME/FEE RECEIPTS DECLARED BY THE FAMILY MEMBERS IS COMMENSURATE WITH THE SUPPORTING WORKS PERFORMED BY EACH OF THE FAMILY ME MBERS. TO PUT IT IN OTHER WAY, WHETHER THE SUPPORTING SERVICES PERFORMED BY THE FA MILY MEMBERS WOULD FETCH THE INCOME/RECEIPTS AS DECLARED BY THEM IN THEIR RESPEC TIVE RETURNS OF INCOME. 13. IN THE PRECEDING PARAGRAPHS, THE TYPE OF WO RK PERFORMED BY EACH OF THE MEMBER OF THE FAMILY WAS DESCRIBED. ACCORDING TO THE SAID REPLIES, THE WIFE OF THE ASSESSEE SMT. LEELAMONI SARMA HAS TO SIT FOR HOURS NEAR HOMA GNI AND SHE ALSO INTERACTS WITH THE CLIENTS. THE AO HAS OBSERVED THAT SHE HAS TO SIT N EAR HOMAGNI ONLY FOR CERTAIN SPECIFIC POOJAS ONLY. THE FIRST SON SHRI RATHEESH SARMA PUR CHASES REQUISITE POOJA ITEMS, PREPARES PRASADAM. BESIDES, HE ALSO MANAGES THE AS TROLOGY SERVICES OFFERED BY HIS FATHER THROUGH INTERNET. THE SECOND SON SHRI RAKES H SARMAS JOB INCLUDES CLEANING, MAKING GARLANDS, DRAWING KOLAMS, SETTING UP OF MAND APS, WHICH ARE BASIS WORKS. BESIDES SHRI RAKESH SHARMA CLAIMS THAT HE HAS LEARN T ABOUT SPECIAL POOJAS FROM HIS FATHER AND ASSISTS HIM. THUS IT IS SEEN THAT THE N ATURE OF SERVICES CLAIMED TO HAVE BEEN DONE BY THE FAMILY MEMBERS ARE ONLY SUPPORTIVE AND GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY LEARNED OR VEDIC SKILLS OR PROFESSIONAL EXPERTISE. THERE CANNOT BE ANY DISPUTE THAT THE PROFESSIONAL EXPERTISE AND EXPERIE NCE ONLY FETCHES MORE REVENUE IN ANY KIND OF PROFESSION. 14. THE AO HAS NOTICED THAT THE FAMILY MEMBERS HAVE DECLARED LOWER INCOME IN THE ORIGINAL RETURN OF INCOME FILED BY THEM. WHEN THEY RECEIVED NOTICES U/S 133(6) OF THE ACT, THEY FILED REVISED RETURNS OF INCOME COMMENSUR ATE WITH THE ADDITIONAL UNDISCLOSED INVESTMENTS NOTICED IN THEIR NAMES AT THAT POINT OF TIME. SUBSEQUENT TO THE SEARCH OPERATIONS, THEY HAVE AGAIN REVISED THE RETURNS OF INCOME, AGAIN WITH THE OBJECTIVE OF MATCHING THEIR RESPECTIVE INCOME WITH THE INVESTMEN TS MADE IN THEIR NAMES. THUS, IT IS SEEN THAT THE OBJECTIVE OF DECLARING ADDITIONAL INC OME BY THE FAMILY MEMBERS IN THE I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 8 REVISED RETURNS IS ONLY TO SHOW SOURCES FOR THE INV ESTMENTS MADE IN THEIR RESPECTIVE NAMES. 15. THE QUESTION THAT ARISES FOR CONSIDERATION AT THIS STAGE IS WHETHER THE FAMILY MEMBERS HAVE REALLY EARNED REVENUE ON THEIR OWN OR THE ASSESSEE HEREIN HAS PROVIDED FUNDS TO THEM TO ENABLE THEM TO MAKE INVESTMENTS? WE HAVE ALREADY NOTICED THAT THE TYPE OF SUPPORTING SERVICES RENDERED BY EACH OF THE FAMILY MEMBERS DO NOT REQUIRE PROFESSIONAL EXPERTISE. SUCH SERVICES ARE MAINLY L ABOUR ORIENTED AND IN OUR VIEW, THEY WOULD NOT FETCH REVENUE AS DECLARED BY THEM IN THEI R RESPECTIVE RETURN OF INCOME. HENCE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE ONLY INFERENCE THAT COULD BE DRAWN IS THAT THE ASSESSEE HEREIN AS PROVIDED FUNDS TO SOME EXTENT TO THE FAMILY MEMBERS IN ORDER TO ENABLE THEM TO MAKE INVESTMENTS . 16. THE NEXT QUESTION THAT ARISES FOR CONSIDERATI ON IS WHETHER THE FACT THAT THE INCOME HAS BEEN DECLARED BY THE FAMILY MEMBERS IN T HEIR RESPECTIVE RETURN OF INCOME WOULD PRECLUDE THE TAXABILITY OF INCOME IN RIGHT HA NDS? IT IS A WELL SETTLED PROPOSITION OF LAW THAT THE ASSESSING OFFICER CAN AND HE MUST T AX THE RIGHT PERSON AND THE RIGHT PERSON ALONE. REFERENCE MAY BE MADE IN THIS REGARD TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ITO VS. CH. ATCHAIAH ( 218 ITR 239 (SC)). THEN NEXT QUESTION THAT ARISES IS WHETHER THE ITO CAN DISREGA RD THE RETURNS OF INCOME FILED BY THE FAMILY MEMBERS OF THE ASSESSEE. WE HAVE ALREADY NO TICED THAT THE RETURNS OF INCOME WERE FILED BY THE FAMILY MEMBERS INITIALLY AND THEY WERE REVISED TWICE, I.E., ON RECEIPT OF NOTICES U/S 133(6) AND ALSO AFTER THE SEARCH PRO CEEDINGS. HENCE, WE ARE OF THE VIEW THAT IT WOULD BE JUSTIFIABLE TO EXCLUDE THE INCOME THAT WAS DECLARED IN THE ORIGINAL RETURN OF INCOME FILED BY THE FAMILY MEMBERS AND AS SESS ONLY THE ADDITIONAL INCOME THAT WAS OFFERED IN THE REVISED RETURNS OF INCOME I N THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO RESTRICT THE ADDIT ION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF ADDITIONAL INCOME OFFERED IN BOTH THE REV ISED RETURNS FILED BY THE FAMILY MEMBERS. I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 9 17. A QUESTION MAY ARISE ABOUT THE FATE OF TAX ALREADY PAID IN THE HANDS OF THE FAMILY MEMBERS OF THE ASSESSEE. THE ASSESSEE MAY APPROACH THE TAX AUTHORITIES IN THIS REGARD AND IN THE INTEREST OF NATURAL JUSTICE, THE TAX AUT HORITIES MAY CONSIDER THE PLEA OF THE ASSESSEE TAKING A LENIENT VIEW OF THE MATTER. 18. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSEE HAD CLAIMED HUGE EXPENSES RELATING TO ADVERTISEMENT AND ALSO ON PURCHASE OF MATERIALS REQUIRED FOR PERFORMING POOJA S/HOMAMS. THE ASSESSEE ADMITTED THAT HE DID NOT MAINTAIN PROPER ACCOUNTS FOR THE EX PENSES. HE ALSO ADMITTED THAT HE WOULD MEET EXPENSES FROM THE PROFESSIONAL FEE RECEI VED BY WAY OF CASH AND THE REMAINING AMOUNT WOULD ONLY BE DEPOSITED INTO THE B ANK ACCOUNT. IT APPEARS THAT THE ASSESSEE HAS COLLATED THE GROSS AMOUNT OF PROFESSIO NAL RECEIPTS FROM THE BANK DEPOSITS AND HENCE, THE AO HAS OPINED THAT, IN SOME CASES TH ERE IS NO NECESSITY OF ALLOWING EXPENSES AGAIN, SINCE SOME OF THE EXPENDITURE ARE M ET AT THE TIME OF RECEIVING THE PROFESSIONAL RECEIPTS ITSELF. THE AO ALSO NOTICED THAT THE BILLS PRODUCED IN SUPPORT OF PURCHASE OF GOLD PLATES/SILVER PLATES FOR MAKING YA NTRAM, NAVARATNA RINGS ETC. CONTAINED BILLS FOR PURCHASE OF PERSONAL ITEMS LIKE FANCY CHA INS, BANGLES, ANKLETS. IN VIEW OF THE ABOVE, THE AO TOOK THE VIEW THAT ONLY 5% OF THE GRO SS RECEIPTS CAN BE CONSIDERED AS REASONABLE EXPENDITURE. ACCORDINGLY HE REJECTED TH E CLAIM OF EXPENDITURE OVER AND ABOVE 5% OF THE GROSS RECEIPTS (PERSONAL + FAMILY M EMBERS). 19. BEFORE LD CIT(A), IT WAS SUBMITTED THAT THE BILLS FOR PURCHASE OF PERSONAL ITEMS LIKE FANCY CHAINS, BANGLES, ANKLETS ETC., THOUGH FO UND IN THE VOUCHERS, HAVE NOT ACTUALLY BEEN CLAIMED AS EXPENDITURE. IT WAS FURTHER SUBMIT TED THAT THE ASSESSEE HAS PREPARED THE BOOKS OF ACCOUNTS SUBSEQUENT TO THE DATE OF SEA RCH AND ALSO PRODUCED THE CASH VOUCHERS. IT WAS FURTHER SUBMITTED THAT THE POOJA MATERIALS ARE PURCHASED MOSTLY FROM SMALL SHOPS AND HENCE PRINTED BILLS COULD NOT BE OB TAINED FROM THEM. THE LD CIT(A), ACCORDINGLY, DIRECTED THE AO TO ALLOW EXPENSES TO T HE EXTENT OF 50% OF THE PROFESSIONAL I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 10 RECEIPTS BELONGING TO THE ASSESSEE. (IT MAY BE NOTE D THAT THE LD CIT(A) HAD DIRECTED THE AO TO EXCLUDE THE PROFESSIONAL RECEIPTS BELONGI NG TO THE FAMILY MEMBERS). 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE RECORD. ADMITTEDLY, THE BOOKS OF ACCOUNTS HAVE BEEN PREPARED SUBSEQUENT TO THE SEARCH OPERATIONS. ACCORDING TO THE AO, EVEN THE CASH VOUCHERS, WHICH ARE SELF M ADE, HAVE ALSO BEEN FOUND PREPARED SUBSEQUENT TO THE DATE OF SEARCH. HENCE, THEY ARE NOT SUSCEPTIBLE FOR CROSS VERIFICATION. IT IS WELL SETTLED PROPOSITION OF LA W THAT THE RESPONSIBILITY TO PROVE THE EXPENSES CLAIMED ALWAYS RESTS UPON THE ASSESSEE. M AJOR PART OF EXPENSES APPEARS TO HAVE BEEN INCURRED ON PURCHASE OF GOLD/SILVER ITEMS . HOWEVER, IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE WAS ABLE TO LINK SUCH PURCHASE S WITH THE CLIENTS ON WHOSE BEHALF THE POOJAS/HOMAMS WERE CONDUCTED. THE ASSESSEE HAS ALSO NOT FURNISHED ANY DETAILS TO ASCERTAIN THE QUANTUM OF EXPENSES THAT WOULD BE INCURRED NORMALLY IN RESPECT OF POOJAS/HOMAMS. UNDER THESE CIRCUMSTANCES, WE ARE O F THE VIEW THAT THE TAX AUTHORITIES HAVE NO OTHER OPTION, BUT TO ESTIMATE T HE EXPENSES. AS NOTICED EARLIER, THE AO HAS ESTIMATED THE EXPENSES AT 5% OF THE GROSS RE CEIPTS AND THE LD CIT(A) HAS ENHANCED IT TO 50%. ACCORDINGLY, TO PUT AN END TO THIS DISPUTE, WE DIRECT THE AO TO ESTIMATE THE EXPENSES AT 40% OF THE GROSS RECEIPTS DETERMINED BY US IN THE EARLIER PARAGRAPHS. IN OUR VIEW, IT WOULD MEET THE ENDS OF JUSTICE. 21. THE LAST ISSUE RELATES TO THE COMPUTATION O F INCOME UNDER NET ACCRETION METHOD. THE AO DETERMINED THE TOTAL INCOME OF TH E ASSESSEE ON THE BASIS OF RECEIPTS AND EXPENSES. THE AO HAS ALSO COMPUTED THE INCOME UNDER NET ACCRETION TO ASSETS METHOD, APPARENTLY TO CORROBORATE THE TOTAL INCOME DETERMINED BY HIM ON THE BASIS OF RECEIPTS AND EXPENSES. BEFORE LD CIT(A), THE ASSES SEE POINTED OUT MANY DEFICIENCIES IN THE COMPUTATIONS MADE BY THE AO UNDER NET ACCRETIO N METHOD AND ALSO FURNISHED THE COPIES OF CASH FLOW STATEMENTS PREPARED BY THE ASSE SSEE AND HIS FAMILY MEMBERS. THE LD CIT(A), ACCORDINGLY, TOOK THE VIEW THAT ALL THE ASSETS AND INVESTMENTS MADE BY THE ASSESSEE AND FAMILY MEMBERS STAND EXPLAINED. ACCOR DINGLY, THE LD CIT(A) HELD THAT I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 11 THE INCOME DETERMINED UNDER NET ACCRETION METHOD NEED NOT BE CONSIDERED FOR ASSESSMENT PURPOSE. 22. WE HAVE ALREADY NOTICED THAT THE AO DID NOT ACT UPON THE INCOME DETERMINED UNDER NET ACCRETION METHOD, WHICH FACT HAS ALSO B EEN ACCEPTED BY THE ASSESSEE IN HIS CROSS OBJECTIONS. OBVIOUSLY, THE PURPOSE OF ARRIVI NG INCOME UNDER NET ACCRETION METHOD IS ONLY TO SUBSTANTIATE THE QUANTUM OF INCO ME THAT WAS DETERMINED BY THE AO ON THE BASIS OF RECEIPTS AND EXPENSES. SINCE THE I NCOME COMPUTED ON THE BASIS OF RECEIPTS AND EXPENSES EXCEEDED THE INCOME DETERMINE D UNDER NET ACCRETION METHOD, THERE WAS NO NECESSITY/OCCASION FOR THE AO TO ACT U PON IT. THERE SHOULD NOT BE ANY DISPUTE THAT AN ADDITION IS WARRANTED IF THERE IS S HORTFALL IN THE SOURCES FOR INVESTMENTS MADE BY AN ASSESSEE. HENCE, WE DO NOT FIND ANY INF IRMITY IN THE ACTION OF THE AO IN WORKING OUT THE INCOME UNDER NET ACCRETION METHOD . 23. FROM THE PERUSAL OF ORDERS OF LD CIT(A), WE F IND THAT THERE IS A LOT OF DIFFERENCE/VARIATION IN THE AND ALSO IN THE COMPONE NTS FORMING PART OF NET ASSET ADOPTED BY THE ASSESSEE AND THE AO. HENCE, UNLESS SUCH DIFFERENCES ARE RECONCILED AND SET RIGHT, NO ONE WOULD BE IN A POSITION TO EXA MINE THE CORRECTNESS OF THE COMPUTATION. THE LD CIT(A) AS WELL AS THE TRIBUNAL HAS MODIFIED THE QUANTUM OF INCOME/EXPENSES AND CONSEQUENTLY, THE INCOME COMPUT ED ON THE BASIS OF RECEIPTS AND EXPENSES WOULD ALSO UNDERGO A CHANGE. THE COMPUTAT IONS MADE BY THE AO ON NET ACCRETION ALSO NEED TO BE CORRECTED, SINCE THE ASS ESSEE HAS POINTED OUT MANY DEFICIENCIES IN THEM. THUS, THE COMPUTATION OF IN COME UNDER BOTH THE METHODS, I.E., ON THE BASIS OF RECEIPTS AND EXPENSES AND ALSO ON T HE BASIS OF NET ACCRETION METHOD WOULD REQUIRE RE-COMPUTATION. ACCORDINGLY WE SET A SIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WI TH THE DIRECTION TO RE-COMPUTE THE INCOME UNDER BOTH THE METHODS IN ACCORDANCE WITH TH E ORDERS OF THIS TRIBUNAL. WHILE COMPUTING THE INCOME UNDER NET ACCRETION METHOD, THE AO SHOULD DULY CONSIDER AND ADDRESS THE VIEWS OF THE ASSESSEE. I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 12 24. WE SHALL NOW TAKE UP THE APPEAL FILED IN THE CASE OF SHRI RATHEESH SARMA. WE NOTICE THAT THE ASSESSMENT HAS BEEN MADE U/S. 153C OF THE ACT IN THE HANDS OF THE ASSESSEE IN ORDER TO PROTECT THE INTERESTS OF THE R EVENUE. IN THE HANDS OF SHRI SASIDHARA SARMA, WE HAVE DECIDED VARIOUS ISSUES AND THE SAID DECISION WILL HAVE CONSEQUENTIAL EFFECT IN THE HANDS OF SHRI RATHEESH SARMA ALSO. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSMENT IS REQUIRED TO BE DONE AFRESH IN THE HANDS OF THIS ASSESSEE CONSEQUENT TO THE ORDER PASSED BY THE TRIB UNAL IN THE HANDS OF HIS FATHER, SHRI SASIDHARA SARMA. ACCORDINGLY, WE SET ASIDE THE ORD ER OF THE LD. CIT(A) AND RESTORE ALL THE MATTERS TO THE FILE OF THE ASSESSING OFFICER FO R CARRYING OUT THE ASSESSMENT DE NOVA. 25. IN THE RESULT, THE APPEALS OF THE REVENUE I N THE CASE OF SASIDHARA SARMA ARE TREATED AS PARTLY ALLOWED AND THE CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE DISMISSED. THE APPEAL OF THE REVENUE IN THE CASE OF SHRI RATHE ESH SARMA AND CROSS OBJECTION IN THAT CASE ARE TREATED AS ALLOWED. PRONOUNCED ACCORDINGLY O N 07-09-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 7TH SEPTEMBER, 2012 GJ COPY TO: 1.SRI SASIDHARA SARMA, PAREMADOM, KUDAMALOOR P.O.,K OTTAYAM. 2 SRI RATHEESH SARMA, PAREMADOM, KUDAMALOOR P.O., K OTTAYM. 3.THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE, KOTTAYAM. 4.THE COMMISSIONER OF INCOME-TAX(APPEALS)-I,TRIVAND RUM. 5.THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. I.T.A. NOS. 242-246/COCH/2011& C.O. NOS.17-21/COCH/2011& I.T.A. NO. 247/COCH/2011 & C.O. NO.22/COCH/2011 13 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN