The ITO, Kollam V. M/s.Sunny Jacob Jewellers and wedding Centre, Kottarakkara

ITA 476/COCH/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3941 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-01-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 21-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Search and seizure; Opportunity of being heard; Retraction; Reassessment proceedings
• Section: 132; 144; 142(1); 133A; 153A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M ITA NO. AY APPELLANT RESPONDENT 32 6 / COCH/2016 200 7 - 08 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1, NON - CORPORATE, KOCHI. SUNNY JACOB JEWELLERS & WEDDING CENTRE, CHANTHAMUKKU, KOTTARAKKARA, KOLLAM. [ PAN: A BCFS 1711R] 47 6 /COCH/2018 2005 - 06 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIR CLE - 1, NON - CORPORATE, KOCHI. SUNNY JACOB JEWELLERS & WEDDING CENTRE, CHANTHAMUKKU, KOTTARAKKARA, KOLLAM. [ PAN: ABCFS 1711R] 47 7 /COCH/2018 2006 - 07 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1, NON - CORPORATE, KOCHI. SUNNY JACOB JEWELLERS & WEDDING CE NTRE, CHANTHAMUKKU, KOTTARAKKARA, KOLLAM. [ PAN: ABCFS 1711R] REVENUE BY SMT. A.S. BINDHU, SR. DR ASSESSEE BY S HRI T.M. SREEDHARAN, SR. ADV. D ATE OF HEARING 2 3 /0 1 /201 9 DATE OF PRONOUNCEMENT 0 5 / 02 /201 9 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: TH ESE APPEALS FILED BY THE REV ENUE ARE DIRECTED AGAINST THE DIFFERENT ORDER S OF THE C IT(A) - IV, KOCHI AND PERTAIN TO DIFFERENT ASSESSMENT YEAR S. 2. ORIGINALL Y, THE REVENUE HAD FILED SINGLE APPEAL IN ITA NO. 32 6 /COCH/2016 ON 21/07/2016 COVERING THREE ASSESSMENT YEARS NAMELY, AYS . 200 5 - 06, 2006 - 07 AND 2007 - 08. THIS DISCREPANCY WAS POINTED OUT TO THE DEPARTMENT. LATER TWO I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 2 SEPARATE APPEALS IN ITA NO S .476/COCH/2018 FOR THE ASSESSMENT YEAR 2005 - 06 AND 477/COCH/2018 WERE FILED ON 2 5 /09/2018. HENCE , DELAY IN FILING THESE TWO APPEALS BY 742 DAYS WAS NOTED BY THE REGISTRY . I N OUR OPINION, THERE CANNOT BE ANY DELAY IN FILING OF THESE APPEALS B EFORE THE TRIBUNAL AS THE DA TE OF FILING OF THE SE TWO APPEALS SHALL BE RECKONED FROM THE ORIGINAL 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 REGA RD TO DELETION OF ADDITION MADE TOWARDS ESTIMATION OF G.P. 4 . THE FACT S OF THE ISSUE AS NARRATED IN ITA NO. 326 /COCH/201 6 FOR ASSESSMENT YEAR 200 7 - 08 ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED ON 12/07/2004. SHRI SUNNY JACOB AND SMT. MAGG Y 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 T OTAL INCOME OF RS.31,380/ - . A SEARCH UNDER SECTION 132 OF THE I.T. ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE FIRM ON 21/08/2007. ON T HE 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 I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 3 NOTICE, THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 200 7 - 08 WAS FILED ON 02.07.2009 DECLARING A LOSS OF RS.26,62,920/ - . THE INCOME RETURNED BY M/S. SUNNY JACOB JEWELLERS & WEDDING CENTRE ORIGINALLY U/S. 139(1) OF THE IT ACT WAS RS.( - )26,62,920/ - . THE ADDITIONAL INCOME NOW INCLUDED IN THE RETURN FILED U/S. 153A OF THE IT ACT WAS NIL. THE GIST OF THE RETURNED INCOME FILE D, THE INCOME ORIGINALLY ASSESSED AND THE INCOME RE - ASSESSED AS PER DIRECTIONS OF THE ITAT IS SUMMED UP AS UNDER: ASSESSMENT YEAR INCOME RETURNED ASSESSED INCOME (ORIGINAL) ASSESSED INCOME (REVISED) 2005 - 06 31,377 22,34,388 20,34,114 2006 - 07 35,850 1,31,01,968 1,19,14,140 2007 - 08 ( - )26,62,920 1,39,92,024 1,24,77,939 2008 - 09 ( - ) 7,34,442 42,19,190 37,68,860 4 .1 DURING THE COURSE OF SEARCH AT THE ASSESSEES BUSINESS PREMISES ON 21/08/2007, IT WAS NOTICED THAT THE ASSESSEE HAD EFFECTED SA LES BY ISSUE OF ESTIMATE SLIPS INSTEAD OF SALE BILLS AND THE SALE BILLS WERE PREPARED FOR ACCOUNTING PURPOSES ONLY IN FEW CASES. IT WAS ALSO NOTICED THAT THE SALES ON ESTIMATE SLIPS WERE NOT ACCOUNTED RESULTING IN UNDER RECORDING OF SALES AND SUPPRESS ION OF TURNOVER . AS PART OF PRE - SEARCH ENQUIRIES GOLD ORNAMENT WAS PURCHASED FROM THE ASSESSEES SHOP ON 25/07/2007 BY THE INVESTIGATION WING. ON PURCHASING 1.5 80 GMS OF GOLD ON 25/07/2007, THEY HAD ISSUED ESTIMATE SLIP SHOWING RECEIPT OF RS.1, 55 0/ - . BUT NO SALE BILL HAD BEEN ISSUED. SUBSEQUENT TO THE SEARCH, ON VERIFICATION OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE, IT WAS I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 4 NOTICED THAT THE ABOVE SALES ON THE BASIS OF E STIMATE SLIPS WERE NOT ACCOUNTED BY THEM, EITHER IN THE COMPUTER OR IN ANY OTHE R BOOKS . SIMILAR ESTIMATE SLIPS WERE ISSUED FROM THE DIFFERENT SHOPS OF THE SUNNY JACOB JEWELLERS GROUP WHILE SELLING GOLD ORNAMENTS. WHILE RECORDING STATEMENTS FROM SHRI SUNNY JACOB BY THE ASST. DIRECTOR OF INCOME - TAX(INV.) AFTER THE SEARCH, THE ABOVE ESTIMATE SLIPS HAD BEEN SHOWN TO HI M . IN REPLY TO QN. NO. 5 HE HAD STATED THAT THE ASSESSEE WAS ISSUING ESTIMATE SLIPS ONLY FOR SHOWING THE CUSTOMER, BUT THEY WERE ISSUING BILLS ON FINALIZATION OF THE SALES . THE ABOVE CONTENTION OF THE ASSESSEE WAS R EJECTED BY THE AO. 4.2 DURING THE COURS E OF SEARCH AT THE PREMISES OF THE ASSESSEE O N 21/08/2007 , DAILY SUMMARY SHEET RELATING TO 20/08/2007, I.E. THE DAY PREVIOUS OF SEARCH (SHEET NO. 16 OF AWA 19) WAS FOUND AND SEIZED. IN THE ABOVE DAILY STATEMENT , THERE WERE 37 SALES, AS PER WHICH 157.190 GMS. OF GOLD WAS SOLD. CONSIDERING THE SALE RATE OF GOLD FOR THAT DAY, I..E. RS.830/ - PER GRAM, THE TOTAL SALES SHOULD HAVE BEEN RS.1,30,467/ - . BUT THE ACTUAL SALES RECORDED IN THEIR DAY BOOK FOR THAT DAY WAS R S.40,237.98 ONLY, I.E. ONLY 30.85% OF THE REAL SALES. SHRI BEJIMON S. MANAGER OF KOTTARAKKARA SHOW ROOM COULD NO T 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 ). I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 5 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 STATE MENT 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 ORN AMENTS, 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 'E STIMATE 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 ALL THE SALES EFFECTED IN YOUR SHOP AND THAT FOR THE SALES FOR WHICH SALES BILLS ARE NOT ISSUED, 'ESTIMATE SLIPS' ARE ISSUED TO THE CUSTOMER. HE HAS FURTHER STATED THAT WHEN YOU ARE PURCHASING OLD GOLD ORNAMENTS FROM CUSTOMERS YOU WERE NOT ISSUING PURCHASE BILLS. HE HAS ALSO STA TED THAT IN THE CASH BOOK MAINTAINED BY HIM HE IS NOT ENTERING ALL THE SALES EFFECTED IN YOUR SHOP. I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 6 B) SHRI PINTU T. JACOB, COMPUTER OPERATOR OF YOUR SHOP HAS STATED ON 21/08/2007 THAT HE IS PRINTING OUT ESTIMATE SLIPS WHILE MAKING SALES AND THAT HE IS PREPARING ESTIMATE SLIPS FOR ALL THE SALES MADE IN YOUR SHOP. HE HAS ALSO STATED THAT HE IS NOT AWARE WHETHER ANY OTHER BILL IS PREPARED FOR THE SALES MADE IN YOUR SHOP. HE FURTHER STATED THAT RECORDING OF THE ACTUAL SALES ARE NOT MADE IN THE HARD DISK OF THE COMPUTER. AS PER HIS STATEMENT, NO PURCHASE BILLS ARE ISSUED WHILE EXCHANGING OLD GOLD ORNAMENTS IN YOUR SHOP FOR PURCHASING NEW ONES. INSTEAD, THE PURCHASES ARE RECORDED IN THE ESTIMATE SLIPS PREPARED. 4 .4 DURING THE COURSE OF SEARCH AT THE PREMISES OF M/S. SUNNY JACOB GOLD HYPER MARKET, KOLLAM ON 21/08/2007, THREE NOTE BOOKS MARKED AS MSP(1), MSP(2) AND MSP(3) WERE SEIZED. THESE NOTE BOOKS CONTAINED ACCOUNTS OF PURCHASES AND ISSUE OF GOLD ORNAMENTS AND WHEN COMPARED WITH THE REGULAR STOCK REGISTER MAINTAINED BY THEM, I.E., MSP(113), IT WAS NOTICED THAT THERE WAS WIDE VARIATIONS IN ACCOUNTING PURCHASES AND ISSUES AS PER THESE REGISTERS DURING THE PERIOD 26/07/2007 TO 07/08/2007 . IT WAS NOTICED THAT IN PLACE OF REAL PURCHASE OF 1207.430 GMS. , ONLY 188.500 GMS. FOUND PLACE IN THE REGULAR STOCK REGISTER GIVING RISE TO SUPPRESSION OF 1018.93 GMS. WHICH SHOWED THAT A VERY GOOD PERCENTAGE OF BUSINESS OF THE SHOW ROOM AT KOLLAM., I.E., ABOUT 84.39% WAS OUTSIDE THE BOOKS OF ACCOUNTS AND ONLY 15.61% WAS ACCOUNTED. I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 7 4 . 5 ON CHECKING THE LOG - IN TIME OF THE COMPUTER MAINTAINED IN M/S. SUNNY JACOB 916 JEWELLERY SHOWROOM, TRIVANDRUM, IT WAS FOUND THAT ALL THE SALES FOR A DAY ARE RECORDED IN THE COMPUTER WITHIN A SHORT TIME OF 2 TO 3 MINUTES WHICH GIVES M ORE CREDENCE TO THE VIEW THAT SALE BILLS GENERATED IN THE COMPUTER ARE MADE UP FOR ACCOUNTING PURPOSES ONLY AND THEY DO NOT REFLECT THE ACTUAL SALES . 4 . 6 FURTHER THE FOLLOWING DISCREPANCIES WERE NOTICED IN THE BOOKS OF ACCOUNTS FOUND AND SE IZED DURING THE COURSE OF SEARCH REGARDING THE AMOUNT WITHDRAWN AND 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 RECE IVED 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. BU T THERE IS NO CORRESPONDING WITHDRAWAL FROM KOTTAYAM SHOP ON THE ABOVE DATE. I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 8 4.7 THE A SSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION FOR THE DISCREPANCIES . BUT DURING THE COURSE OF HEARING AT THE TIME OF FIRST ASSESSMENT, THE ASSESSEE PRODUCED COMPUTER PRINTED CASH BOOK AND LEDGER WHERE THE ABOVE DISCREPANCIES WERE REMOVED THE CASH BOOK AND THE LEDGER PRODUCED ON 28/12/2009 WERE IMPOUNDED U/S. 131(3) OF THE ACT. AS THE ACCOUNT BOOKS BASED ON WHICH THE ASSESSEE HAD MADE UP THE ACCOUNTS, WERE HELD TO BE NOT RELIABLE AND INCOME WAS ESTIMATED ON ESTIMATED TURNOVER, THE ABOVE DISCREPANCIES DID NOT AFFECT THE COMPUTATION OF INCOME. 4.8 DURING THE SHOP INSPECTION BY THE COMMERCIAL TAXES DEPARTMENT, MANY I RREGULARITIES WERE FOUND AND THE MAIN IRREGUL ARITY NOTICED WAS THAT THE ASSESSEE WAS MAKING SALES ON ESTIMATE SLIPS AND ACCORDINGLY , ASSESSMENT ORDERS W E RE PASSED BY THE COMMERCIAL TAXES . THE ASSESSEE STATED BEFORE THE ASST. DIRECTOR OF INCOME - TAX(INV.) THAT THE ORDERS WERE CHALLENGED BEFORE THE HIG H COURT BUT THE ORDERS OF THE HIGH COURT HAVE NOT BEEN RECEIVED SO FAR. FROM THE BOOKS/DOCUMENTS FOUND DURING THE COURSE OF SEARCH, DATA FOUND IN THE ASSESSEES COMPUTER, INFORMATION COLLECTED FROM THE SALES TAX DEPARTMENT AND ON THE BASIS OF THE INFORMATI ON GATHERED BEFORE EH SEARCH, IT WAS APPARENT THAT THE ASSESSEE WAS MAKING SALES ON ESTIMATE SLIPS INSTEAD OF SALE BILLS AND THEAT THEY ARE GENERATING SALE BILLS ONLY FOR ACCOUNTING PURPOSES AND HENCE, THE SALES RECORDED IN THEIR ACCOUNTS WERE NOT REFLE CTING THE ACTUAL TURNOVER OF THEIR BUSINESS. SINCE THE ACCOUNTING WAS NOT BASED ON ACTUAL SALES, BUT ON MADE UP ONE AND THE SALE BILLS PRODUCED FOR ACCOUNTING PURPOSES ONLY WERE ENTERED AND I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 9 SAVED IN THE COMPUTER, THE ASSESSEES COMPUTER GENERATED ACCOUNTS DID NOT REFLECT THE ACTUAL SALES OR TRANSACTIONS IN THEIR BUSINESS. HENCE, IT WAS PROPOSED TO ESTIMATE THE TOTAL TURNOVER OF THE ASSESSEE TAKING INTO ACCOUNT THE CIRCUMSTANCES OF THE CASE. 4.9 IT WAS FOUND THAT AS PER THE ACCOUNT BOOKS OF SUNNY JACOB 916 SHOW ROOM, PAZHAVANGADI, TRIVANDRUM, THE TOTAL NUMBER OF SALES ON 20/08/2007 WAS 6, I.E., B ILL NOS. 624 TO 629. THE ESTIMATE SLIP NO. 17 ISSUED FROM THE SHOP FOR SALE OF JEWELLERY HAD BEEN PRODUCED BY SHRI A. BABY BEFORE THE AUTHORIZED OFFICER AT THE TIME OF SEARCH. IT WAS SEEN THAT NONE OF THE ESTIMATE SLIPS WERE ACCOUNTED. PRESUMING THAT THERE WERE ONLY 17 ESTIMATE SALES ON THAT DAY, THE SALES ACCOUNTED ON THAT DAY WAS 6/23 I.E. 26.08%. SIMILARLY, ON 16/08/2007 AS PER THE ACCOUNT BOOKS, THERE WE R E ONLY 6 SALES I.E. BILL NOS. 603 TO 608. ESTIMATE SALES SLIP NO. 31, EVIDENCING SALE 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 I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 10 SALES, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE WAS ACCOUNTING ONLY 30% OF THE REAL TURN OVER IN TH E BOOKS OF ACCOUNTS. 4. 9 . 2 THE ASSESSING OFFICER PROPOSED TO ALTER THE PROFIT FROM BUSINESS V IDE 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 TH E FINAL SELECTION AND WHERE THERE WAS POSSIBILITY OF EXCHAN GE OR RETURN SUBSEQUENTLY . IT WAS EXPLAINED THAT ESTIMATE SLIPS WERE ENTERED IN THE SALE BILLS ON SUBSEQUENT DATE S . THE ASSESSEE WANTED OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHICH WAS GRANTED. ON CROSS - EXAMINATION AND RE - EXAMINATION, THE AO FOUND T HAT THE STATEMENT GIVEN BY SHRI A. BABY, RETIRED KSRTC DRIVER , KOLLAM THAT HE WA S NOT ISSUED ANY PURCHASE BILL IN RESPECT OF PURCHASE OF NEW GOLD ORNAMENTS IN EXCHANGE OF OLD GOLD ORNAMENTS WAS CORRECT. FROM THE STATEMENT OF SHRI JOSHI ABRAHAM, ERSTWHILE CASHIER OF M/S. SUNNY JACOB 916 JEWELLERY SHOWROOM, TRIVANDRUM, IT WAS CLEAR THAT T HE ESTIMATE SLIPS MADE ON THE LAST SELECTION WAS HANDED OVER TO SHRI MATHEW EAPEN , FORMER FLOOR SUPERVISOR OF M/S. SUNNY JACOB 916 JEWELLERY, TRIVANDRUM WHO WAS ISSUING THE SALE BILLS TO THE CUSTOMER . HENCE, ACCORDING TO HIM NO ESTIMATE SLIPS, WHERE FINAL SELECTION WAS MADE COULD GO OUT OF THE SHOP AND IT IS ONLY IN THE CASES WHERE THERE WERE POSSIBILITIES OF AN IMMEDIATE EXCHANGE, ESTIMATE SLIPS WERE GIVEN AFTER AFFIXING CA SH RECEIVED SEAL. SHRI MATHEW EAPEN IN HIS STATEMENT DATED 21/08/2007 HAD STATED THAT HIS SHOP WAS NOT ISSUING SALE BILLS FOR ALL SALES AND I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 11 PURCHASE BILLS FOR ALL PURCHASES BUT ON RE - EXAMINATION, HE STATED THAT HIS SHOP WAS ISSUING SALE BILLS FOR ALL SALE S AND PURCHASES BILLS FOR ALL PURCHASE S . SIMILARLY, SHRI BEJIMON S. , ERSTWHILE MANAGER OF M/S. SUNNY JACOB JEWELLERS AND WEDDING CENTRE, KOTTARAKKARA TRIED TO EXPLAIN THAT THE SHOP AT KOTTARAKKARA WAS NOT USING COMPUTER BUT ON RE - EXAMINATION HE STATED THA T THE COMPUTER WAS USED AT LEAST SPARINGLY. THE STATEMENT GIVEN BY SHRI PINTU T. JACOB , COMPUTER OPERATOR, M/S. SUNNY JACOB 916 JEW E LLERY, TRIVANDRUM WAS A CLARIFICATION TO THE EFFECT THAT HE WAS ONLY PRINTING ESTIMATE SLIPS AND NOT SALE BILLS AND HE WAS ONLY ENTRUSTED WITH THE WORK OF PRINTING ESTIMATE SLIPS AND SALE BILLS WERE WRITTEN BY SHRI MATHEW EAPEN. ACCORDING TO THE AO, NONE OF THE ABOVE STATEMENTS WAS SUFFICIENT ENOUGH TO PROVE THAT THE BUSINESS ESTABLISHMENTS IN THE GROUP WERE NOT ISSUING ESTI MATE SLIPS, INSTEAD THEIR STATEMENTS ESTABLISH THAT THEY WERE DESTROYING T HE ESTIMATE SLIPS. AFTER HAVING A TOTAL APPRAISAL OF THE STATEMENTS GIVEN BY DIFFERENT PERSONS AT THE TIME OF SEARCH, CROSS - EXAMIN A TION, RE - EXAMINATION AND ON THE BASIS OF THE INFOR MATION COLLECTED DURING THE COURSE OF SEARCH AND PRE - SEARCH ENQUIRIES, IT WAS FOUND THAT THE BUSINESS CONCERNS OF M/S. SUNNY JACOB GROUP OF JEWELLERS WERE RESORTING TO SUPPRESSION OF SALES BY EFFECTING A MAJOR PORTION OF SALES THROUGH ESTIMATE SLIPS NOT AC COUNTED IN THE BOOKS OF ACCOUNT. ACCORDING TO THE AO, THE INSPECTION BY THE SALES TAX DEPARTMENT AT THE PREMISES OF ALL THE 5 BUSINESS CONCERNS ALSO REVEALED THAT THE ASSESSEE WAS MAKING SALES ON ESTIMATE SLIPS. CONSIDERING THE ABOVE FACTS, IT WAS CONCLU DED THAT THE ASSESSEE WAS ACCOUNTING ONLY 30% OF THE SALES IN ITS ACCOUNTS. IN VIEW OF THE ABOVE, THE AO I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 12 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% I N THEIR DIFFERENT SHOPS AT KOTTAYAM, KOLLAM, KOTTARAKKARA AND TRIVAND RUM 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 TH E AVERAGE PROFIT DECLARED BY THE ASSESSEE S THEMSELVES AND TAKING INTO ACCOUNT THE REQUEST OF THE ASSESSEE, THE GROSS PROFIT OF THE BUSINESS WAS COM PUTED AT 22% OF THE TURNOVER IN THE ORIGINAL ASSESSMENT ORDER. 4 .9. 4 THE ASSESSEE STATED THAT THE PROFIT RATE OF SUPPRESSED TURNOVER ADOPTED IN THE ORIGINAL ASSESSMENT ORDER @ 22% WAS HIGHLY EXCESSIVE. IT WAS STATED THAT NO SALES RETURNS WERE RECORD ED IN THE FINAL ACCOUNTS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. AFTER VERIFYING THE SEIZED MATERIALS, THE AO FOUND THAT NO DETAILS WERE PRODUCED IN SUPPORT OF THE ASSESSEES CLAIM REGARDING SALES RETURN. HENCE, WITHOUT ANY SUPPORTING MATERIAL, THE ASSESSING OFFICER HELD THAT I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 13 ASSESSEES CLAIM OF SUPPRESSED TURNOVER WAS NOT TENABLE. HOWEVER, THE ASSESSING OFFICER DETERMINED THE PROFIT ON SUPPRESSED SALES TURNOVER AT 20% OF RS.7,57,04,295/ - AS AGAINST THE RATE OF 22% MADE IN THE ORIGINAL ASSESSM ENT ORDER. 5 . ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAD REWORKED THE GP BY APPLYING THE RATE OF 20% INSTEAD OF GPO @ 22% APPLIED IN THE ORIGINAL ORDER ON THE SAME SUPPRESSED TURNOVER AND ESTIMATED THE SAME AS TOTAL INCOME OF THE ASSE SSEE. ACCORDING TO THE CIT(A), THE AO HAD RESORTED TO ESTIMATION OF SUPPRESSED PROFIT AS WELL AS THE ESTIMATION OF APPLICABLE G.P. RATE, BASED ON THE FINDINGS OF THE PERIOD RELEVANT TO THE AY 2008 - 09 AND THE FINDING OF THE AY 2008 - 09 HAS BEEN STRETCHED BA CK TO COVER THE ENTIRE PERIOD BETWEEN THE AY 2002 - 03 TO 2007 - 08. ACCORDING TO THE CIT(A), ONLY THE REAL INCOME CAN BE TAXED AND NO NOMINAL INCOME CAN BE ASSESSED TO TAX BASED ON ASSUMPTIONS AND PRESUMPTIONS. THE ASSESSING OFFICER HAD NOT BROUGHT OUT ANY N EW FACTS ON RECORDS. THEREFORE, IT WAS HELD THAT THE ADDITION BASED ON DERIVING THE INCOME OUT OF APPLYING ESTIMATED GP RATE AT THE ESTIMATED SUPPRESSED TURNOVER HAS GOT NO BASIS. ACCORDINGLY, THE CIT(A) DELETED THE ADDITION S FOR THE AYS . 2005 - 06, 2006 - 0 7 AND 2007 - 08. 6 . AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR RELIED ON THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HOTEL MERIYA IN WHICH COURT HAD I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 14 HELD THAT WHEN IT IS REVEALED IN A SEARCH U/S. 132 THAT THE ASSESSEE WAS FOLL OWING A PARTICULAR METHOD TO CONCEAL INCOME, IT IS JUST AND REASONABLE TO PRESUME THAT THE SAME PRACTICE WAS FOLLOWED BY THE ASSESSEE THROUGHOUT THE ASSESSMENT YEARS IN THE BLOCK PERIOD. THE LD. DR SUBMITTED THAT THE INCOME GENERATED FROM THE UNACCOUNTED SALES HAD BEEN INVESTED IN IMMOVABLE PROPERTIES WORTH MORE THAN RS.6 CRORES WHICH ITSELF IS A CONCRETE EVIDENCE FOR THE CONCEALMENT OF INCOME FOR ALL THE YEARS. IT WAS SUBMITTED THAT THE COMMERCIAL TAXES DEPARTMENT HAD ALSO DETECTED THE SUPPRESSION OF SALE S 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/C OCH/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 ASSESSEES CASE: A) K. MOID U 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. ACIT (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 MASAL A P. LTD. (250 ITR 570) (MUM) I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 15 6 .1 IT WAS SUBMITTED THAT IN THE ABOVE CASES, THE ADDITIONS BASED ON ESTIMATE WERE DELETED , B UT IN THE CASE OF THE ASSESSEE, THERE WAS A CLEAR EVIDENCE. ACCORDING TO THE LD. DR, THE CIT(A) HAD NOT CONSIDERED THE FOLLOWING EVIDENCES FOUND AND COLLECTED DURING THE SEARCH AND SEIZURE PROCEEDINGS: A) COMPUTERISED DATA FOUND IN CPU AND PENDRIVE. B) ENTRY INTO COMPUTERS I.E. A L L THE SA L ES A RE MADE IN ONE GO NOT AS AND WHEN SALES IS EFFECTED. C) SALES BY ESTIMATE SLIP. D) P RE - SEARCH ENQUIRY - GOLD ORNAMENTS PURCHASED ON 25/7/ 2 007 FOR WHICH ONLY ESTIMATE SLIP ISSUED - NO SALE BILL ISSUED. THIS WAS LATER ON FOUND DURING SEARCH THAT WAS NOT AT ALL ENTERED IN COMPUTER OR BOOKS OF ACCOUNTS. E) STATEMENTS GIVEN ON 21/8/2007 BY EMPLOYEES/ CU STOMER & CROSS EXAMINATI ON OFFERED BY THE ASSESSES ON 22/12/2009. F) ANALYSIS OF DIFFERENCE FOUND BETWEEN THE PURCHASE NOTE BOOKS MSP - 1, MSP - 2, M SP - 3 AND DAILY STOCK REGISTER MSP 113 - (REFLECTED SUPPRESSION OF SALES). G ) DISCREPANCY NOTI CED IN BOOKS OF ACCOUNTS . H) SUPPRESSION OF SALES FOUND BY COMMERCIAL DEPT. KOTTAYAM . I) PURCHASE OF IMMOVABLE PROPERTIES BY THE PARTNERS SRI SUNNY JACOB AND SMT. MAGGY SUNNY WHERE ONLY 20% OF PURCHASE VALUE HAS BEEN REGISTERED. 6 .2 THE L D . DR SUBMITTED THAT THE ASSESSING OFFICER HA D ANALYSED ALL THE MATERIALS AVAILABLE BEFORE HIM , INCLUDING OBJECTIONS RAISED AND HA D TAKEN A LIBERAL VIEW, GIVING THE B ENEFIT OF DOUBT TO ASSESSEE AND ADOPTED 20 % OF TURNOVER AS GROSS PROFIT/INCOME OF ASSESSEE . THE REFORE, THE ORDER OF A.O. WAS REASONABLE. I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 16 6 .3 IT WAS SUBMITTED THAT THE CIT (A) HA D ALSO ERRED IN ACCEPTING THE RETRACTION OF STATEMENT BY THE EMPLOYEES OF THE ASSESSEE FIRM DURING CROSS E XAMINATION. THE LD. DR SUBMITTED THAT THE CIT(A) WAS INFLUENC ED BY THE STATEMENT OF THE EMPLOYEES THAT DURING SEARCH PROCEED INGS, O UT OF FEAR, THEY ADMITTED SUPPRESSION OF SALES , IGNORING THE FACT THAT RETRACTION WAS MADE AS AFTER THOUGHT AND AFTER A LONG DELAY . IT WAS SUBMITTED THAT TH E CIT (A) ALSO IGNORED THE F ACT THAT RETRACTION AFTER LONG DELAY IS INVALID AND THE SWORN STATEMENT AND 'PANCHANAMA' REVEAL ED NO COERCION/THREAT WAS EMPLOYED WHILE RECORDING STATEMENT. 6 .4 THE LD. DR PLACED RELIANCE ON THE FOLLOWING CASE LAWS: I) SURJIT SINGH CHABRA VS. UNION OF INDIA (1997) 1 SCC 508 (SC) II) T.S. KUMARASWAMY VS. ACIT (65 ITD 188) (ITAT, CHENNAI) WHEREIN IT WAS HELD THAT IT IS WELL KNOWN THAT ITOS ARE NOT POLICE OFFICERS AND THEY DO NOT USE OR RESORT TO UNFAIR MEANS OR III DEGREE METHODS IN RECORDING OATH ST ATEMENTS 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 DUREN. NO SUCH CIRCUMSTANCES EXISTED OR PROVED TO HAVE EXISTED. IN SAYING SO WE ARE SUPPOR TED 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. II I ) CARPENTERS CLASSICS (EXIM) P. LTD VS. DCIT (108 ITD 142) (ITAT, BANG.) I V ) CIT VS. DURGA PRASAD MORE (82 ITR 540) ( SC) I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 17 V) V.KUNHAMBU & SONS VS. CIT (219 ITR 235) (KER.) V I ) 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 INVESTED FOR PURCHASE OF IMMOVABLE PROPERTIES IN THE NAME OF THE PARTNERS SHRI SUNNY JACOB AND SMT. MAGGY SUNNY. IT WAS NOTICED THAT THE MAJOR INVESTMENTS WE RE MADE DURING THE AYS 2005 - 06, 2006 - 07 AND 2007 - 08, THE DOCUMENTED VALUE OF THE PROPERTIES BEING RS. 6 CRORES. IT WAS SUBMITTED THAT ONE OF THE PARTNERS, SHRI SUNNY JACOB, IN HIS STATEMENT HAD ADMITTED TO UNDERVALUING PROPERTIES TO THE EXTENT OF 20% OF T HE ACTUAL SALE VALUE, ON THE BASIS OF AGREEMENTS RELATING TO PURCHASE OF TWO PROPERTIES, SEIZED AT THE TIME OF SEARCH. IT WAS SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE UNACCOUNTED INVESTMENT OF MORE THAN RS.20 CRORES IN IMMOVABLE PROPERTIES ITSELF IS A CONCRETE EVIDENCE FOR CONCEALMENT OF INCOME FOR THE EARLIER YEARS IN WHICH INVESTMENTS WERE MADE. 6. 6 THE LD. DR SUBMITTED THAT THE CIT(A) - III, KOCHI VIDE ORDER DATED 23/09/2010 AND CIT(A) - IV, KOCHI VIDE ORDER DATED 31/03/2016 HAVING FOLL OWED THE JUDGMENT OF THE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF RAJNIK & CO. VS. ACIT (252 ITR 561) AND SUSTAINED THE ADDITION FOR AY 2008 - 09, OUGHT TO HAVE I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 18 SUSTAINED THE ADDITIONS FOR THE A.YS. 2003 - 04 TO 2007 - 08. RELIANCE WAS ALSO PLACED ON THE ORDE R OF THE ITAT, COCHIN IN THE CASE OF M/S. RAJAN JEWELLERY IN ITA NOS. 331 - 337, 366 - 372 DATED 24/05/2013 WHEREIN THE GROSS PROFIT DETERMINED @ 20% WAS CONFIRMED. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD CORRECTLY ASSESSED THE INCOME OF THE ASSESSEE BASED ON EVIDENCE GATHERED DURING SEARCH PROCEEDINGS AND ADOPTED THE GROSS PROFIT @ 20% AS AGAINST THE ORIGINAL ASSESSMENT AT 22%. F OR THESE REASONS, IT WAS PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 7. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE PURCHASE OF 1580 GMS OF GOLD AGAINST THE PAYMENT OF RS.1550/ - PERTAINS TO ASSESSMENT YEAR 2008 - 09 AND HAS NO EVIDENTIARY VALUE SO FAR AS ASSESSMENT YEAR 2005 - 06 IS CONCERNED. THE ABOVE T RANSACTION CANNOT HAVE ANY EVIDENTIARY VALUE UNLESS THERE IS CORROBORATION OF EXAMINING THE WITNESSES CONCERNED AND CROSS EXAMINATION OF WITNESSES AFFORDED TO THE ASSESSEE TO REBUT SUCH EVIDENCE. IT WAS S UBMITTED THAT THE NUMBER OF ESTIMATE SLIPS PERTAINI NG TO JULY AND AUGUST 2007 WERE FEW. RATE PER GRAM AND SALE VALUE WHICH WAS RECORD E D TO SHOW MARGIN OF PROFIT RELATED TO THE ASSESSMENT YEAR 2008 - 09 AND NOT FOR THE RELEVANT ASSESSMENT YEAR S . IT WAS SUBMITTED THAT WHILE 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 I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 19 OFFICER ON THIS ISSUE WAS APPLICABLE ONLY FOR THE ASSESSMENT YEAR 2008 - 09 AND NOT FOR THE REL EVANT 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 CI T 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 I N THE BOOKS OF ACCOUNTS AND IN ALL THAT CASES, ESTIMATE WAS MADE FOR EARLIER YEARS, THEREFORE, THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE ABOVE JUDGMENT CANNOT BE APPLIED TO THE ASSESSEES CASE. HENCE, IT WAS SUBMITTED THAT FOR THE ASSESSMENT YEA RS 2005 - 06, 2006 - 07 AND 2007 - 08, THERE WAS NO EVIDENCE TO SHOW ANY SUPPRESSION OF INCOME OR TURNOVER AND THERE WAS NO INCRIMINATING MATERIAL SO AS TO WARRANT ADDITIONS FOR THOSE THREE YEARS. THE LD. AR RELIED ON THE JUDGMENT OF JUDGMENT OF THE SUPREME CO URT IN THE CASE OF CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY (2017) (397 ITR 344) WHEREIN IT WAS HELD AS UNDER: WHERE, AS PER PROVISIONS OF SEC. 153C OF THE ACT, INCRIMINATING MATERIAL WHICH WAS SEIZED HAD TO PERTAIN TO A.YS. IN QUESTION AND I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 20 DOCUME NTS WHICH WERE SEIZED DID NOT ESTABLISH ANY CO - RELATION, DOCUMENT - WISE, WITH FOUR A.YS. THEN ORDER PASSED FOR INITIATION OF PROCEEDINGS U/S. 153C SHOULD BE QUASHED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE MAIN CONTENTION OF THE LD. AR IS THAT FOR THE ASSESSMENT YEARS UNDER CONSIDERATION, THERE WAS NO SEIZED MATERIAL TO SUGGEST THE UNDISCLOSED INCOME OF THE ASSESSEE. EVEN IF THERE IS SEIZED MATERIAL, IT IS NOT AT ALL RELEVANT TO THE ASSESSMENT YEARS 2005 - 06 TO 2007 - 08 AN D IT IS ONLY RELEVANT TO ASSESSMENT YEAR 2008 - 09. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2008 - 09 WAS ACCEPTED BY THE ASSESSEE BY AN ORDER OF TRIBUNAL ITA NO.371/COCH/2016 DATED 10/10/2018. FURTHER, IT WAS SUBMITTED THAT THE JUDGMENT OF JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS. MERIYA HOTEL (332 ITR 537) CANNOT BE APPLIED TO THE ASSESSEES CASE. IN THAT CASE, THERE WAS ADMISSION BY THE MANAGING PARTNER THAT 20% OF THE SALES TURNOVER WAS SUPPRESSED AND ONLY 80% OF THE SALES TURNOVER WAS RECORDED IN THE BOOKS OF ACCOUNT WHICH WAS THE PRACTICE FROM THE BEGINNING. HENCE, IN THAT CASE, IT WAS PRESUMED THAT THERE WAS WILLFUL CONCEALMENT OF INCOME FOR ALL THE ASSESSMENT YEARS. IT WAS ALSO SUBMITTED THAT THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN T HE CASE OF TRAVANCORE DIAGNOSTICS P. LTD. VS. ACIT (390 ITR 167) WHEREIN IT WAS HELD THAT WHEN SUPPRESSION HAD BEEN FOUND FROM THE DOCUMENTS AND THE STATEMENT ON RECORD, THE ASSESSING OFFICER WAS COMPLETELY JUSTIFIED IN ADOPTING THOSE FIGURES FOR THE WHOL E YEAR AND FOR THE NEXT YEAR WHICH WAS BASED ON SOUND RATIONALE, SINCE FROM THE STATEMENT ON BEHALF OF THE ASSESSEE, THE SUPPRESSION WAS FOUND TO BE CONTINUED , CANNOT BE APPLIED TO THE ASSESSEES CASE I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 21 AS IN THAT CASE, THERE WAS ADMISSION BY THE PARTNERS O F THE ASSESSEE - FIRM AND THE ASSESSEE HAD FOLLOWED UNIFORM SYSTEM OF SUPPRESSION OF SALES 7.1 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. T HE 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 CONFIR MED 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 A SSESSEE 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 CONTAI NING 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 WERE THE ONES MEANT FOR PRODUCTION BEFORE THE INCOME TAX DEPARTMENT ALONGWIT H RETURN OF INCOME. IN RESPECT OF KOTTAYAM SHOWROOM, THE COMPUTER WAS HAVING NO DATA IN IT. IN RESPECT OF DATA IN COMPUTERIZED FORM, IT WAS FOUND THAT THE COMPUTERIZED DATA RELATING TO THE VOLUME OF THE BUSINESS WERE ONLY A SMALL PORTION OF THE VOLUME. IT WAS SEEN THAT THESE COMPUTERIZED DATA WERE ONLY 30.84% OF THE REAL VOLUME IN RESPECT OF KOTTARAKKARA SHOW ROOM. IN RESPECT OF KOLLAM AND TRIVANDRUM SHOPS THE DATA RELATING TO VOLUME OF BUSINESS IS STILL LOW AND IT IS 15.61% AND 16.22% RESPECTIVELY. TA KING A LIBERAL VIEW, THE ASSESSING OFFICER HELD THAT VOLUME OF BUSINESS AS PER COMPUTERIZED DATA WAS ONLY 30% OF THE REAL TURNOVER OR THE VOLUME OF BUSINESS IN THE VARIOUS SHOWROOMS OF THE GROUP. ON VERIFICATION OF THE DATA IN RESPECT OF THE SHOW ROOM AT TRIVANDRUM, IT WAS OBSERVED THAT THE DATA REGARDING THE VOLUME OF BUSINESS RELATING TO A PARTICULAR DATE IS LOGGED INTO THE COMPUTER AT A PARTICULAR TIME ONE AFTER THE ANOTHER. FOR EXAMPLE, ON I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 22 08/05/2007 THERE ARE IN ALL 4 SALES AS PER BILL NOS. 201, 201, 203 AND 204 WHICH WERE ENTERED INTO THE COMPUTER AT 1:12:06 P.M., 1:12:41 P.M., 1:31 : 25 P.M. AND 1:13:25 P.M. THIS SHOWED THAT THE BILLS UNDER REFERENCE WERE NOT PREPARED DURING THE COURSE OF THE BUSINESS BUT IT WAS PREPARED AT A STRETCH ONE AFTER ANOTHER AT A PARTICULAR TIME OF THE DAY. THE CLUSTER OF BILLS AT A PARTICULAR POINT OF TIME PROVED BEYOND ANY DOUBT THAT THE COMPUTERIZED DATA WERE NOT REFLECTING THE REAL BUSINESS BUT ONLY IMAGINARY OR VIRTUAL ONES AND ARE NOT HAVING ANY NEXUS TO REAL ONES. HE NCE, THE ASSESSING OFFICER DETERMINED THE ESTIMATED INCOME ON THE BASIS OF SUPPRESSION OF SALES. IT WAS OBSERVED THAT ASSESSEE WAS CONCEALING 70% OF ITS REAL TURNOVER. THEREFORE, ON THE SUPPRESSED TURNOVER, THE GP RATE OF 22% WAS ADOPTED TO ARRIVE AT THE C ONCEALED INCOME OF THE ASSESSEE. IT WAS ALSO OBSERVED THAT SALES RECORDED ON ESTIMATE SLIPS ISSUED BETWEEN 24/07/2007 TO 20/08/2007 HAD NOT BEEN FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNT. 7.1 THE OBSERVATIONS OF THE ASSESSING OFFICER IN PARAS 21 & 22 ARE REPRODUCED BELOW: '21 THE BUSINESS CONCERNS OF M/S. SUNNY JACOB GROUP OF JEWELLERIES ARE PRINTING ESTIMATE SLIPS ON COMPUTER WHEN A CUSTOMER COMES AND SELECTS A GOLD ORNAMENT FOR PURCHASE. AS A CUSTOMER MAY CHANGE HIS SELECTION MORE THAN ONCE, M ORE THAN ONE ESTIMATE SLIPS 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 T HE 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 BIL L, 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 A N 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 TH AN 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 TRANSPARENT. ESTIMATE SLIPS SHOWING DIFFERENT SL. NOS., ISSUED BY THE DIFFERENT SHOPS OF THIS GROUP HAS BEEN OBTAINED BY THE INCOME - TAX DEPARTMENT. SIMILARLY, ANOTHER I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 23 ESTIMATE SLIP ISSUED, FROM THE PAZHAVANGADI SHOP OF THE ASSESSEE WAS FOUND WITH A CUSTOMER ON 21 - 8 - 2007. THESE ARE EVIDENCES ENOUGH TO CONCLUDE THAT THE ASSESSEE IS EFFECTING, SALES ON ESTIMATE SLIPS. THE SL. NOS. OF ESTIMATE SLIPS OBTAINED FROM THE SHOPS ARE 2, 17, 31 ETC. WHICH SHOWS THAT THE FIRM HAD ISSUED SO MANY NUMBERS OF. ESTIMATE SLIPS ON THOSE DAYS. BUT THE SALES ACCOUNTED ON THAT DALE I S 6 IN NUMBER. THAT SHOWS THAT THE SALES ON ESTIMATE SLIPS ARE MUCH LARGER THAN THAT ON SALE BILLS. IF THE ASSESSEE'S STATEMENT THAT ESTIMATE SLIPS ARE ISSUED TO THE CUSTOMER ONLY WHEN THERE IS POSSIBILITY OF EXCHANGE OR RETURN IS EXPECTED, IT WILL RESULT IN A SITUATION WHERE A LARGE PERCENTAGE OF CUSTOMERS ARE RETURNING OR EXCHANGING ORNAMENTS BOUGHT FROM THEM WITHIN A FEW DAYS. THIS IS A HIGHLY IMPROBABLE SITUATION. THE CONTENTION OF THE ASSESSEE IN THIS REGARD IS NOT AT ALL REASONABLE CONSIDERING THE NAT URAL PROBABILITY. 22. THE SALES TAX DEPARTMENT HAD CONDUCTED A SEARCH AT THE PREMISES OF ALL THE 5 BUSINESS CONCERNS IN 2006 AND IT WAS FOUND THAT THERE WAS LARGE SCALE SALE ON ESTIMATE SLIPS. THE CONSEQUENT ASSESSMENT MADE IS, AS PER THE ASSESSEE DISPUTE D BEFORE THE HIGH COURT, THE FACT THAT THE SALES - TAX DEPARTMENT ALSO COULD COME TO THE FINDINGS THAT THE ASSESSEE HAD SOLD, ORNAMENTS ON ESTIMATE SLIPS CORROBORATES THE FINDINGS MADE DURING THE COURSE OF SEARCH. FROM THE ABOVE FACTS IT CAN BE CONCLUDED THA T THE ASSESSEE IS MAKING SALES ON ESTIMATE SLIPS. ' 7.2 FURTHER, THE ASSESSING OFFICER HAS MADE THE FOLLOWING OBSERVATIONS: 5 .5. IN PARA 10 OF THE ASSESSMENT ORDER THE AO HAS REFERRED TO 3 NOTE BOOKS MARKED AS MSP - 1, MSP - 2 AND MSP - 3 WHICH HAVE BEEN FO UND AND SEIZED FROM THE PREMISES OF M/S. SUNNY JACOB GOLD HYPER MARKET, KOLLAM ON 21.08.2007. THESE NOTE BOOKS CONTAINED ACCOUNTS OF PURCHASE AND ISSUE OF GOLD ORNAMENTS. THE AO HAS OBSERVED THAT WHEN COMPARED WITH REGULAR STOCK REGISTER MAINTAINED BY THEM I.E. MSP - 113, WIDE VARIATIONS WERE NOTED FOR THE DATES 26.07.2007 TO 07.08.2007. THE AO HAS ALSO POINTED - OUT THAT AT THE SHOWROOM OF M/S. SUNNY JACOB JEWELLERS 916 KERALA SHOWROOM, PAZHAVANGADI, TRIVANDRUM ALL THE SALES OF THE DAY ARE RECORDED IN THE COMP UTER WITHIN 2 TO 5 MINUTES. THE PERIOD REFERRED 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 ONL Y 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 I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 24 KOTTARAKKARA SHOP. BASED ON THESE DISCREPANCIES THE AO HAS FINALLY REJECTED THE BOOKS OF ACCOUNTS INVOKING P ROVISIONS 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 APPELLA NT 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 IN A CASE WHERE A NOTICE UNDER SUB - SECTI ON (1) OR SEC. 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT. THE ASSESSMENT ORDER HAS BEEN MADE IN WHICH IT IS CLEARLY MENTIONED IN PARA 5 THAT NOTICE U/S 142(1) WAS ALSO ISSUED BEFORE PASSING THIS ORDER. THE APPELLANT HAS NOT DISPUTED THIS. HE NCE THE CONTENTION PUT FORTH BY THE APPELLANT THAT INVOCATION OF SEC. 145(3) WAS BAD IN LAW IS NOT MAINTAINABLE. ACCORDINGLY THIS GROUND OF THE APPELLANT IS DISMISSED. 7. AS REGARDS THE ESTIMATION OF SUPPRESSED TURNOVER AND WORKING OUT OF GP THEREON FOR A RRIVING AT THE CONCEALED INCOME OF THE APPELLANT. IN MY VIEW FOR ASSESSMENT YEAR 2008 - 09 THERE - WAS SUFFICIENT MATERIAL ON RECORD AND IN THE POSSESSION OF THE DEPARTMENT WHICH PROVE THAT THE APPELLANT ASSESSEE WAS ENGAGED IN SALE/TRANSACTIONS OUTSIDE THE R EGULAR BOOKS OF ACCOUNTS. HOWSOEVER UNSCIENTIFIC THE METHOD OF COMPUTATION OF CONCEALED INCOME HAS BEEN ADOPTED BY THE AO IT CANNOT BE DENIED THAT THERE IS EVIDENCE OF CONCEALMENT OF INCOME CAME TO LIGHT DURING THE COURSE OF SEARCH. IN VARIOUS CASE LAWS CI TED IN MY ORDERS FOR THE SAME ASSESSEE FOR THE ASSESSMENT - YEAR 2002 - 03 TO 2007 - 08, ONE PRINCIPLE, WHICH IS COMMON FOR FRAMING THE ASSESSMENT FOR THE SEARCH AND SEIZURE CASE IS THAT THERE SHOULD BE EVIDENCE WHICH CAME TO LIGHT DURING SEARCH AND IS SUPPORTED BY CORROBORATIVE EVIDENCE REGARDING THE CONCEALMENT OF INCOME. IN THE PRESENT CASE AND FOR THE PRESENT YEAR THOUGH THE ASSESSMENT IS AGAIN BASED ON ESTIMATE BASIS BUT THE AVAILABILITY OF INCRIMINATING DOCUMENTS IS NOT RULED - OUT FOR WHICH THERE IS NO SATIS FACTORY EXPLANATION GIVEN BY THE APPELLANT. IN THE EARLIER YEARS NO ADDITIONS WERE MAINTAINABLE BECAUSE THERE WAS NO MATERIAL RELATING TO THOSE YEARS FOUND OR SEIZED DURING THE COURSE OF SEARCH, BUT FOR THE A.Y. 2008 - 09 MATERIALS ARE AVAILABLE WITH SPECIFI C DATES AND PERIOD WHICH HAS BEEN RIGHTLY RELIED UPON BY I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 25 THE AO IN HOLDING THAT THERE WAS CONCEALMENT OF INCOME IN THE FORM OF SUPPRESSED TURNOVER AND PROFITS EARNED THEREON. IN THE CASE OF RAJNIK & CO, VS. ACIT (251 ITR 561) (AP), IT HAS BEEN HELD THAT WH ERE A REGULAR PATTERN OF SUPPRESSION IS ESTABLISHED THE PRESUMPTION IS THAT THERE IS SUPPRESSION FOR WHOLE OF THE SEARCH YEAR. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF RAJENDRAKUMAR LAHOTI VS. DCIT (266 ITR 621), IN THE EARLIER YEARS THE ADDITIONS COULD NOT STAND THE TEST OF APPEAL BECAUSE THERE WAS NO MATERIAL 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 JUDI CIAL 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: T HE ORDER GIVING EFFECT TO THE ORDER N/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 MARKET VALUE OF THE CLOSING STOCK WAS WORKED OUT AT RS.1,48,63,511/ - [I.E. 1,21,83,206*122/100] WHILE GIVING EFFECT TO THE ORDER U/S.263. AS A RESULT, AN ADDITION OF RS.26,80,305/ - TO THE BUSINESS INCOME DETERMINED IN THE ORIGINAL ASSESSMENT. WHILE GIVING EFFECT TO THE ORDER U/S.263 OF THE CIT (CENTRAL), AN ADDITION OF RS.26,80,305/ - WAS MADE BY RECOMPUTING THE VALUE OF THE CLOSING STOCK BY APPLYING THE GROSS PROFIT RATIO OF 22% ADOPTED IN THE ORIGINAL ASSESSMENT. IN VIEW OF THE FACT THAT THE PROFIT PERCENTAGE NOW ADOPTED IS ONLY 19%, THE VA LUE OF CLOSING STOCK IS RECOMPUTED TO RS.1,44,98,015 / - [I.E. 2,21,83,206*119/100]. ACCORDINGLY, THE ADDITION OF RS.26,80,305/ - MADE VIDE ORDER DATED 20.03.2013 GIVING EFFECT TO THE ORDER U/S.263 OF THE CIT(CENTRAL) IS RESTRICTED TO RS.23,14,809/ - WHILE CO MPLETING THE ASSESSMENT. I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 26 7.4 IN OUR OPINION, THERE IS NO ERROR IN THE ESTIMATION OF INCOME OF THE ASSESSEE ON THE BASIS OF THE SEIZED RECORDS. THE ESTIMATION OF INCOME BY THE ASSESSING OFFICER IS BASED ON THE DOCUMENTS FOUND DURING THE SEARCH AND STATE MENT RECORDED DURING THE COURSE OF SEARCH. BEING SO, THE ASSESSING OFFICER IS COMPLETELY JUSTIFIED IN ADOPTING THOSE FIGURES FOR THE WHOLE YEAR AND FOR THE NEXT YEAR. FOR THIS PROPOSITION, RELIANCE IS PLACED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COU RT IN THE CASE OF TRAVANCORE DIAGNOSTICS P. LTD. VS. ACIT (390 ITR 167) WHEREIN IT WAS HELD THAT WHEN SUPPRESSION HAD BEEN FOUND FROM THE DOCUMENTS AND THE STATEMENT ON RECORD, THE ASSESSING OFFICER WAS COMPLETELY JUSTIFIED IN ADOPTING THOSE FIGURES FOR T HE WHOLE YEAR AND FOR THE NEXT YEAR WHICH WAS BASED ON SOUND RATIONALE, SINCE FROM THE STATEMENT ON BEHALF OF THE ASSESSEE, THE SUPPRESSION WAS FOUND TO BE CONTINUED. IN VIEW OF THE UNCONTROVERTED AND ADMITTED STATEMENT GIVEN ON BEHALF OF THE ASSESSEE U/ S. 133A AND THE DOCUMENTS IMPOUNDED DURING THE SURVEY, WHICH WERE ALSO VIRTUALLY ADMITTED BY THE ASSESSEE, THERE WAS NO ERROR IN THE ORDER OF THE TRIBUNAL IN ACCEPTING THE MATERIALS ON RECORD IN ORDER TO ARRIVE AT AN ASSESSMENT. RELIANCE IS ALSO PLACED O N THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HOTEL MERIYA (332 ITR 537) WHEREIN IT WAS HELD AS UNDER: (II) THAT THE PARTNER OF THE ASSESSEE HAD IN UNAMBIGUOUS TERMS STATED THAT 20 PER CENT OF THE SALES OUTTURN WAS SUPPRESSED AND ONLY 80 PER CENT WAS RECORDED IN THE ACCOUNT BOOKS AND IT WAS THE 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 AS SESSEE 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. 7.2 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 200 8 - 09 . THERE WAS A CLEAR FINDING OF THE ASSESSING OFFICER I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 27 THAT THE ASSESSEE FIRM HAD PRACTICED SUPPRESSION OF SALES FO R 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 REAS ONABLY 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 TO Q. NO. 5 EXPLAINED THAT T HE ASSESSEE WAS ISSUING ESTIMATE SLIPS ONLY FOR SHOWING THE CUSTOMER, BUT THEY WERE ISSUING BILLS ON FINALIZATION OF THE SALES. THIS METHOD ADOPTED BY THE ASSESSEE IS HAVING NO LEGAL SANCTION. IT WAS ALSO NOTICED THAT THE ASSE SSEE HAD EFFECTED SALES BY ISSUE OF ESTIMATE SLIPS INSTEAD OF SALE BILLS AND THAT SALE BILLS WERE PREPARED FOR ACCOUNTING PURPOSES ONLY IN A FEW CASES. IT WAS ALSO NOTICED THAT THE SALES ON ESTIMATE SLIPS WERE NOT ACCOUNTED RESULTING IN UNACCOUNTING O F SALES AND SUPPRESSION OF TURNOVER. THE ESTIMATE SLIPS COLLECTED FROM DIFFERENT SHOPS AND THE MARGIN OF PROFIT ON SALE OF GOLD ORNAMENTS WERE CLEARLY COMPILED IN PARA 18 OF THE ORIGINAL ASSESSMENT ORDER. TH IS PRACTICE WAS REGULARLY FOLLOWED BY THE ASSES SEE . 7.3 IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THERE IS A CLEAR PATTERN OF SALES SUPPRESSION VISIBLE IN THIS CASE. THEREFORE, THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF SALES TAX VS. H.M. ESUFALI H.M. ABDULALI ( 90 ITR 271 ) CLEARLY APPLIES TO THE CASE IN HAND. IN THAT CASE, IT WAS HELD AS UNDER: I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 28 FOR THE PERIOD NOVEMBER 1, 1959 TO OCTOBER 29, 1960, THE ASSESSEE, A DEALER IN IRON AND STEEL, WAS ASSESSED TO SALES TAX ON A TURNOVER OF RS. 1,21,567 UNDER THE M.P. G ENERAL SALES TAX ACT, 1958, AND ON A TURNOVER OF RS.22,916 UNDER THE CENTRAL SALES TAX ACT, 1956. THESE ASSESSMENTS WERE MADE PRIMARILY ON THE BASIS OF THE RETURNS FILED BY THE ASSESSEE AND THE BOOKS OF ACCOUNT. SUBSEQUENTLY, THE FLYING SQUAD OF THE DEPAR TMENT INSPECTED THE BUSINESS PREMISES OF THE ASSESSEE AND FOUND A BILL BOOK FOR THE PERIOD SEPTEMBER 1 TO 19, 1960, SHOWING SALES OF THE VALUE OF RS. 31,171.28, WHICH HAD NOT BEEN ENTERED IN THE ASSESSEES ACCOUNT BOOKS. THE OFFICER INITIATED REASSESSMENT PROCEEDINGS U/S. 19(1) OF THE M.P. SALES TAX ACT, AND AFTER REJECTING THE ASSESSEES ACCOUNT BOOKS, ESTIMATED THE ESCAPED TURNOVER AT RS.2,50,000 UNDER THE M.P. SALES TAX ACT AND RS.1,00,000 UNDER THE CENTRAL SALES TAX ACT, ADOPTING THE SALES OF RS.31,171 .28 AS ESCAPED TURNOVER FOR A PERIOD OF 19 DAYS AS THE BASIS: HELD, THAT THE REASSESSMENTS WERE VALID. FROM THE CIRCUMSTANCE THAT THE ASSESSEE HAD DEALINGS OUTSIDE THE ACCOUNTS OF THE VALUE OF RS.31,171.28 FOR 19 DAYS, IT WAS OPEN TO THE OFFICER TO IN FER THAT THE ASSESSEE HAD LARGE - SCALE DEALINGS OUTSIDE THE ACCOUNTS. IN SUCH A SITUATION, 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 BAS I S OF THE M A T ERIAL 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 SUP PRESSED. 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 A SSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. THE HIGH COURT CANNOT SUBSTITUTE THE BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY. 7.4 THEREFORE, IN OUR CONSIDERED VIEW, IN THIS KIND OF A SSESSMENT, WHICH WAS CONSEQUENT TO SEARCH U/S. 132 OF THE ACT, THE UNDISCLOSED INCOME IS TO BE COMPUTED BASED ON EVIDENCE FOUND AS A RESULT OF SEARCH. THE EVIDENCE COLLECTED I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 29 DURING THE COURSE OF SEARCH ACTION SUGGEST THAT THE ASSESSEE IS ISSUING ESTIMATE SLIPS WHILE COLLECTING SALES. LATER, THE SALE BILLS ARE PREPARED FOR ACCOUNTING PURPOSES AND ACCOUNTING OF THE SALES MADE THROUGH ESTIMATE SLIPS WHICH RESULTED IN SUPPRESSION OF SALES WHICH WAS CONFIRMED BY THE STATEMENT RECORDED FROM SHRI BEJIMON S. , ERSTWHILE MANAGER OF M/S. SUNNY JACOB JEWELLERS AND WEDDING CENTRE, KOTTARAKKARA TRIED TO EXPLAIN THAT THE SHOP AT KOTTARAKKARA WAS NOT USING COMPUTER BUT ON RE - EXAMINATION HE STATED THAT THE COMPUTER WAS USED AT LEAST SPARINGLY. THE STATEMENT GIVEN BY SHRI PINTU T. JACOB, COMPUTER OPERATOR, M/S. SUNNY JACOB 916 JEWELLERY, TRIVANDRUM WAS A CLARIFICATION TO THE EFFECT THAT HE WAS ONLY PRINTING ESTIMATE SLIPS AND NOT SALE BILLS AND HE WAS ONLY ENTRUSTED WITH THE WORK OF PRINTING ESTIMATE SLIPS AND SALE BILLS WERE WRITTEN BY SHRI MATHEW EAPEN. THE STATEMENT GIVEN BY SHRI A. BABY, RETIRED KSRTC DRIVER, KOLLAM THAT HE WAS NOT ISSUED ANY PURCHASE BILL IN RESPECT OF PURCHASE OF NEW GOLD ORNAMENTS IN EXCHANGE OF OLD GOLD ORNAMENTS WAS CORRECT. THE STATEMENTS RECORDED BY THE ASSESSING OFFICER FROM THE ABOVE PERSONS WERE CONFIRMED BY THIS TRIBUNAL IN ITA NO.371/COCH/2016 VIDE ORDER DATED 10/10/2018. MOREOVER, THIS FACT IS ALSO SUPPORTED BY THE INSPECTION REPORT FROM THE COMMERCIAL TAX DEPARTMENT DATED 24/02/200 6 WHEREIN IT WAS FOUND THAT SIMILAR PRACTICE WAS BEING ADOPTED BY THE ASSESSEE IN SALE OF JEWELLERY BY ISSUING ESTIMATE SLIPS. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER HAD NO OPTION BUT TO ESTIMATE THE INCOME OF THE ASSESSEE. I T CANNOT BE SAID THAT IT IS ARBITRARY BUT BASED ON CORROBORATIVE EVIDENCE UNEARTHED DURING THE COURSE OF SEARCH ACTION AND ENQUIRY I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 30 THEREAFTER. IN OUR OPINION, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER AND ONCE THE BOOKS OF ACCOUNTS ARE REJEC TED, THE TURN OVER HAS TO BE ESTIMATED AND WHILE ESTIMATING THE TURNOVER, THE PATTERN FOLLOWED BY THE ASSESSEE HAS TO BE CONSIDERED . IN THIS CASE, THE STRATEGY FOLLOWED BY THE ASSESSEE TO SUPPRESS THE SALES IS COMMON FOR ALL THE ASSESSMENT YEARS AS COMPAR ED TO ASSESSMENT YEAR 2008 - 09 WHICH WOULD HAVE DIRECT RELEVANCE FOR ESTIMATION OF INCOME FOR THE ASSESSMENT YEARS 2005 - 06 TO 2007 - 08. 7.5 FURTHER, IN THE ASSESSEES OWN CASE REPORTED IN (362 ITR 664), THE JURISDICTIONAL HIGH COURT HELD THAT U/S. 15 3A, THE DEPARTMENT CAN ASSESS OR REASSESS IN ACCORDANCE WITH THE ASSESSMENT OR REASSESSMENT PROCEDURE CONTEMPLATED U/S. 153A OF THE ACT. THERE IS ALSO NO REQUIREMENT U/S. 153A AND OTHER PROVISIONS REQUIRING THE DEPARTMENT TO COLLECT INFORMATION AND EVIDEN CE FOR EACH AND EVERY YEAR FOR THE SIX PREVIOUS YEARS U/S. 153A OF THE I.T. ACT. THEREFORE, THE ARGUMENT OF THE LEARNED COUNSEL FOR THE APPELLANT - ASSESSEE THAT THE INFORMATION GATHERED EITHER DURING PRE - SEARCH ENQUIRY OR DURING THE COURSE OF SEARCH CANNOT BE MADE USE SO FAR AS THE SIX PREVIOUS ASSESSMENT YEARS, IS UNSUSTAINABLE. 7. 6 IN VIEW OF THE ABOVE DISCUSSIONS, WE FIND THAT THE ASSESSING OFFICER HAS GIVEN A CATEGORIC FINDING WITH REGARD TO SUPPRESSION OF SALES FOR ALL THE I.T.A. NOS. 326/COCH/2016 & 47 6 &477/COCH/ 201 8 (SUNNY JACOB JEWELLERS & WEDDING CENTRE ) 31 ASSESSMENT YEARS. WHIL E ESTIMATING THE PROFIT, THE ASSESSING OFFICER HAS ASSESSED THE INCOME ON THE BASIS OF RATE OF PROFIT ADOPTED FOR THE ASSESSMENT YEAR 2008 - 09. ON THIS REASONING, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER AND THE SAME IS CONFIRMED. HENCE, THIS GROUND OF APPEALS OF THE REVENUE ARE ALLOWED. 9. IN THE RESULT, THE APPEALS OF THE REVENUE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5TH FEBRUARY, 2019. SD/ - SD/ - GEORGE GEORGE K . ) (CHANDRA POOJARI) J UDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 5 TH S FEBRUARY, 2019 GJ COPY TO: 1. SUNNY JACOB JEWELLERS & WEDDING CENTRE, CHANTHAMUKKU, KOTTARAKKARA, KOLLAM. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CI RCLE - 1, NON - CORPORATE, KOCHI. 3 . THE COMMISSIONER OF INCOME - TAX (AP P EALS) - IV , KOCHI 4 . THE COMMISSIONER OF INCOME - TAX, CENTRAL, KOCHI. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN