Classy the Antique Designed Furniture, Kottakkal V. DCIT, Calicut

ITA 125/COCH/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52260 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2011
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: ANIL D NAIR ADV
• Keywords: Retraction; Documents seized
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.A. NO. 125 & 126/COCH/2011 ASSESSMENT YEARS: 2007-08 & 2008-09 CLASSY THE ANTIQUE DESIGNED FURNITURE, WOOD COMPLEX TOWER, NEAR AYURVEDA COLLEGE, CHANKUVETTY, KOTTAKKAL. [PAN: AAFFC 2235C] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2. KOZHIKODE. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI ANIL D.NAIR, ADV.-AR REVENUE BY SHRI S.R.SENAPATI, SR. DR DATE OF HEARING 08/08/2011 DATE OF PRONOUNCEMENT 21/10/2011 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE ASSESSEE, I. E., FOR TWO CONSECUTIVE ASSESSMENT YEARS, BEING A.Y. 2007-08 AND 2008-09, A RISING OUT OF THE ORDERS OF EVEN DATED (12.11.2010) BY THE COMMISSIONER OF INCOME-TA X (APPEALS)-I, KOCHI (CIT(A) FOR SHORT), PARTLY ALLOWING THE ASSESSEES APPEALS AGAI NST THE ASSESSMENT ORDERS PASSED U/S. 153A OF THE INCOME TAX ACT, 1961 (THE 'ACT' HEREINA FTER), AGAIN, OF EVEN DATE, I.E., 24.12.2009. AS THE APPEALS RAISE COMMON ISSUES, THE Y WERE HEARD TOGETHER, AND ARE, ACCORDINGLY, BEING DISPOSED OF VIDE A COMMON, CONSO LIDATED ORDER. 2. BEFORE DWELLING ON THE INDIVIDUAL ISSUES INVOLVE D, IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND FACTS OF THE CASE LEADING TO THE IMP UGNED ASSESSMENT/S. THE ASSESSEE, A PARTNERSHIP FIRM OF THREE PERSONS, I.E., SHRI ADATT IL MOHAMMED, SHRI ADATTIL MUJEEB AND SHRI ADATTIL JABIR, IS A DEALER IN FURNITURE OF ALL KINDS. IT ORIGINALLY RETURNED A LOSS FOR BOTH I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 2 THE YEARS UNDER REFERENCE. A SEARCH ACTION U/S. 13 2 OF THE ACT WAS CARRIED OUT AT ITS BUSINESS PREMISES AS WELL AS AT THE RESIDENTIAL PRE MISES OF THE PARTNERS, AND BOOKS OF ACCOUNTS AND OTHER DOCUMENTS SEIZED. NOTICES U/S. 153A WERE ISSUED ON 29.10.2008 AND SERVICED ON 3.11.2008, IN RESPONSE TO WHICH THE ASS ESSEE FILED THE RETURNS ON 20.1.2009, DECLARING A LOSS OF ` 16,75,385/- FOR BOTH THE YEARS. THE ASSESSMENT PRO CEEDINGS WERE TAKEN UP BY THE ISSUE OF NOTICE U/S. 143(2), SERVED ON 4.5.2009, AND THE ASSESSMENTS FRAMED ON THE BASIS OF THE STATEMENT OF SH. A. JABI R, PARTNER, U/S. 132(4) OF THE ACT ON 12.9.2007(PB PGS. 21 TO 44 ). VIDE THE SAID STATEMENT, SHRI A.JABIR EXPLAINED THE MODUS OPERANDI IN RESPECT OF ITS SALES BEING FOLLOWED BY THE FIRM . EXPLAINING A TAG, WHICH IS ATTACHED TO EACH ITEM OF THE FURNITURE, HE SPECIFIE D W.R.T. ONE SUCH READING AS UNDER (IN ANSWER TO Q. NO. 10 OF HIS STATEMENT): 139G GRAND CHAIR MAHOGANY D/D 3375 THAT IT WOULD BE BILLED FOR ` 3375/-, I.E., THE D/D CODE IS THE BILLING RATE. THE ACTUAL SALE RATE, HOWEVER, IS TWICE THE AMOUNT. FURTHER, ON ACC OUNT OF BARGAINING, ETC. USUALLY A DISCOUNT AT THE RATE OF 25% (OF THE ACTUAL SALE PRI CE) ON MAHOGANY AND REDWOOD ITEMS AND 15% ON TEAK WOOD AND ROSE WOOD, VEETI, IS GIVEN. T HE ASSESSING OFFICER (AO) ACCORDINGLY WORKED OUT THE SUPPRESSED SALES ON THE BASIS OF THE SAME AT ` 34,77,290/- AND ` 69,53,071/- FOR A.Y. 2007-08 AND A.Y. 2008-09 RESPE CTIVELY, AND SHOW CAUSED THE ASSESSEE IN ITS RESPECT. IN EXPLANATION, IT WAS SU BMITTED THAT SHRI ADATTIL JABIR IS ONLY A `BOY OF 22 YEARS OF AGE, PRIMARILY PURSUING HIS ST UDIES, AND IS FRESH IN BUSINESS. HE WAS NOT WELL-VERSED WITH THE CONDUCT OF THE BUSINESS, A ND ONLY ASSISTED HIS FATHER, SHRI ADATTIL MOHAMMED, THE MANAGING PARTNER OF THE FIRM. IN FAC T, HIS STATEMENT WAS ALSO RECORDED BY THE REVENUE ONLY FOR THE REASON THAT THE MANAGIN G PARTNER WAS OUT OF STATION ON THAT DATE. SECONDLY, THE STATEMENT WAS NOT VOLUNTARY AN D RECORDED UNDER THE THREAT OF PENAL ACTION, WHICH WOULD BE CLEAR FROM THE REPRESENTATIO N DATED 18.9.2007 MADE IN THIS REGARD. THE STATEMENT WAS NOT CORROBORATED BY ANY INDEPENDE NT EVIDENCE, SO THAT IT IS NOT BY ITSELF SUFFICIENT TO REJECT THE ACCOUNTS, WHICH WER E AUDITED, AND DULY SUPPORTED BY PRIMARY I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 3 DOCUMENTS. FINALLY, IF AT ALL SOME CREDENCE IS TO BE PLACED ON THE STATEMENT OF SHRI JABIR, THE INCOME SHOULD BE COMPUTED BY ADOPTING A PROFIT MARGIN OF 15% ON THE ALLEGED SUPPRESSED TURNOVER. THE AO, HOWEVER, DID NOT FIND THE SAME AS ACCEPTABLE. THE STATEMENT OF SHRI A.JABIR, PARTNER OF THE ASSESSEE- FIRM, WAS IN FACT AN ADMISSION OF THE BOOKS OF ACCOUNTS/SALE BILL AS NOT REFLECTING THE F ULL SALE VALUE. THE SAME WAS NOT RENDERED UNDER ANY THREAT OR COERCION. AN ITEM OF FURNITURE WAS SHOWN TO BE SOLD AT ` 39,000/-, THOUGH ACTUALLY SOLD TO ONE SHRI JOSEPH F OR ` 26,000/-, WHILE THE CORRESPONDING SALE BILL WAS FOR ` 14850/-. TWO, SHRI V.AHAMMED, A SALESMAN OF KOTTAKK AL WOOD INDUSTRIES, A SISTER CONCERN OF THE ASSESSEE-FIRM, HAD CONFIRMED THAT SHRI JABIR FIXES THE PRICE OF THE GOODS. AS SUCH, TO STATE, WITH REFERE NCE TO HIS AGE, THAT HE IS NEW TO THE BUSINESS AND NOT WELL VERSED THEREIN, OR IN THE PRI CING OF THE GOODS, IS INCORRECT. THE PLEA WITH REGARD TO ADOPTING THE PROFIT AT THE RATE OF 1 5% COULD ALSO BE NOT ACCEPTED AS IT IS ONLY THE UNDERSTATEMENT OF SALES THAT HAS BEEN ADMI TTED TO, SO THAT THE ENTIRE OF IT WOULD ONLY BE PROFIT, I.E., IS NOT AMENABLE TO BEING SUBJ ECT TO THE GROSS PROFIT METHOD. FINALLY, AN INSPECTION BY THE DEPARTMENT OF COMMERCIAL TAXES IN THE CASE OF KOTTAKKAL WOOD COMPLEX, ANOTHER SISTER CONCERN IN THE SAME BUSINES S, ON 17.8.2006, REFLECTED EXCESS STOCK OF ` 1438785/-, AND WHICH DIFFERENCE WAS IN FACT ADMITTE D TO BY THE SAID FIRM (I.E., FOR 12 OF THE 31 ITEMS OF STOCK INVENTORIZED). HE, ACCORDINGLY, FRAMED THE ASSESSMENT BY WORKING OUT THE SUPPRESSED TURNOVER ON THE BASIS OF THE STATEMENT OF SHRI JABIR. THE SAME STOOD CONFIRMED IN FIRST APPEAL ON THE SAME BA SIS. HOWEVER, THE LD. CIT(A) FOUND MERIT IN THE ASSESSEES PLEA THAT THE SALE OF BRAND ED ITEMS, WHICH CARRIED A MRP (MAXIMUM RETAIL PRICE), WOULD NOT BE SOLD IN EXCESS THEREOF, SO THAT THE SAME HAD TO BE EXCLUDED WHILE WORKING OUT THE EXCESS TURNOVER. TH E MATTER WAS, THEREFORE, REMANDED BY HIM BACK TO THE FILE OF THE AO FOR WORKING OUT THE EXCESS TURNOVER AFTER EXAMINING THE ASSESSEES CONTENTION ON MERITS, AND GRANT IT RELIE F AS APPROPRIATE. THE ASSESSEE ALSO RAISED ANOTHER CONTENTION BEFORE HIM, I.E., THAT THE ADDIT IONAL PROFIT WORKED OUT OUGHT TO BE SUBJECT TO DEDUCTION IN RESPECT OF INTEREST ON THE PARTNERS CAPITAL AS WELL AS SALARY THERE- TO. THE AO, IN HIS VIEW, HAD NOT ESTIMATED THE NET PROFIT AND, THEREFORE, THERE WAS NO QUESTION OF ADJUSTING THE DEDUCTION ON THAT COUNT A LREADY ALLOWED IN THE FIRMS ASSESSMENT. AGGRIEVED, THE ASSESSEE IS IN APPEAL. I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 4 3. BEFORE US, LIKE CONTENTIONS STOOD RAISED. THE A SSESSMENT HAS BEEN FRAMED BY RELYING SOLELY ON THE SONS STATEMENT, AND HE HAD C LEARLY STATED THAT IT IS HIS FATHER WHO IS THE MANAGING PARTNER OF THE FIRM, MANAGING ITS AFFA IRS. THE DISTINCTION BETWEEN BRANDED AND UNBRANDED, I.E., THOSE MANUFACTURED BY THE ASSE SSEE ITSELF, HAS NOT BEEN TAKEN INTO ACCOUNT. FURTHER, THE HIGHER RATE OF SALE PRICE HA S BEEN APPLIED AFTER THE DATE OF SEARCH, I.E., FROM 13.9.2007 ONWARDS, IGNORING THE FACT THA T THE ASSESSEE HAD DECLARED A HIGHER TURNOVER AFTER THAT PERIOD. A DISCOUNT RATE OF 20% HAS BEEN APPLIED EVEN AS THE DEPONENT CLEARLY STATED OF THE SAME BEING AT 25% AND 15% ON THE DEFINED CATEGORIES OF FURNITURE BASED ON THE WOOD USED. THE LD. DR, ON THE OTHER H AND, SUBMITTED THAT THE ASSESSMENT IS LEGALLY FIRM IN-AS-MUCH AS THE STATEMENT U/S. 132(4 ) IS STATUTORILY MANDATED AS EVIDENCE WHICH COULD BE USED AGAINST THE ASSESSEE. ADMISSIO N, IT IS WELL SETTLED, IS THE BEST FORM OF EVIDENCE AND, IN THE INSTANT CASE, IT FLOWS FROM A WORKING PARTNER OF THE FIRM HIMSELF, ADVERTING TO THE DECISION IN THE CASE OF NARAYAN BHAGWAT RAO GOSAVIBALAJIWALE VS. GOPAL VINAYAK GOSAVI & OTHERS 1960 AIR (SC) 100 (COPY ON RECORD). FURTHER, THE INGREDIENTS OF A VALID RETRACTION IN LAW HAVE NOT B EEN SATISFIED IN THE INSTANT CASE AND, THEREFORE, IT COULD NOT BE SAID THAT THE STATEMENT HAS BEEN OR STANDS `RETRACTED. NO FACTUAL OR LEGAL INFIRMITY HAS BEEN SHOWN THEREIN; THE LAW IN THE MATTER IS WELL SETTLED, AND FOR WHICH HE ADVERTED TO THE FOLLOWING DECISIONS: RAVINDRA D. TRIVEDI V. CIT (2008) 215 CTR 313 (RAJ.); AIRPORTS AUTHORITY OF INDIA V. CBDT (2007) 207 CTR 196 (DEL.); AND HIRALAL MAGANLAL & CO V. CIT (DY.) , 96 ITD 113 (MUM.). AS REGARDS THE APPLICATION OF THE SALE FORMULA TO PERIODS NOT SPECIFICALLY COVERE D BY THE STATEMENT, HE RELIED ON THE DECISION BY THE APEX COURT IN THE CASE OF CST V. H.M. ESUFALI H.M. ABDULALI (1971) 90 ITR 271 (SC). IN FACT, THE LD. CIT(A) HAD ALLOWED THE ASSESSEE RELIEF WHERE FOUND MERITORIOUS, I.E., WITH REFERENCE TO THE SALE OF TH E BRANDED FURNITURE. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER, AND FIND THE ASSESSEES CLAIM AS, IN THE MAIN, NOT ACCEPTABLE. THERE IS NO THING ON RECORD TO SUGGEST THAT THE STATEMENT WAS COERCED OR GIVEN UNDER DURESS, EVEN A S THE SAME BEARS A I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 5 DECLARATION/AVERMENT TO THE EFFECT THAT IT IS TRUE AND RENDERED VOLUNTARILY. FURTHER, THOUGH STATED AS HAVING BEEN CLOSED ONLY BY 4 CLOCK ON 13/ 9/2007, THE SAME BEARS THE DATE `12/9/2007, AND ALSO SIGNED AND DATED BY TWO WITNE SSES. AS SUCH, WE FIND NO BASIS FOR THE SAID CLAIM. IN FACT, THE FACTUAL DETAILS EMANAT ING FROM THE STATEMENT, NONE OF WHICH HAS BEEN SHOWN AS INCORRECT OR MISTAKEN, WOULD ITSE LF BEAR OUT THAT IT COULD NOT BE ISSUED EXCEPT BY A PERSON WHO IS IN COMPLETE KNOWLEDGE OF THE SALE PROCESS. TO REITERATE THE SAME, WE WRITE THE DETAILS AS DISPLAYED ON A TAG, A S MENTIONED IN THE STATEMENT U/S. 132(4) ITSELF (AS ALSO IN THE ASSESSMENT ORDER): 139G GRAND CHAIR MAHOGANY D/D 3375 LET US ANALYSE THE SAME IN SOME DETAIL. `139G IS ADMITTEDLY THE ITEM CODE. `GRAND CHAIR REPRESENTS THE NAME OF THE ITEM OF FURNITURE . `MAHOGANY REPRESENTS THE WOOD USED. IT IS THE DECIPHERING OF THE FOURTH LINE OF THE TAG WHICH IS IN DISPUTE, WITH THE ASSESSEE NOW STATING THAT THE SAME REPRESENTS THE D RAWING AND DESIGN CODE. WHAT DOES THAT MEAN ? IT DOES NOT EXPLAIN FURTHER. FURTHER, IF IT IS TR UE, AND THUS THE SAME HAS NO RELATION WHATSOEVER WITH THE SALE RATE, WHY DID T HE PARTNER STATE SO? EVEN SO, THE ASSESSEE COULD EASILY DEMONSTRATE ITS TRUTH WITH RE FERENCE TO A CATALOGUE OR SOME OTHER DOCUMENT LISTING THE PROFILES OF THE DIFFERENT ITEM S ALONG WITH THEIR RESPECTIVE CODES. IN FACT, THE TRUTH OF THE DEPOSITION AND, CORRESPONDIN GLY, THE UNTRUTH OF THE SUBSEQUENT ASSERTION, IS BORNE OUT BY THE STATEMENT, WHEREAT S HRI JABIR EXPLAINS THAT THE SALE RATES STAND FED INTO THE COMPUTER, AND THE SALE BILL IS I SSUED BY THE COMPUTER AT THE RATES FED ON THE BASIS OF THE ITEM CODE. THAT IS, THERE IS A DI RECT, CLEAR, AND ONE TO ONE, CORRESPONDENCE AND RELATION BETWEEN THE ITEM CODE AND THE D/D CODE , WITH THE LATTER IN FACT REPRESENTING THE BILLING RATE. GOING BY THE TAG UNDER REFERENCE, FOR EXAMPLE, FEEDING THE ITEM CODE 139G WOULD YIELD A SALE RATE, OR A SALE BILL AT T HE RATE OF ` 3375/-, I.E., THE COMPUTER WOULD GENERATE A SALE BILL @ ` 3375/- ON RUNNING THE SALE MENU/PROGRAM FOR THE ITE M CODE `139G, WHICH EFFECTIVELY PROVES HIS STATEMENT (REF ER, IN PARTICULAR, ANSWERS TO Q. NOS. 3,6). HE ALSO CONFIRMS THEREIN THAT, HOWEVER, THE BILL RATE (AS, SAY, ` 3375/-) IS NOT THE I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 6 ACTUAL SALE RATE, AND WHICH IS AT TWICE THE BILL RA TE, THOUGH THERE IS SCOPE FOR BARGAIN, AND USUALLY DISCOUNT RANGING FROM 15% TO 25% IS GIVEN F ROM SALE AMOUNT TO THE CUSTOMER (REFER ANSWER TO QUESTION NO. 10). AGAIN, IF THE D/ D CODE IS A DRAWING AND A DESIGN CODE, THE SAME COULD AGAIN BE EASILY EXHIBITED WITH REFER ENCE TO A CATALOGUE OR A DOCUMENT, LISTING THE VARIOUS DESIGNS ALONG WITH THEIR RESPEC TIVE CODES. ALSO, IN THAT CASE, THE SALE BILL WOULD EXHIBIT NOT ONLY THE ITEM NAME AND CODE, BUT ALSO THE D/D CODE. THIS IS AS, ADMITTEDLY, THEREFORE, THE ITEM CODE IS NOT A COMPL ETE SPECIFICATION OF AN ITEM, WHICH COULD HAVE MORE THAN ONE DESIGN AND, THUS, D/D CODE . IF A PARTICULAR ITEM BEARS A UNIQUE ITEM CODE, AS WE CONSIDER IT TO BE IN THE PRESENT C ASE, TO WHAT EFFECT OR PURPOSE IS THE D/D CODE? FURTHER STILL, IT IS WELL KNOWN THAT A PARTI CULAR ITEM, SAY, A CHAIR OR TABLE OF A PARTICULAR DESIGN, COULD BE IN VARIOUS SIZES. THOUG H THEIR DESIGN CODE WOULD BE THE SAME, THE PRICE CANNOT BE; THEY ENTAILING VASTLY DIFFEREN T QUANTITY OF RAW MATERIAL (WOOD) AND LABOUR. AS SUCH, THE ASSERTION OF THE CODE D/D AS R EPRESENTING A DESIGN CODE IS WITHOUT BASIS AND INCONSISTENT. THE FIRST QUESTION, I.E., T HAT IF THE SAME (D/D CODE) HAD NO RELATION WITH THE SALE VALUE, WHY DID THE PARTNER STATE SO, REMAINS IN ANY CASE UNANSWERED? NOT ONLY SO, HE CONJURES UP SOME FORMULA, LINKING TWO T HINGS AS DIVERSE AND DISTINCT AS THE DRAWING & DESIGN CODE AND THE SALE PRICE! WHY? FURT HER, ASSUMING THAT THE SAME IS ACTUALLY A DESIGN CODE, WITH NO RELEVANCE TO OR REL ATIONSHIP WITH THE SALE VALUE, THE NEXT QUESTION IS: HOW, THEN, IS THE SALE PRICE COMMUNICATED TO THE CU STOMER ? ARE THERE ANY OTHER DOCUMENTS/S, LISTING THE SALE PRICE WITH REFE RENCE TO THE D/D CODE OR THE ITEM CODE ? THE `EXPLANATION RAISES A NUMBER OF QUESTIONS, NON E OF WHICH STANDS ADDRESSED. AS SUCH, THE CONTENTION OF THE SAME AS NOT REPRESENTING THE CODE IN RESPECT OF SALE VALUE, BUT A DIFFERENT CODE, IS UNSUBSTANTIATED, WITHOUT ANY BAS IS IN FACT/S, AS WELL AS CONTRADICTORY. 4.2 NEXT, WE EXAMINE THE CONTOURS, AS WELL AS THE C ONTEXTUAL BACKGROUND OF THE STATEMENT. SHRI JABIR NOT ONLY STATES THE ACTUAL SA LE RATE, BUT ALSO THE DISCOUNT WHICH IS USUALLY GIVEN FOR ITEMS BASED ON DIFFERENT WOOD TYP ES, AS WELL AS ACCOUNTING OF SALES AND THE MANAGEMENT OF THE CASH, I.E., THE MODUS OPERANDI AND THE ENTIRE PROCESS, SO THAT THE STATEMENT IS COMPLETE AND INTERNALLY CONSISTENT AND , AS SEEN IN THE FOREGOING PART, PROVEN. WHERE IS THE AMBIGUITY ? IT COULD, IN FACT, BEEN ISSUED ONLY BY SOMEONE WH O IS WELL VERSED I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 7 WITH ALL ASPECTS OF THE SALE FUNCTION. AS CONFIRMED BY THE SALESMAN OF A SISTER CONCERN, IT IS SHRI JABIR WHO FIXES THE SALE PRICE OF DIFFERENT ITEMS. IN FACT, HIS PARTICIPATION STANDS AFFIRMED BY HIM IN ANSWER TO DIFFERENT QUESTIONS. H E HAS BEEN A PARTNER FOR NEARLY TWO YEARS AT THE TIME OF SEARCH . HE HAS NOT BEEN SHOWN TO BE UNDERTAKING ANY COURSE OF STUDY, MUCH LESS A REGULAR COURSE OF STUDY, AT THE RELEVAN T TIME, I.E., SEPTEMBER, 2007. IN FACT, HIS MARK-SHEET FOR THE B.COM COURSE SHOWS THAT HE T OOK AND CLEARED THE EXAMINATIONS FOR THE THREE YEAR DEGREE PROGRAM IN MAY, 2003, MAY, 20 04 AND SEPTEMBER, 2005 (PB PGS. 18-20). HE STANDS COOPTED AS A PARTNER IN THE FIRM SOON THEREAFTER, IN DECEMBER, 2005. RATHER, AS IT APPEARS, HE MAY WELL BE ATTENDING THE BUSINESS, THOUGH ON A PART TIME BASIS, EVEN PRIOR TO THE COMPLETION OF HIS STUDIES IN SEPT EMBER, 2005. AS REGARDS THE NON-CORROBORATION OF THE STATEMENT, THE SAME IS, AGAIN, NOT CORRECT. AS CLARIFIED WITH REFERENCE TO THE ACTUAL SALE TRAN SACTION TO ONE SHRI JOSEPH (IN ANSWER TO QUESTION NOS. 8 & 9), THE SAME NOT ONLY EXHIBITS TH E FACTUM OF SUPPRESSION (IN SALE), BUT ALSO FITS INTO THE EXPLANATION BY SHRI JABIR IN HIS STATEMENT. AS AGAINST THE CODE VALUE OF SAY ` 100/-, THE ACTUAL SALE PRICE HAS BEEN WORKED AT ` 160/- , I.E., AT 1.6 TIMES, ALLOWING A DISCOUNT OF 20% ON THE ACTUAL VALUE OF ` 200/- ( ` 100 X 2). IN THIS CASE, THE SALE VALUE (AFTER DISCOUNT), I.E., ` 26,000/- WORKS TO 1.75 TIMES THE SALE BILL VALUE OF ` 14850/-. THE CASH-IN-HAND ALSO DID NOT MATCH WITH THE CASH BOOK, WHICH IS THE MOST OBVIOUS AND CONSEQUENT RESULT OF REALIZING MORE THAN IS RECORDE D QUA SALES IN BOOKS, THOUGH THE EXTENT WOULD VARY DEPENDING ON THE ACTUAL SALES ON A GIVEN DAY. THE QUESTIONS AND ANSWERS ON CASH MANAGEMENT CLARIFY THIS BEYOND DOUBT, WHEREAT IT IS EXPLAINED THAT THE ACTUAL CASH TRANSACTIONS ARE RECORDED, I.E., THE ACTUAL CASH RE CEIVED AND PAID, BY WAY OF A DAILY STATEMENT, WHICH IS DESTROYED AFTER VERIFICATION AT THE END OF EACH DAY, AND AFTER HE (DEPONENT) IS ENTRUSTED WITH THE CASH. THE STAFF M EMBER USUALLY PREPARING THE DAILY CASH STATEMENT IS ALSO NAMED BY HIM (MR. ARUN). FURTHER , A SLIP FOR SALE OF BENJARE CEAT 5, PROPOSED TO BE SOLD FOR ` 39,000/-, AND AGAINST WHICH ` 10,000/- HAD BEEN RECEIVED AS ADVANCE, FROM THE CUSTOMER, WAS ALSO FOUND DURING S EARCH, AND WHICH WAS CONFIRMED AS REPRESENTING AN ACTUAL SALE, WITH THE ADVANCE RECEI VED BEING REFLECTED IN THE DAILY CASH STATEMENT OF 11.9.2007, I.E., THE IMMEDIATELY PRECE DING DAY (IN ANSWER TO Q. # 5) . I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 8 ADMISSION, IT IS WELL-SETTLED, IS THE BES T FORM OF EVIDENCE, EVEN AS THE STATEMENT STANDS ACCORDED STATUTORY RECOGNITION PER S. 132(4) . IN THE INSTANT CASE, IT IS NOT ONLY CORROBORATED, BUT ALSO THERE IS NO BASIS FOR RETRAC TION. IN FACT, SOME OF THE PLEAS RAISED, ONE OF WHICH HAS ALSO BEEN ACCEPTED, AND ONLY RIGHT LY SO, BY THE LD. CIT(A), I.E., QUA BRANDED GOODS, RATHER, FURTHER CONFIRM AND REINFORC E THE REVENUES STAND OF THE SUPPRESSION OF/IN SALES, AND THE ASSESSEES BOOKS A S NOT REFLECTING THE CORRECT SALE VALUE OF THE GOODS SOLD. THAT IS, NOTWITHSTANDING THE ACCEPT ANCE OR NON-ACCEPTANCE OF SUCH CLAIMS, BEING A MATTER TO BE EXAMINED AND DECIDED INDEPENDE NTLY ON ITS RESPECTIVE MERITS, THE RAISING OF THE CLAIM/S ITSELF IS A TACIT ADMISSION AS TO THE SALE SUPPRESSION. WHAT ELSE DOES, ONE MAY ASK, THE CLAIM FOR THE ESTIMATION BEING NOT VALID FOR THE PERIOD FROM 13.9.2007 (THE DATE FOLLOWING THE DATE OF SEARCH) IN VIEW O F THE FIRM HAVING DISCLOSED A HIGHER TURNOVER THEREOF - OR FOR ALLOWANCE OF INTEREST AND SALARY TO THE PARTNERS AGAINST THE ADDITIONAL PROFIT, OR BEING NOT VALID FOR BULK SALE S OR FOR BRANDED GOODS, MEAN BY WAY OF NECESSARY IMPLICATION ? 4.3 IN VIEW OF THE FOREGOING, WE HOLD THAT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE STATEMENT U/S. 132(4) OF SHRI A. JABIR AS A LEG ALLY VALID EVIDENCE, WHICH HAS NOT BEEN IMPUGNED IN ANY MANNER AND, THUS, CONSTITUTES A VAL ID BASIS FOR FRAMING THE ASSESSMENT. AS REGARDS THE LAW IN THE MATTER, WE CONSIDER THE S AME AS WELL-SETTLED, SO THAT IT IS ESSENTIALLY A MATTER OF ITS APPLICABILITY OR OTHERW ISE IN THE FACTS OF THE CASE THAT IS RELEVANT. APART FROM THE DECISIONS STATED BY THE LD . DR, EACH OF WHICH WE FIND AS APPLICABLE, WE ALSO RELY ON THE DECISION IN THE CAS E OF KUNHAMBU V. & SONS VS. CIT , 219 ITR 235 (KER.). BEFORE PARTING WITH THE MATTER, HOWEVER, WE CONSIDER IT RELEVANT TO DELIBERATE ON ONE ASPECT THEREOF. WE FIND THE ASSESSEE TO HAVE ALSO R AISED A PLEA WITH RESPECT TO BULK SALES, I.E., AS MADE TO CUSTOMERS LIKE ARYA VAID SALA; PAS SPORT OFFICE, AND THE LIKE, BEFORE THE LD. CIT(A). THE LD. FIRST APPELLATE AUTHORITY, HOW EVER, DID NOT CONSIDER THE ASSESSEES CLAIM VALID FOR THE REASON THAT IT STOOD NOT PRESSE D BEFORE THE AO, EVEN AS THE ONE QUA BRANDED GOODS WAS. THOUGH TRUE, WE DO NOT CONSIDER THAT THE ASSESSEES CASE IN THE MATTER DESERVES TO BE REFUSED ADMISSION FOR CONSIDERATION ON MERITS WHERE IT IS ABLE TO MAKE OUT I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 9 A PRIMA FACIE CASE BEFORE THE FIRST APPELLATE AUTHORITY. THIS IS AS IT MAY WELL BE THAT SOME ASPECT OF ITS CASE, AND WHICH IS ONLY INTERCONNECTE D, REMAINS TO BE CANVASSED BEFORE THE A.O., WHO WOULD IN ANY CASE BE REQUIRED TO EXAMINE AND VERIFY THE SAME, I.E., BEFORE ITS ADJUDICATION BY HIM. EVEN QUA BRANDED GOODS, THE ASSESSEE SUPPORTED ITS CASE BEF ORE THE LD. CIT(A) WITH FIGURES, WHILE FAILED TO DO SO BEFO RE THE AO. THE WHOLE TONE AND TENOR OF THE STATEMENT U/S. 132(4) OF MR. A. JABIR IS QUA RETAIL SALES, WHILE THE BULK OR INSTITUTIONAL SALES WOULD DEFINITELY NEED TO BE MANAGED DIFFERENT LY. AS POINTED OUT BY MR. JABIR, DISINCLINATION ON THE PART OF THE CUSTOMER TO BEAR THE SALE TAX RATE (OF 12.5%) IS ONE OF THE CONTRIBUTING REASONS FOR NOT RAISING THE BILL FOR T HE FULL SALE VALUE (REFER ANSWERS TO Q. NO. 6,7). SUCH CONSIDERATIONS ARE USUALLY ABSENT IN THE CASE OF LARGE ORGANIZATIONS, WITH ACCESS ONLY TO ACCOUNTED FUNDS, SO THAT THEY BEAR T HE INCIDENTAL TAX. ACCORDINGLY, THOUGH WE CONFIRM AND ENDORSE THE FINDINGS BY THE FIRST AP PELLATE AUTHORITY, WE ONLY CONSIDER IT FIT AND PROPER UNDER THE CIRCUMSTANCES TO RESTORE T HIS ASPECT OF THE MATTER BACK TO HIS FILE, TO ALLOW THE ASSESSEE AN OPPORTUNITY TO PRESENT ITS CASE WITH REGARD TO BULK SALES, WITH A FURTHER DIRECTION TO ADMIT THE SAME WHERE A PRIMA FACIE STANDS MADE OUT BY IT. FURTHER, IF SO, HE SHALL ADJUDICATE ON MERITS IN ACCORDANCE WIT H LAW, AND WITH DUE REGARD TO THE PROCEDURE, I.E., AFTER DUE OPPORTUNITY OF HEARING T O BOTH THE SIDES, BESIDES THE OPPORTUNITY TO THE AO TO EXAMINE AS WELL AS TO MEET THE ASSESSE ES CASE IN THE MATTER. WE DECIDE ACCORDINGLY. 5. WE SHALL NEXT TAKE UP THE ADDITIONAL CLAIMS QUA WHICH THE ASSESSEE HAS RAISED SPECIFIC GROUNDS, ON MERITS. 6. AS REGARDS THE SUPPRESSION OF SALES BEING NOT VA LID FOR THE PERIOD 13.9.2007 ONWARDS, THE SAME IS ADMITTEDLY A QUESTION OF FACT. WITHOUT DOUBT, IT IS WELL NIGH POSSIBLE THAT THE ASSESSEE, AS IT NOW CLAIMS, COULD HAVE, AT LEAST THEORETICALLY, ABANDONED ITS PRACTICE, AND STARTED REFLECTING THE FULL SALE VALU E IN THE SALE BILL, FROM THE DAY IMMEDIATELY FOLLOWING THE DAY OF SEARCH. IN WHICH C ASE, IF SO, NO PRESUMPTION OF SALE SUPPRESSION AFTER 12.9.2007 COULD HOLD. BUT THEN, AS INDICATED ABOVE, THAT ONLY CONFIRMS THE FACT OF SUPPRESSION PRIOR THERE-TO; THE ASSESSE E CANNOT BLOW HOT AND COLD AT THE SAME I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 10 TIME . IN FACT, NO SUCH PLEA STANDS RAISED EITHER BEFOR E THE ASSESSING AUTHORITY OR THE FIRST APPELLATE AUTHORITY AND, PERHAPS, FOR THE SAME REAS ON. THE ASSESSEE, THEREFORE, CANNOT BE ALLOWED TO TAKE THIS PLEA AT THIS STAGE, WHICH IS E VEN WITHOUT A SPECIFIC GROUND. DE HORS THE SAME, THE PRESUMPTION OF THE STATUS QUO WOULD HOLD, PARTICULARLY IN THE ABSENCE OF ANYTHING TO THE CONTRARY, AS FOR EXAMPLE, A MUCH HI GHER GROSS PROFIT AS THE ENTIRE INCREASED TURNOVER WOULD TRANSLATE INTO PROFIT - FO R THE LATTER PART OF THE RELEVANT YEAR, RESULTING IN A MUCH HIGHER PROFIT FOR A.Y. 2008-09 IN COMPARISON WITH THAT OBTAINING FOR A.Y. 2007-08. IN FACT, AS AFORE-STATED, NO SUCH CLA IM HAS BEEN RAISED INDICATING A PRIMA FACIE CASE, SO THAT THE DECISION IN THE CASE OF H.M. ESUFALI H.M. ABDULALI (SUPRA) WOULD APPLY. WE ACCORDINGLY FIND NO SUBSTANTIATION IN THE ASSESSEES SAID PLEADING. IT NEEDS TO BE CLARIFIED THAT THE IMPUGNED ASSESSMENTS ARE NOT CHAPTER XIV-B ASSESSMENTS, SO AS TO BE STRICTLY LIMITED TO THE EVIDENCE FOUND IN SEARCH TO REGULAR ASSESSMENTS. THE DECISION IN THE CASE OF CATHERINE THOMAS VS. DY. CIT , 111 ITD 132 (COCHIN) IS ACCORDINGLY NOT APPLICABLE. 7. NEXT, IS THE ASSESSEES CLAIM OF BEING ENTITLED TO EXPENDITURE BY WAY OF INTEREST TO PARTNERS ON THEIR CAPITAL, AND SALARY TO THE WORKIN G PARTNERS. NO PLEA IN THIS REGARD WAS RAISED DURING THE HEARING. ON MERITS; HOW DOES THE ADDITION FOR SUPPRESSED TURNOVER RESULT IN INCREASE IN CAPITAL OF THE PARTNERS, WHICH IS TO BE AS PER THE BOOKS OF ACCOUNT, IS NOT UNDERSTOOD. DOES IT IMPLY THAT THE INCREASED PROFIT STANDS DEPLOYED BY THE PARTNERS IN THE FIRM? IF SO, WHAT ARE THE CORRESPONDING ASSETS, AS THE SAME WOULD ONLY JUSTIFY THE ADDITIONAL CAPITAL? FURTHER, THE CLAIM IS WITHOUT R EFERENCE TO THE PARTNERSHIP DEED, I.E., THE CONTRACTUAL AGREEMENT BETWEEN THE PARTNERS, WHICH A UTHORIZES THE SAME. IT NEEDS TO BE APPRECIATED THAT BOTH THE INTEREST AS WELL AS THE S ALARY TO THE PARTNERS IS ONLY A PART OF AND TOWARD THEIR SHARE IN THE PROFITS OF THE FIRM AND, ACCORDINGLY, IS TO BE NECESSARILY WITH REFERENCE TO THE PARTNERSHIP DEED AND THE BOOKS OF ACCOUNTS OF THE FIRM RECOGNISED THEREBY. DOES, IT MAY BE ASKED, THE SAID DEED ENVI SAGE TRANSACTIONS NOT RECORDED IN THE ASSESSEES REGULAR BOOKS OF ACCOUNTS? IT IS ONLY TH E BOOKS OF ACCOUNT AS MAINTAINED IN THE REGULAR COURSE OF ITS BUSINESS, ON THE BASIS OF WHI CH RETURNS STAND FILED WITH THE REVENUE, WHICH STANDS RECOGNIZED BY THE PARTNERSHIP AGREEMEN T, SO THAT THE SHARING OF THE PROFIT OR I.T.A. NOS. 125 & 126/COCH/2011 (ASSTT. YEARS: 2007-08 & 2008-09) 11 LOSS, INCLUDING BY WAY OF INTEREST AND SALARY TO PA RTNERS, ALLOWABLE U/S. 36(1)(III)/37(1) R.W.S. 40(B) OF THE ACT, IS ONLY WITH REFERENCE TO THE CAPITAL AND THE PROFIT DISCLOSED THEREBY, I.E., ON THE BASIS OF SUCH BOOKS OF ACCOUN TS. WE, THEREFORE, DO NOT FIND MERIT IN THE ASSESSEES CLAIM. AS RIGHTLY POINTED OUT BY THE LD. CIT(A), THE DECISION IN THE CASE OF CIT VS. JAIN CONSTRUCTIONS CO. , 156 CTR (RAJ.) 290 IS NOT APPLICABLE IN THE PRESE NT CASE. THE DEDUCTION OF INTEREST ON CAPITAL AND SALARY TO PARTNERS WAS ONLY WITH REFERENCE TO THE PARTNERSHIP DEED; THE ASSESSING OFFICER HAVING ESTI MATED THE NET PROFIT WITHOUT REFERENCE TO THE CLAIM FOR SUCH DEDUCTIONS. IT IS NOT THE AS SESSEES CASE IN THE INSTANT CASE, THAT IT HAS NOT BEEN ALLOWED THE SAID CLAIM AS PREFERRED PE R ITS FURNISHED RETURNS, AND WHICH STAND ACCEPTED AS SUCH, I.E., EXCEPT FOR THE ADDITION TOW ARD SUPPRESSED TURNOVER/PROFITS. 8. IN THE RESULT, THE APPEALS BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 21ST OCTOBER, 2011 GJ COPY TO: 1. CLASSY THE ANTIQUE DESIGNED FURNITURE, WOOD COMP LEX TOWER, NEAR AYURVEDA COLLEGE, CHANKUVETTY, KOTTAKKAL. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL C IRCLE-2, KOZHIKODE. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .