Pattambi Fruits Co., Palakkad V. DCIT, Trichur

ITA 507/COCH/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7494 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 02-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-09-2013
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Keywords: Depreciation; Document seized; Principle of natural justice; Question of law; Documents seized
• Section: 40A(3); 143(3); 142(1); 153A; 147; 132; 144; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NOS. 604-611/COCH/ 2013 ASSESSMENT YEARS : 2001-02 TO 2008-0 9 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, THRISSUR. VS. PATTAMBI FRUITS CO., T.K. COMPLEX, PALLIPURAM ROAD, PATTAMBI, PALAKKAD. [PAN:AEFP 0708N] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) I.T.A. NOS. 504-507COCH/ 2013 ASSESSMENT YEARS : 2002-03, 2004-05, 2006-07 & 2007 -08 PATTAMBI FRUITS CO., T.K. COMPLEX, PALLIPURAM ROAD, PATTAMBI, PALAKKAD. [PAN:AEFP 0708N] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, THRISSUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI ANIL D. NAIR, ADV. REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 02/02/2016 DATE OF PRONOUNCEMENT 12/02/2016 O R D E R PER BENCH: THE REVENUE HAS RAISED THE FOLLOWING APPEALS F OR DIFFERENT YEARS AND THE ASSESSEE HAS ALSO FILED APPEALS AS PER DETAILS BELO W: I.T.A. NO.504 ETC./COCH/2013 2 SL. NO. I.T.A. NO. ASSESSEE /REVENUE ASST. YEAR CIT(A) DATE OF ORDER 1. 604/COCH/2013 REVENUE 2001-02 CIT(A) I, KOCHI 03.06.2013 2. 605/COCH/2013 -DO- 2002-03 -DO- -DO- 3. 606/COCH/2013 -DO- 2003-04 -DO- -DO- 4. 607/COCH/2013 -DO- 2004-05 -DO- -DO- 5. 608/COCH/2013 -DO- 2005-06 -DO- -DO- 6. 609/COCH/2013 -DO- 2006-07 -DO- -DO- 7. 610/COCH/2013 -DO- 2007-08 -DO- -DO- 8. 611/COCH/2013 -DO- 2008-09 -DO- -DO- 9. 504/COCH/2013 PATTAMBI FRUITS CO. 2002-03 CIT(A)-I, KOCHI 03.06.2013 10. 505/COCH/2013 -DO- 2004-05 -DO- -DO- 11. 506/COCH/2013 -DO 2006-07 -DO- -DO- 12. 507/COCH/2013 -DO- 2007-08 -DO- -DO- 2. IDENTICAL GROUNDS HAVE BEEN TAKEN IN ALL THE R EVENUE AND ASSESSEE APPEALS IN ALL THE YEARS. FOR THE SAKE OF CONVENIEN CE, WE REPRODUCE THE FOLLOWING GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2001-02 IN I.T.A NO. 604/COCH/2013 IN THE CASE OF THE REVENUE AS UNDER: 1. IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN VACATING THE ASSESSMENT ORDER O N THE TENETS OF COMPLETED PROCEEDINGS WITHOUT APPRECIATING THE FIN DINGS OF THE ASSESSING OFFICER DERIVED FROM THE MATERIALS FOUND AND SEIZE DURING THE COURSE OF SEARCH AND CONCLUSIONS DRAWN DURING POST- SEARCH PROCEEDINGS. THE CIT(APPEALS)S DECISION TO VACATE THE ASSESSMEN T ORDER IS IN DEFIANCE OF THE LAW AND IN CONTRADICTION TO THE RAT IO OF THE DECISION RELIED UPON BY HIM, WHERE THE QUESTION OF LAW WAS REGARDIN G JURISDICTION TO MAKE THE ADDITION BASED ON SEIZED MATERIALS PERTAIN ING TO A PARTICULAR YEAR AND NOT THE VALIDITY OF THE ASSESSMENT MADE. THE LEARNED CIT(APPEALS)S ORDER VACATING THE ASSESSMENT ORDER FOR THE AY 2001-02, THEREFORE, DESERVES TO BE REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED. I.T.A. NO.504 ETC./COCH/2013 3 2. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL , THE ASSESSMENT MADE FOR THE AY 2001-02 DESERVES TO BE SUSTAINED ON MERITS, SINCE THE ASSESSMENT MADE IS BASED ON FINDINGS DERIVED FROM S EIZED MATERIALS AND INFERENCE DRAWN FROM INVESTIGATIONS MADE DURING POS T-SEARCH PROCEEDINGS. IT IS NOT THE CASE OF THE ASSESSEE TH AT IT HAD PROPERLY COMPLIED WITH THE VARIOUS NOTICES SENT TO IT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT ITS BOOKS OF ACCOUNTS WERE CORRECT AND COMPLETE. THE ES TIMATE OF PROFIT AND ADDITIONS MADE BY THE ASSESSING OFFICER WERE BASED ON FINDINGS DERIVED FROM THE SEIZED MATERIALS AND CONCLUSIONS ARRIVED A T AFTER CONDUCTING VARIOUS INVESTIGATION DURING POST-SEARCH PROCEEDING S. SINCE THE ASSESSING OFFICER HAS BROUGHT ON RECORD CLINCHING E VIDENCE AND FINDINGS ON THE BASIS OF WHICH HE HAS EXTRAPOLATED THE PROFI T FOR AY 2001-02 AND MADE VARIOUS OTHER ADDITIONS, THE ASSESSMENT SO MAD E DESERVES TO BE SUSTAINED ON MERITS. 3. THE APPELLANT PRAYS THAT THE CIT(APPEALS) ORDERS VACATING THE ASSESSMENT MAY BE REVERSED AND THAT OF THE ASSESSIN G OFFICER RESTORED ON LEGAL GROUND AND THE ASSESSMENT OF INCOME MADE S USTAINED ON MERITS. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS ALSO RAISED IDENTICAL GROUNDS IN ALL THE YEARS. WE REPRODUCE HEREINBELOW THE GROUNDS RAISED BY THE ASS ESSEE FOR THE ASSESSMENT YEAR 2002-03 IN I.T.A. NO. 504/COCH/2013 :- 1. THE ORDER OF THE LOWER AUTHORITIES ARE AGAINST L AW, FACTS AND NATURAL JUSTICE. 2. THE LEARNED LOWER AUTHORITIES ERRED IN LAW AS WE LL AS ON FACTS WHILE MAKING INCONSISTENT ESTIMATES BASED ON SEIZED MATER IALS. 3. THE ASSUMPTIONS WITH REGARD TO SEIZED MATERIALS ARE TOTALLY UNJUSTIFIED UNWARRANTED AND UNSUBSTANTIATED BY THE MATERIALS ON RECORD. I.T.A. NO.504 ETC./COCH/2013 4 4. SEIZED MATERIALS DOES NOT REPRESENT A RECORDING OF TRANSACTIONS RELATING TO THE APPELLANT AND IS NOT ON ACCOUNT OR A RECORD MAINTAINED BY THE APPELLANT. 5. THE MATERIAL ALLEGED TO BE SEIZED MATERIALS AND BASED ON WHICH THE INCOME IS ESTIMATED WAS NOT A RECORD SEIZED FROM TH E PREMISES OF THE APPELLANT. CONSEQUENTLY THE RULE OF PRESUMPTION CON TAINED IN RULE 132(4) CANNOT BE INVOLVED. 6. THE COMMISSIONER OF INCOME TAX(APPEALS) WENT WRO NG IN ESTIMATING PROFIT OF AN YEAR BASED ON PURCHASES ALONE AND THAT TOO RELATING TO 149 DAYS. 7. SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING. 4. THE ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED ON 01/04/1998 BY A PARTNERSHIP DEED DATED 09/11/1998 WITH THREE PARTNE RS, VIZ. SHRI V. MOHAMMED, SHRI ABDUL MAJEED AND SHRI ABDUL RAHIMAN . THE FIRM WAS CONSTITUTED TO CARRY ON THE BUSINESS IN THE WHOLESA LE AND RETAILS SALE OF FRUITS IN PATTAMBI. A SEARCH U/S. 132 OF THE ACT W AS CARRIED ON IN THE BUSINESS PREMISES OF THE FIRM AND AT THE RESIDENCES OF THE PARTNERS ON 14/11/2006. FALLING IN THE FINANCIAL YEAR 2006-07 P ERTAINING TO THE ASSESSMENT YEAR 2007-08. DURING THE COURSE OF SEAR CH, CASH AND VARIOUS DOCUMENTS WERE FOUND AND SEIZED. STATEMENTS OF THE PARTNERS AND SOME EMPLOYEES WERE RECORDED DURING THE COURSE OF SEARCH . THE ASSESSEE HAD ALREADY FILED RETURNS FOR ALL THE BLOCK YEARS U/S. 139 OF THE ACT. NOTICE U/S. 153A(A) WAS ISSUED ON 22/10/2007 TO THE ASSESSEE AN D IN RESPONSE TO THAT NOTICE, THE ASSESSEE FILED THE RETURNS ON 24-03-200 8. HOWEVER, FOR THE ASSESSMENT YEAR 2007-08, NOTICE U/S. 142(1) WAS ISS UED ON 22/10/2007 AND I.T.A. NO.504 ETC./COCH/2013 5 THE RETURN OF INCOME WAS FILED ON 24/03/2008. THE ASSESSEE HAS SHOWN THE TOTAL INCOME AS PER THE ORIGINAL RETURN AND IN RESP ONSE TO 153A AS UNDER: ASSESSMENT YEAR INCOME RETURNED AS PER 139 (RS.) INCOME RETURNED AS PER 153A (RS.) 2001-02 37,600/- 37,600/- 2002-03 24,820/- 24,820/- 2003-04 1,35,490/- 1,35,490/- 2004-05 97,750/- 97,750/- 2005-06 1,15,420/- 1,15,420/- 2006-07 2,55,310/- 10,34,846/- 2007-08 16,68,300/- 16,68,300/- DURING THE COURSE OF ASSESSMENT, THE ASSESSING OF FICER FOUND THAT THREE SETS OF ACCOUNT BOOKS ARE MAINTAINED BY THE ASSESSE E, VIZ. (A) ACCOUNT BOOKS MEANT FOR DISCLOSURE BEFORE THE DEPARTMENT, ( B) BOOKS REFLECTING THE CORRECT POSITION OF THE BUSINESS AND (C) BOOKS OF A CCOUNT FURNISHED DURING THE ASSESSMENT PROCEEDINGS. ACCORDING TO THE ASSES SING OFFICER, THE DEPARTMENT HAS SEIZED BOOKS OF ACCOUNTS AND IDENTIF IED AS APC 73, APC 74, APC 10, APC 11 & APC 12. THE ASSESSING OFFICER HA S NOTED THAT AS PER THE STATEMENT RECORDED DURING THE COURSE OF SEARCH FROM THE MG. PARTNER SHRI V. MOHAMMED ASSESSEE AS WELL AS SHRI ABDUL RASHEED, EMPLOYEE OF THE FIRM, THESE ARE THE ACCOUNTS RESULTS OF WHICH ARE M EANT TO BE REFLECTED IN THE INCOME TAX RETURNS. THE DEPARTMENT HAD SEIZED S OME OTHER BOOKS IDENTIFIED AS APC 33 TO 40, APC 3,4 & 8, APC 64 TO 71, ETC. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS NOT A CONSIGNEE, IN A CONSIGNMENT BUSINESS, BUT CONDUCTING OWN SALE BUS INESS AND A MEAGER I.T.A. NO.504 ETC./COCH/2013 6 AMOUNT OF COMMISSION HAS BEEN SHOWN BY INFLATING TH E DIRECT EXPENSES SUCH AS FREIGHT, COOLIE AND SUCH DETAILS WERE NOT S HOWN IN THE RETURN OF INCOME. THE ASSESSEE HAS NOT FURNISHED ITS TRADING ACCOUNT ALONG WITH THE RETURNS BUT FILED COPY OF PROFIT AND LOSS ACCOUNT S TARTING FROM GROSS COMMISSION RECEIVED. THE ASSESSING OFFICER FOUND T HAT IN ADDITION TO CONSIGNMENT EXPENSES, HUGE EXPENSES ARE CLAIMED IN THE P&L ACCOUNT WHICH IS AGAINST THE PRINCIPLES OF CONSIGNMENT BUSI NESS. IN THIS LINE OF BUSINESS ALL THE EXPENSES EXCEPT NEGLIGIBLE ADMINIS TRATIVE EXPENSES ARE TO BE BORNE BY THE CONSIGNOR. BY THIS WAY, THE ASSES SEE HAS REDUCED THE PROFIT. 5. FROM THE BOOKS OF ACCOUNT, THE CORRECT POSITIO N OF THE BUSINESS WAS RECORDED IN THE BOOKS APC 33 TO 40 WHICH CONSISTED OF BUNDLES OF LOOSE SHEETS CONTAINING DAILY TRANSACTIONS OF THE FIRM FR OM APRIL, 2006 TO 13 TH NOVEMBER, 2006, APC 4&8 ARE ROUGH BOOKS FROM 01/12/ 2005 TO 01/11/2006, APC 65-71 ARE POCKET BOOKS WHICH ACT A S LEDGERS IN RESPECT OF PURCHASES, SALES, COOLIE CHARGES, FREIGHT CHARGES E TC. FROM THESE BOOKS, APC 64 REFLECTS THE CASH PURCHASE TRANSACTIONS MADE FOR A PERIOD OF 149 DAYS FROM 05/09/2001 TO 31/01/2002. 6. THE ASSESSEE CLAIMED TO BE A CONSIGNMENT AGENT. HOWEVER, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE DID NOT CONFORM TO THAT MAINTAINED BY A I.T.A. NO.504 ETC./COCH/2013 7 CONSIGNMENT AGENT. THE DEPOSITION OF ONE OF THE EMP LOYEES WAS ALSO RECORDED IN WHICH ONE OF THE EMPLOYEES, SHRI K. ABDUL RASHEED C ONTENDED THAT THE ASSESSEE IS DOING OWN SALE BUSINESS AND NOT THE COMMISSION B USINESS. HE FURTHER STATED THAT THE SALES DETAILS ARE NOT RECORDED INDIVIDUAL PARTY-WISE FROM WHOM PURCHASED. THE SALES PATTIKA IS PREPARED ACCORDING TO THE MARKET RATE AT WHICH THE GOODS ARE SOLD AND AFTER DEDUCTING COMMISSION, THE NET AMOUNT IS DECLARED AS PAID TO THE PARTIES. IT WAS FURTHER STATED BY HI M THAT THE INFRASTRUCTURE AND THE DISTRIBUTION NETWORK OF THE ASSESSEE IS USED FO R SUCH BUSINESS. THERE WERE CERTAIN SUNDRY CREDITORS AND SUNDRY DEBTORS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE FURNISHED THE NAMES OF FIVE PARTIES OUT OF 54 WHOSE NAMES WERE APPEARING IN THE BALANCE SHEET AS SUNDRY CREDITORS. THERE WAS EVIDENCE OF RECEIPT OF SALE PRODUCED NEITHER DURING THE COURSE OF SEARCH NOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE E NQUIRIES IN RESPECT OF SUPPLIERS WERE GOT DONE THROUGH THE OFFICERS IN THE INVESTIGATION WING OF DELHI AND CHENNAI TO EXAMINE THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT THEY HAVE RECEIVED CONSIGNMENTS OF FRUITS FOR SALE ON COMMISS ION BASIS. 7. THE BOOKS OF ACCOUNT SHOW PURCHASES FROM PERSO NS OTHER THAN THE CULTIVATORS TO WHOM PAYMENTS HAVE BEEN MADE IN CASH . THESE PAYMENTS ARE NOT COVERED BY THE EXCEPTIONS PROVIDED UNDER RULE 6DD A ND AS SUCH 20% OF SUCH EXPENSES HAVE BEEN DISALLOWED UNDER SECTION 40A(3) OF THE ACT. THE ASSESSING OFFICER RELIED UPON THE DOCUMENTS SEIZED DURING THE COURSE OF THE SEARCH AND I.T.A. NO.504 ETC./COCH/2013 8 ESTIMATED THE INCOME OF THE ASSESSEE BY ADOPTING A FORMULA BY WHICH ADDITIONS WERE MADE. ACCORDING TO THE ASSESSING OFFICER, ONL Y THE BOOKS REFLECTING THE CORRECT POSITION WHICH WERE FOUND AND SEIZED ARE RE LATING TO THE SALES AND PURCHASES WERE FOR THE PERIOD FROM APRIL 2006 TO 13 TH NOVEMBER 2006 AND ROUGH BOOKS FROM 01/12/2005 TO 01/11/2006. ACCORDING TO THE ASSESSING OFFICER, OTHER BOOKS WERE RELATING TO THE ASSESSMENT YEAR 2001-02 TO 2005-06 WHICH ARE BOOKS SUPPORTING THE RETURNS FILED AND PREPARED ONLY FOR THE PURPOSE OF INCOME TAX DEPARTMENT AND HENCE, NOT RELIABLE. ON THIS PREMIS E, THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE. THERE WAS ALS O DISALLOWANCE U/S. 40A(3) FOR THE PAYMENTS MADE TO THE FARMERS AND THERE WAS ALSO DISALLOWANCE OF CLAIM OF FREIGHT MADE BY THE ASSESSEE. THE ASSESSMENTS W ERE ACCORDINGLY COMPLETED U/S. 153A OF THE ACT FOR THE ASSESSMENT YEARS 2001- 02 TO 2005-06 AND FOR THE ASSESSMENT YEAR 2006-07 WAS COMPLETED U/S. 153A(B) AND THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 WERE COMPL ETED U/S. 143(3) OF THE ACT. 8. THE ASSESSEE BEING AGGRIEVED FROM THE ORDER OF THE ASSESSING OFFICER FILED THE APPEAL BEFORE THE LD. CIT(A) WHO ASKED FOR REMA ND REPORT AND ACCORDINGLY MODIFIED THE ASSESSMENT. I.T.A. NO.504 ETC./COCH/2013 9 9. NOW THE REVENUE IS IN APPEAL BEFORE US FOR THE RELIEF GRANTED AND THE ASSESSEE IS IN APPEAL FOR THE RELIEF NOT OBTAINED I N THE APPELLATE ORDER PASSED BY THE LD. CIT(A). 10. THE CHALLENGE BEFORE US BY THE REVENUE IS WIT H REGARD TO THE FINDINGS OF THE LD. CIT(A) AS TO THE EXTENT OF HOLDING THAT THE ASSESSEE IS A CONSIGNMENT AGENT AND NOT A PERSON BUYING AND SELLING FRUITS. D URING THE COURSE OF APPEAL AND DURING THE REMAND PROCEEDINGS, THE REVENUE HAS TAKEN NOTE OF THE EVIDENCES FROM SEVERAL FARMERS ACROSS THE COUNTRY B UT THE ASSESSEE WAS NOT GIVEN THE OPPORTUNITY TO CROSS EXAMINE THE SAID FAR MERS. BASED ON SUCH EVIDENCES, THE ASSESSING OFFICER WAS OF THE VIEW TH AT THE ASSESSEE IS NOT INVOLVED IN THE BUSINESS AS A CONSIGNMENT AGENT. HO WEVER, THE LD. CIT(A), WHILE DECIDING THE APPEAL, HAS TAKEN NOTE OF THE FACT THA T THE ASSESSEES PARTNERS HAVE STUDIED ONLY UPTO 4 TH STANDARD AND THE ACCOUNTS ARE MAINTAINED BY AN ACCOUNTANT WHO IS NOT A PROFESSIONAL. THE ASSESSEE FOLLOWS TRADITIONAL BUSINESS AND ACCOUNTING PRACTICE PREVALENT IN FRUIT BUSINESS TO RECORD THE CONSIGNMENT TRANSACTIONS. THE LD. CIT(A) ALSO TOOK NOTE OF THE FACT THAT THE STYLE OF THE ACCOUNTS SHOULD NOT BE THE CRITERIA TO JUDGE THE NA TURE OF THE BUSINESS TRANSACTIONS AND WHAT WAS RELEVANT WAS THE CONTENT OF THE TRANSACTIONS RATHER THAN THE FORM OF STATIONERY AND ACCOUNTING PRACTICE . ON A PERUSAL OF THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH, THE LD . CIT(A) PROCEEDED TO HOLD THAT THE SEIZED DOCUMENTS HAVE EVIDENTIARY VALUE IN TERMS OF SECTION 132(4) OF I.T.A. NO.504 ETC./COCH/2013 10 THE ACT AND THE ASSESSING OFFICER HAS NOT DISCHARGE D THE BURDEN OF PROVING THAT THEY ARE UNRELIABLE. FURTHERMORE, THE FINDING OF T HE ASSESSING OFFICER THAT FROM THE DOCUMENTS RECOVERED AVAILABLE IN APC 4&8 AND AP C 65-71, IT WOULD REVEAL THAT THEY ARE NOT DIFFERENT FROM ANY OWN SALE BUSIN ESS. FURTHERMORE, THE ASSESSEE HAS BEEN FURNISHED WITH THE COPIES OF EVID ENCES RECORDED ONLY DURING THE COURSE OF APPELLATE PROCEEDINGS AND THEY HAVE O BJECTED FOR USE OF THE SALE AS ONE TAKEN WITHOUT AN OPPORTUNITY TO CROSS EXAMIN E. ON THE BASIS OF PATTIALS ISSUED, CERTAIN DISCREPANCIES WERE POINTED OUT TO T HE EFFECT THAT IT DOES NOT CONFORM TO THE ACCOUNTING STANDARDS. THE LD. CIT(A) EXAMINED THESE CONTENTIONS AND HELD THAT THE DEPARTMENT IS NOT IN A POSITION TO PROVE THAT THEY WERE WRONG AND THAT THESE PATTIALS HAVE NOT BEEN AC CEPTED BY THE SUPPLIERS. THE ONLY ARGUMENT OF THE ASSESSING OFFICER IS THAT THE COMMISSION IS RECEIVED IN THE GARB OF INFLATED EXPENSES AND THEREFORE, THE TR ANSACTION IS NOT CONSIGNMENT. 11. WE HAVE EXAMINED THE ISSUE ON THE BASIS OF T HE ARGUMENTS MADE BEFORE US AND ON THE BASIS OF DOCUMENTS PRODUCED DURING TH E COURSE OF HEARING. THE REASONING OF THE ASSESSING OFFICER TO HOLD THAT THE ASSESSEE IS DOING OWN BUSINESS IS ON THE BASIS OF STATEMENT RECORDED OF S HRI K. ABDUL RASHEED, AN EMPLOYEE OF THE ASSESSEE WHO HAS CONFIRMED THAT THE SALE PATTIKAS ARE ISSUED WHICH IS COMMERCIALLY ACCEPTED DOCUMENT IN RESPECT OF CONSIGNMENT BUSINESS AND THAT THE SAME IS IN ACCORDANCE WITH THE MARKET RATE OF SALE AFTER DEDUCTING THE COMMISSION ITSELF. FURTHERMORE, IT IS AN ADMITT ED POSITION THAT THE ENTIRE I.T.A. NO.504 ETC./COCH/2013 11 TRANSACTIONS OF THE ASSESSEE ARE ON THE BASIS OF SA LE PATTIYALS. THERE IS NOTHING ON RECORD TO SHOW THAT THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WERE ON THE BASIS OF SOME OTHER DOCUMENTS. ACCORDINGLY, WE CON FIRM THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE IS INVOLVED IN CONSIGNMENT BUSINESS AND NOT BUYING AND SELLING BUSINESS. 12. THE REVENUE HAS ALSO AGITATED THE ISSUE OF ESTIMATION OF INCOME FOR THE ASSESSMENT YEAR 2001-02 TO 2005-06. ACCORDING TO TH E ASSESSING OFFICER, THE ONLY BOOKS REFLECTED THE CORRECT POSITION OF THE BU SINESS WHICH ARE FOUND AND SEIZED ARE RELATING MAINLY TO SALES AND PURCHASES F OR THE PERIOD APRIL 2006 TO 13 TH NOVEMBER, 2006 AND ROUGH BOOKS FROM 01/12/2005 TO 0 1/04/2006. APC 64 REPRESENTS CASH TRANSACTIONS FOR THE PERIOD OF 149 DAYS FROM 05/09/2001 TO 31/01/2002. ACCORDING TO THE ASSESSING OFFICER, OTH ER BOOKS RELATING TO VARIOUS ASSESSMENT YEARS SUPPORT THE RETURN FILED AND PREPA RED FOR THE INCOME TAX DEPARTMENT ARE NOT RELIABLE RECORDS. THE ASSESSING OFFICER HAD REJECTED SUCH BOOKS AND RETURNS AND THE ASSESSING OFFICER HAS PRO CEEDED TO COMPLETE THE ASSESSMENT U/S. 144 OF THE ACT. THE BOOKS FOR THE A SSESSMENT YEARS 2006-07 AND 2007-08 ARE BOOKS NOT FOUND AND SEIZED AT THE T IME OF SEARCH. THOUGH THESE ARE PREPARED POST SEARCH PRODUCED AT THE TIME OF TH E ASSESSMENT. WHILE COMPLETING ASSESSMENT U/S. 143(3) FOR THE ASSESSMEN T YEARS 2006-07 AND 2007- 08, THE ASSESSING OFFICER HAS RELIED ON THE PURCHAS ES AND SALES FIGURES AS GIVEN IN THE BOOKS OF ACCOUNT PRODUCED AT THE TIME OF ASS ESSMENT, THOUGH THESE BOOKS I.T.A. NO.504 ETC./COCH/2013 12 WERE NEVER FOUND AND SEIZED. ACCORDING TO THE ASSE SSING OFFICER THESE BOOKS ARE PREPARED POST SEARCH MAINLY TO CONFIRM THE POST SEARCH RETURN FILED. THE ASSESSING OFFICER HAS COMPARED PRE SEARCH RETURNS A ND POST SEARCH RETURNS FOR THE ASSESSMENT YEARS 2006-07 AND HAS COME TO THE CO NCLUSION THAT IN THE POST SEARCH RETURN, SALES IS HIGHER AT 267% AND PURCHASE S IS HIGHER AT 276.93%. BASED ON THIS RATIO, THE ASSESSING OFFICER HAS ESTI MATED SALES AND PURCHASES FOR THE VARIOUS YEARS FROM 2001-02 TO 2005-06. FROM TH E ABOVE, THE ASSESSING OFFICER HAS DEDUCTED EXPENSES AS PER THE ORIGINAL R ETURN. 13. THE LD. CIT(A) HAS EXAMINED THE DETAILS AND SUBMISSIONS PUT FORTH BEFORE HIM AND HAD APPRECIATED THE DOCUMENT SEIZED AS APC 64. IT RELATES TO THE PERIOD 05/09/2001 TO 31/01/2002. IT SHOWS PAYMENT OF RS.97,71,000/- BY TTS DURING THE FINANCIAL YEAR 2001-02. THESE ENTRIES A RE NOT FOUND IN THE CASH BOOKS PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING S, ACCORDINGLY, THE ASSESSING OFFICER HAS CONCLUDED THAT APC 64 REPRESE NTS UNACCOUNTED PURCHASES FOR THE AFORESAID PERIOD OF 4 MONTHS AND 26 DAYS. ON THE ABOVE BASIS, HE HAD WORKED OUT THE ALLEGED UNDISCLOSED PURCHASES AT RS. 3,90,84,000/- CONCLUDING THAT THE UNDISCLOSED PURCHASES WHICH REPRESENT 138% OF THE DISCLOSED PURCHASES AS PER THE PROFIT AND LOSS ACCOUNT. HE FURTHER CONC LUDED THAT THERE ARE DIRECT PURCHASES OF RS.1,54,53,034/- AND CONCLUDED THAT TH IS REPRESENTS UNACCOUNTED PURCHASES FOR THE PERIOD OF 149 DAYS. THE LD. CIT( A) HAS EXAMINED THE ISSUE AND FOUND THAT SHRI SHAMSUDEEN WAS THE WRITER OF TH E BOOK, NAMELY APC 64 AND I.T.A. NO.504 ETC./COCH/2013 13 HIS STATEMENT WAS RECORDED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. THOUGH A COPY OF THE SAME WAS REQUESTED BY THE ASSE SSEE TO BE GIVEN, BUT THE SAME WAS NEVER FURNISHED TO THE ASSESSEE. SIMILAR REQUEST WAS MADE DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS BUT NO COPY O F THE SAME WAS MADE AVAILABLE TO THE ASSESSEE. THE ASSESSEE HAS ALSO R EQUESTED A COPY OF THE STATEMENT RECORDED OF SHRI V. MOHAMMED WHICH WAS AL SO NOT FURNISHED TO THE ASSESSEE. THE ASSESSEE CONSISTENTLY CONTENDED THAT THE DOCUMENT MAINTAINED BY SHRI SHAMSUDEEN, NAMELY APC 64 DOES NOT EXCLUSIVELY CONTAIN THE TRANSACTIONS OF THE ASSESSEE BUT ALSO OF M/S. RATHAN LAL & CO. DEALING WITH VARIOUS PURCHASES IN KERALA FOR WHOM SHRI SHAMSUDEEN WAS HANDLING THE ACCOUNTS. THE LD. CIT(A) HAS TAKEN NOTE OF THE LETTER DATED 06/08/2009, WHER E THE ASSESSEE HAS CLEARLY EXPLAINED THE NATURE, SOURCE AND SCOPE OF APC 64. THE EVIDENTIARY VALUE OF THE SAID DOCUMENT IS NOT IN DISPUTE. HOWEVER, SINCE THE BOOKS WERE MAINTAINED BY SHRI SHAMSUDEEN, THE ENTRIES WERE RELEVANT AND THE REFUSAL OF THE ASSESSING OFFICER TO FURNISH THE COPIES OF STATEMENTS RECORDE D OF SHAMSUDEEN GIVES RISE TO A SERIOUS APPREHENSION W.R.T. DOCUMENT. VIDE LETTER DATED 26-08-2009, THE ASSESSEE HAS EXPLAINED THAT THE EXPRESSION TT DID NOT REPRESENT TELEGRAPHIC TRANSFER AS ASSUMED BY THE ASSESSING OFFICER. IT IS NOT CLEAR AS TO WHETHER THE ASSESSING OFFICER HAS MADE ANY ENQUIRY IN THIS REGA RD. THE ASSESSEE HAS CONTENDED THAT THE SAID DOCUMENT DOES NOT REPRESENT TRANSACTIONS RELATING TO THE ASSESSEE AND IS NOT MAINTAINED BY THE ASSESSEE. TH E ASSESSEE SUBMITTED THAT IN VIEW THEREOF THE DOCUMENT APC 64 CANNOT BE GIVEN R ECOGNITION. I.T.A. NO.504 ETC./COCH/2013 14 14. THE ASSESSING OFFICER HAS NOT CONSIDERED NE ITHER THE POST SEARCH RETURN NOR THE PRE SEARCH RETURN CONNECTED BOOKS OF ACCOUN T. HE RELIES ON THE POST SEARCH BOOKS WHICH IS NEITHER FOUND NOR SEIZED AT T HE TIME OF SEARCH. THE ONLY MATERIAL FOUND AND SEIZED DURING THE COURSE OF SEAR CH ARE THE DETAILS OF PURCHASE FOR THE PERIOD OF 149 DAYS FROM 05/09/2001 TO 31.01 .2002. THE ANALYSIS DONE BY THE AO IS NOT FROM THE SEIZED DOCUMENTS BUT FROM TH E DOCUMENTS PRODUCED POST SEARCH. THE LD. CIT(A) HAS ADOPTED AVERAGE OF UNDIS CLOSED PURCHASES AT 178% BEING AVERAGE OF THE DOCUMENTS RECOVERED DURING THE COURSE OF SEARCH. 15. WE HAVE PERUSED THE MATERIAL ON RECORD. WE AR E OF THE VIEW THAT THE CALCULATION/FORMULA ADOPTED BY THE ASSESSING OFFICE R IS ON THE BASIS OF THE BOOKS SEIZED OR RECOVERED DURING THE COURSE OF SEARCH. H E HAS RELIED ON THE DOCUMENT, THE WRITER OF WHICH WAS SUBJECTED TO EXAMINATION BU T FOR REASONS BEST KNOWN TO THE ASSESSING OFFICER, THE COPY OF THE SAME WAS NOT MADE AVAILABLE TO THE ASSESSEE. INSPITE OF THE REPEATED REQUESTS, BOTH A T THE TIME OF ASSESSMENT AND AT THE TIME OF APPEAL, SUCH DEPOSITIONS WERE NOT MA DE AVAILABLE TO THE ASSESSEE. IN VIEW THEREOF, WE ARE LEFT WITH NO OTHER OPTION B UT TO BELIEVE THE CONTENTION OF THE ASSESSEE THAT THE DOCUMENT RELIED UPON DOES NOT REFLECT THE ACCOUNTS OF THE ASSESSEE ALONE BUT OF SOME OTHER DEALERS ALSO, THE ACCOUNTS OF WHICH WERE MAINTAINED BY SHRI SHAMSUDEEN. THE FORMULA ADOPTED BY THE LD. CIT(A) IS ON THE BASIS OF DOCUMENTS RECOVERED DURING THE COURSE OF SEARCH AND THEREFORE, IN I.T.A. NO.504 ETC./COCH/2013 15 THE ABSENCE OF ANY OTHER DOCUMENTS BEING PRODUCED B Y THE REVENUE, WE ACCEPT THE FINDINGS OF THE LD. CIT(A). 16. FOR THE ASSESSMENT YEAR 2001-02, 2003-04, 2004-05 A ND 2005-06, THERE WAS NO SEARCH MATERIALS OR EVIDENCE COLLECTED DURIN G THE COURSE OF SEARCH. FOR THESE PERIODS ALSO, THE ASSESSING OFFICER HAD APPLI ED THE SAME FORMULA FOR ESTIMATING THE INCOME. THE ASSESSEE BEING AGGRIEVE D BY THE ESTIMATION OF INCOME FOR THESE YEARS, RELIED ON THE RATIO OF THE DECISION OF THE ITAT, COCHIN IN THE CASE OF DCIT VS. MATHA ENTERPRISES IN I.T.A. NOS . 269-275/COCH/2010 IN SUPPORT OF HIS PROPOSITION THAT ADDITION IS NOT WAR RANTED. HE ALSO RELIED UPON THE DECISION OF THE ITAT, COCHIN IN THE CASE OF BEST BA KERY AND ICE CREAM PARLOUR VS. ACIT IN I.T.A. NOS. 498 AND 499/COCH/2010 AND A LSO IN THE CASE OF M/S. JOHN & CO. IN I.T.A. NOS. 445 TO 450/COCH/2011 DATED 2 6/04/2013 IN SUPPORT OF HIS PROPOSITION THAT ADDITION IS NOT WARRANTED AND ASSE SSMENTS HAVE ABATED. 17 . THE LD. CIT(A) HAS RELIED ON THE DECISION OF TH E SPECIAL BENCH OF THE ITAT MUMBAI IN THE CASE OF ALL CARGO LOGISTICS LTD., 137 ITD 287 (MUM) (SB) WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY INCRIMINATIN G EVIDENCE, NO ADDITION CAN BE MADE. THE LD. CIT(A), ACCORDINGLY, RELIED ON THE R ATIO OF SAID JUDGMENT AND VACATED THE ORDER FOR THE ASSESSMENT YEAR 2001-02, 2003-04, 2004-05 AND 2005- 06. I.T.A. NO.504 ETC./COCH/2013 16 18. THE REVENUE HAS AGITATED THIS ISSUE ON THE P REMISE THAT THE JURISDICTIONAL HIGH COURT OF KERALA HAS IN THE CASE OF SUNNY JACOB JEWELLERS AND WEDDING CENTRE VS. DCIT (2014) 48 TAXMAN.COM 347 (KER) WHER EIN IT WAS HELD THAT THERE IS NO REQUIREMENT OF THE DEPARTMENT TO COLLECT INFO RMATION AND EVIDENCE FOR EACH AND EVERY YEAR FOR THE SIX PREVIOUS YEARS IN ORDER TO INITIATE THE PROCEEDINGS U/S. 153A OF THE ACT. PER CONTRA THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE UNDERSTANDING OF THE DEPARTMENT OF THE RATIO OF THE JUDGMENT IS NOT CORRECT AND THAT THE JUDGMENT ONLY SAYS THAT THE DEPARTMENT HAS THE POWER TO INITIATE PROCEEDINGS U/S. 153A OF THE ACT FOR THE SIX PRECED ING YEARS. HE FURTHER CONTENDED THAT THE JUDGMENT IS SILENT ABOUT THE UND ISCLOSED INCOME WHICH CAN BE ASSESSED U/S. 153A WHICH CANNOT BE ARRIVED AT IN THE ABSENCE OF ANY INCRIMINATING EVIDENCE RECOVERED DURING THE COURSE OF SEARCH. HE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (2015) 61 TAXMAN.COM 412 TO CANVASS THE PROPOSITION THAT T HE COMPLETED ASSESSMENT CAN BE INTERFERED WITH BY THE ASSESSING AUTHORITY W HILE MAKING THE ASSESSMENT U/S. 153A ONLY ON THE BASIS OF SOME INCRIMINATING M ATERIAL UNEARTHED DURING THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. ADMITTEDLY, T HE ASSESSEE HAS FILED ALL THE RETURNS UNDER SECTION 139 IN ALL THE YEARS. THE RE TURNS HAVE BEEN FILED BEFORE THE DUE DATE MENTIONED UNDER THE ACT. THERE ARE NO PROCEEDINGS INITIATED U/S. 147 OR 154 OR 263 OF THE ACT IN ALL THE YEARS. THE LD. CIT(A) HAS HELD THAT THE ASSESSMENT COULD BE ABATED SINCE NO INCRIMINATING D OCUMENTS HAVE BEEN I.T.A. NO.504 ETC./COCH/2013 17 RECOVERED DURING THE COURSE OF SEARCH. NOW THE ISSU E IS WHETHER THE ACTION OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS U/S . 153A IS IN ORDER. FURTHER, THE QUESTION IS WHETHER THE ASSESSING AUTHORITY IS ENTI TLED TO MAKE ADDITIONS FOR THE YEAR WHERE NO INCRIMINATING DOCUMENTS ARE RECOVERED . AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE RATIO OF THE JUDGMENT IN THE C ASE OF JURISDICTIONAL HIGH COURT OF KERALA IN THE CASE OF SUNNY JACOB JEWELLERS AND WEDDING CENTRE (SUPRA), THERE IS NO REQUIREMENT UNDER THE PROVISION OF THE ACT REQUIRING THE DEPARTMENT TO COLLECT INFORMATION AND EVIDENCE FOR EACH AND EV ERY YEAR FOR THE SIX PRECEDING YEARS U/S. 153A. THIS PROPOSITION IS IN CONFORMITY TO THE RATIO OF THE JUDGMENT MENTIONED ABOVE AND THEREFORE, WE DO NOT HESITATE I N HOLDING THE VIEW THAT THE AO HAS THE JURISDICTION TO INITIATE PROCEEDINGS U/S . 153A FOR THE SIX YEARS PRECEDING THE SEARCH. HOWEVER, THE ASSESSEE IS TO BE EXAMINED IS WHETHER THERE COULD BE AN ADDITION TO THE RETURNED INCOME OF THE ASSESSEE IN THE ABSENCE OF UNEARTHING OF ANY INCRIMINATING EVIDENCE. WE HAVE E XAMINED IN THE LIGHT OF THE JUDGMENT MENTIONED ABOVE AND HOLD THAT THE ASSESSIN G OFFICER IS FULLY JUSTIFIED IN INITIATING THE PROCEEDINGS U/S. 153A OF THE ACT. BU T WE ARE OF THE OPINION THAT IN THE ABSENCE OF ANY INCRIMINATING EVIDENCE, NO ADDIT ION CAN BE MADE TO THE RETURNED INCOME. IN SO FAR AS PENDING ASSESSMENTS A RE CONCERNED, JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESSMENT U/S. 153A M ERGES INTO ONE. THEREFORE, WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW FROM THE VIEW EXPRESSED BY THE LD. CIT(A) AND HOLD THAT THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2001- I.T.A. NO.504 ETC./COCH/2013 18 02, 2003-04, 2004-05 AND 2005-06 WOULD ABATE AND NO ADDITION CAN BE MADE FOR THESE YEARS. 19. FOR THE ASSESSMENT YEARS 2006-07 AND 2007-0 8, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 153A OF THE ACT BASED ON THE BOOKS OF ACCOUNT PRODUCED AT THE TIME OF SEARCH. THESE BO OKS OF ACCOUNT WERE FOUND OR SEIZED DURING THE COURSE OF SEARCH. ACCORDING T O THE ASSESSING OFFICER, THESE BOOKS ARE PREPARED TO JUSTIFY THE POST SEARCH RETUR NS FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08. BASED ON THESE BOOKS, THE ASSE SSING OFFICER HAS PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE BY DISALLOWING THE EXPENSES ON FREIGHT AND DISALLOWING THE PAYMENTS MADE TO THE SUPPLIERS U/S. 40A(3) OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, THE CLAIM OF THE ASSESSEE TOWARDS THE FREIGHT IS EXCESSIVE AND IS INTENDED TO INFLATE THE EXPENSES. FOR ESTIMATION OF FREIGHT EXPENSES, THE ASSESSING OFFICER HAS OBTAINE D LORRY CHARGES TO PLACES LIKE CHANDIGARH, DELHI, AMRAVATHI, NAGPUR AND SANGLI FRO M WHERE SUBSTANTIAL PART OF THE PURCHASES WERE MADE BY THE ASSESSEE. THE ASSES SING OFFICER CLAIMED THAT HE HAS GATHERED INFORMATION FROM LORRY OWNERS ASSOC IATION, TRICHUR AND THEREFORE, REJECTED THE FREIGHT CLAIMED BY THE ASSE SSEE AS EXCESSIVE. PER CONTRA, THE ASSESSEE CONTENDED THAT THE INFORMATION RECEIVE D BY THE ASSESSING OFFICER FROM THE LORRY OWNERS ASSOCIATION WAS COLLECTED BEH IND THE BACK OF THE ASSESSEE. HE ALSO CONTENDED THAT THE FRUITS AND VE GETABLES ARE HIGHLY PERISHABLE GOODS IN NATURE. THEY FALL UNDER THE CATEGORY OF QUICK DELIVERY FOR THE PURPOSE I.T.A. NO.504 ETC./COCH/2013 19 OF FREIGHT. HE FURTHER CONTENDED THAT THE INFORMATI ON GATHERED BY THE ASSESSING OFFICER IS FOR GENERAL CATEGORY AND NOT FOR QUICK D ELIVERY OF MATERIALS. HE FURTHER CONTENDED THAT THE FRUITS ARE TRANSPORTED IN PLASTI C CRATES AND THAT THE CRATES ARE ALWAYS RETURNED TO THE SUPPLIERS. EVERY DEALER IN FRUITS KEEPS A BUFFER STOCK OF CRATES. THE CRATES ARE RETURNED TO THE SUPPLIER MAT CHING IN NUMBER FROM THE ROLLING STOCK MAINTAINED BY THE BUYER. THUS FOR E VERY CONSIGNMENT OF FRUITS RECEIVED IN CRATES, THE ASSESSEE RETURNS THE SAME N UMBER OF EMPTY CRATES FROM THE ROLLING STOCK MAINTAINED BY THE BUYER. THESE C RATES ARE RETURNED IN THE SAME LORRY IN WHICH THE FRUITS ARE RECEIVED. THUS FOR EV ERY PURCHASE OF FRUITS IN CRATES, THERE ARE TWO TRIPS INVOLVED, ONE FOR RECEIVING THE FRUITS IN CRATES FROM THE SUPPLIER AND ANOTHER FOR RETURNING THE EMPTY CRATES TO THE SUPPLIER. THEREFORE THE FREIGHT CHARGES ARE DOUBLED THE SINGLE SIDE RAT E. THE ASSESSING OFFICER HAS TAKEN THE CALCULATION BASED ON ONE WAY DISTANCE ONL Y AND HAS COME TO THE CONCLUSION THAT THE LORRY CHARGES ARE INFLATED AT 7 2.32% ON AN AVERAGE AND HAS DISALLOWED THE EXCESS CLAIM WORKED OUT AT 72.32% OF THE CLAIM AS PER PROFIT AND LOSS ACCOUNT. THE LD. CIT(A) HAS APPRECIATED THE CO NTENTIONS RAISED BY THE ASSESSEE AND ALSO FOR THE EXEMPTION AVAILABLE UNDER RULE 6DD IN RESPECT OF FREIGHT CHARGES. 20. THE ASSESSEE SUBMITTED THAT THE LORRY CARRYI NG FRUITS ARRIVE AT ODD HOURS SO THAT THE GOODS MAY BE SOLD ON THE SAME DAT E. THE CASH IS COLLECTED BY THE DRIVERS WHO DO NOT HAVE ANY BANK A CCOUNT IN THE LOCAL AREA. I.T.A. NO.504 ETC./COCH/2013 20 THEY COME FROM DIFFERENT AREAS LIKE DELHI, CHANDIGA RH, JAMMU & KASHMIR, NAGPUR, AMARAVATHI, SANGLI AND MOST OF THEM REQUIRE THE CASH FOR THEIR TRIP. THEY WOULD ALSO LIKE TO RETURN/GO BACK IMMEDIATELY AFTER THE GOODS ARE SOLD/DELIVERED AND THE EMPTY CRATES HAVE TO BE RETU RNED TO THE FARMERS. THE DEPARTMENT HAS NO CASE TO THE CONTRARY AND THER EFORE, WE ARE INCLINED TO HOLD THAT THE DISALLOWANCE U/S. 40A(3) IS NOT WA RRANTED. THEREFORE, TELESCOPING ON THE PAYMENTS MADE EXCEEDING RS.20,00 0 IS BAD IN LAW. WITH REGARD TO THE FREIGHT, THE DEPARTMENT HAS NOT COME WITH ANY EVIDENCE TO PROVE THAT THE CRATES ARE TO BE RETURNED TO THE OWN ERS. IN THE ABSENCE OF ANY SUCH EVIDENCES, WE ARE INCLINED TO ACCEPT THE F INDINGS OF THE LD. CIT(A). 21. THE ASSESSMENT ORDER DEALING WITH THE PAYMENTS TO THE SUPPLIERS AND DISALLOWANCE U/S. 40A(3) PROCEEDS ON THE PREMISE TH AT THE PAYMENTS ARE MADE IN EXCESS OF RS.20,000/- IN CASH AND THEREFORE , THEY ARE LIABLE TO BE DISALLOWED. THE ASSESSING OFFICER HAS EXAMINED CERT AIN EVIDENCES PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT AN D HAS GIVEN THE FINDING THAT THE TOTAL TRANSACTION IN CASH AS ADMITTED BY T HE FIRM IN THE BOOKS OF ACCOUNT ARE RS.31,16,81,200/- FOR THE PERIOD RELEVA NT TO THE ASSESSMENT YEAR 2001-02 TO 2007-08. MOST OF THE DEALINGS OF T HE ASSESSEE ARE WITH FRUIT AGENTS. THE EVIDENCES OF THESE AGENTS WERE RE CORDED BY APPOINTMENT OF COMMISSIONS ACROSS THE COUNTRY. THE ASSESSING O FFICER PROCEEDED ON THE I.T.A. NO.504 ETC./COCH/2013 21 PREMISE THAT THE GENUINENESS OF THESE TRANSACTIONS IS NOT TRUE AND THEREFORE PROCEEDED TO DISALLOW THE CLAIM. DURING THE COURSE OF APPEAL, THE COPY OF DEPOSITIONS RECORDED WERE FORWARDED TO THE ASSESSEE . ADMITTEDLY, THE ASSESSEE WAS NOT GIVEN THE OPPORTUNITY TO CROSS EXA MINE THESE GROWERS. THE STATEMENTS WERE RECORDED AND ON A PERUSAL OF TH ESE STATEMENTS, THE ASSESSEE CONTENDED THAT IT WAS PROVED BEYOND DOUBT THAT THEY WERE DOING CONSIGNMENT BUSINESS AND ALSO THAT THE FARMERS WERE SELLING THE GOODS THROUGH AGENTS. THE LD. CIT(A) EXAMINED THESE CONTE NTIONS ALONGWITH THE DEPOSITIONS TAKEN FROM THE FARMERS. BY APPRECIATIN G THE DEPOSITIONS, THE LD. CIT(A) CAME TO THE CONCLUSION THAT ALL THE DEPO NENTS ARE FARMERS AND ALL FARMERS ARE SELLING THROUGH AGENTS AND THE TRANSACT IONS ARE IN THE NATURE OF CONSIGNMENT AND THE ASSESSEE TAKES ITS COMMISSION O N CONSIGNMENT SALES. THE COMMISSION TO THE AGENTS IS PAID BY THE FARMERS AND THE FARMERS ARE SELLING THE GOODS THROUGH AGENTS TO THE ASSESSEE AN D THE FARMERS ARE GETTING THE PAYMENTS FROM THE ASSESSEE THROUGH AGEN TS IN CASH. BASED ON THESE FINDINGS OF THE LD. CIT(A), HE HELD THAT THE DISALLOWANCE U/S. 40A(3) WAS UNWARRANTED AS THE ASSESSEE WAS ENTITLED TO GET THE BENEFIT UNDER RULE 6DD. THE REVENUE HAS CONTENDED THAT THE PROVISIONS OF RULE 6DD WOULD NOT APPLY AS THE PAYMENTS WERE NOT MADE TO THE FARM ERS AND THE AGENTS WERE AGENTS OF THE FARMERS AND NOT OF THE ASSESSEE. THIS WAS REBUTTED BY THE ASSESSEE BY ARGUING THAT THESE PERSONS ARE ALL FARMERS AND THAT THEY ARE ALL SELLING THEIR PRODUCE THROUGH AGENTS IS EST ABLISHED BY THE SWORN I.T.A. NO.504 ETC./COCH/2013 22 STATEMENTS RECORDED FROM THEM BY THE DEPARTMENT. TH E ASSESSING OFFICER HAS NOT QUESTIONED THE VALIDITY OF THESE STATEMENTS . THE FARMERS HAVE CLEARLY STATED THAT THEY ARE DOING BUSINESS IN THE NATURE OF CONSIGNMENT FOR WHICH THE PROVISIONS OF SECTION 40A(3) WOULD NOT AT TRACT. ALTERNATIVELY, IT WAS CONTENDED THAT THE ASSESSEE WAS ENTITLED FOR TH E BENEFIT OF RULE 6DD(E)/K OF THE INCOME TAX RULES, 1962. IT IS AN A DMITTED FACT THAT THE ASSESSING OFFICER HAS REFERRED TO THE DEPOSITIONS R ECORDED BY THE DEPARTMENT TO DISALLOW U/S. 40A(3). THE ASSESSING OFFICER HAS NOT DISBELIEVED THE DEPOSITIONS. FURTHERMORE, THE ENTI RE DEPOSITION IS TAKEN BEHIND THE BACK OF THE ASSESSEE. THE DEPONENTS HAVE CLEARLY STATED THAT THEY ARE INVOLVED IN CONSIGNMENT BUSINESS AND THEY HAVE GIVEN STATEMENT ON RECORD THAT THEY ARE DOING BUSINESS THROUGH AGEN TS. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY, WE ARE INC LINED TO ACCEPT THE FINDINGS OF THE LD. CIT(A). AND UPHOLD THE FINDINGS TO THIS EXTENT. 22. AS REGARDS THE ASSESSMENT FOR THE ASSESSMEN T YEAR 2008-09, WHICH WAS COMPLETED U/S. 143(3) OF THE ACT, THE ASSESSING OFFICER FIXED THE TURNOVER AT 25% HIGHER THAN THAT OF THE IMMEDIATE P REVIOUS YEAR RELEVANT TO AY 2007-2008. THUS, THE GROSS PROFIT WAS ESTIM ATED AT RS.1,70,86,458/- AFTER DEDUCTING THE EXPENSES CLAIMED BY THE ASSESSE E AND DETERMINED THE PROFIT AT RS.1,43,87,839/-. CERTAIN OTHER DISALLOW ANCES/ADDITIONS WERE ALSO MADE AND THE TOTAL INCOME WAS COMPUTED AT RS.1,52,5 6,672/-. BEING I.T.A. NO.504 ETC./COCH/2013 23 AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED THE APP EAL AND CONTENDED THAT THE ASSESSMENT WAS BAD IN LAW AND THE ASSESSING OFF ICER HAS MERELY FOLLOWED THE INCOME ASSESSED FOR THE EARLIER YEARS REJECTING THE DETAILED STATEMENT GIVEN BY THE ASSESSEE WRONG IN MAKING THE DISALLOWANCE AND ADDITION TO THE INCOME ALREADY ESTIMATED BY HIM. D URING THE COURSE OF HEARING, THE ASSESSEE HAD DEMONSTRATED THAT DURING THE YEAR THERE CAME INTO EXISTENCE NEW BUSINESS WHEREBY SUBSTANTIAL PAR T OF THE BUSINESS OF THE ASSESSEE WAS TAKEN AWAY BY THE THREE NEW FIRMS. FU RTHERMORE, THE RELATIONSHIP BETWEEN MANY OF THE SUPPLIERS GOT STRA INED IN VIEW OF THE INCOME TAX PROCEEDINGS AND SUBSTANTIAL REDUCTION IN THE WORKING CAPITAL DUE TO SEIZURE OF RS.65 LAKHS DURING THE INCOME TAX RAI D. A REASONABLE ESTIMATE OF THE TURNOVER BASED ON SOUND COMMERCIAL PRINCIPAL S AND BACKED BY TRANSACTIONS REFLECTED IN THE BANK ACCOUNT. IT WAS NOTICED THAT THE ASSESSING OFFICER HAD NOT TAKEN INTO CONSIDERATION ANY OF THE SUBMISSIONS DURING THE COURSE OF THE ASSESSMENT. 23. THE LD. CIT(A) HELD THAT THE ASSESSING OFFIC ER CANNOT REJECT THE VERY COGENT METHOD AND THE ACCOUNTS SUBMITTED BY THE ASS ESSEE FOR ARRIVING AT THE INCOME. HE FAILED TO APPRECIATE THAT THE ASSES SEE HAD TAKEN A GROSS PROFIT HIGHER THAN WHAT WAS DETERMINED BY THE ASSES SING OFFICER. HE RELIED UPON THE RATIO OF THE JUDGMENT OF THE HONBLE SUPRE ME COURT IN THE CASE OF CST VS. ESUFALI ABDUL ALI 90 ITR 271 AND THE DECISI ON OF ITAT, NAGPUR IN I.T.A. NO.504 ETC./COCH/2013 24 THE CASE OF SHAMSHEER ALI ABDUL HASSAN VS. CIT 13 I TR 240. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ADOPT THE ESTIMATE AS PER THE ANNEXURES TO THE STATEMENT GIVEN BY THE ASSESSEE. 24. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS NOT TAKEN NOTE OF THE EXPLANATIONS GIVEN BY THE ASSESSEE. FURTHERMORE, TH E LD. CIT(A) HAS HELD THAT THE GROSS PROFIT OFFERED BY THE ASSESSEE WAS M ORE THAN ARRIVED AT BY THE ASSESSING OFFICER. FURTHERMORE, THE CIRCUMSTANT IAL EVIDENCES NAMELY STARTING OF THE THREE NEW FIRMS, DROP IN WORKING CA PITAL ETC WERE NOT CONSIDERED BY THE ASSESSING OFFICER WHICH WAS APPRE CIATED BY THE LD. CIT(A). THE DEPARTMENT HAS NO MATERIAL ON RECORD TO DEMONSTRATE OTHERWISE. IN VIEW OF THE FACT OF THE CASE, WE FIND THAT THE TURNOVER DIRECTED TO BE ADOPTED BY THE LD. CIT(A) IS REASONABLE AND T HEREFORE, WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW. 25. THE ASSESSEE HAS IN THE APPEAL CONTENDED THAT THE RESTRICTION OF COOLIE CHARGES, DEPRECIATION ON VEHICLES, VEHICLES MAINTEN ANCE AND OTHER EXPENSES LIKE SALARIES AND WAGES, SORTING AND PICKING CHARGE S WERE IRREGULAR. NO EVIDENCES WERE PRODUCED BY THE ASSESSEE TO INTEREFE RE WITH THE FINDINGS OF THE LD. CIT(A). WE, THEREFORE, DO NOT INTERFERE WI TH THE FINDINGS OF THE LD. CIT(A) IN THIS RESPECT. I.T.A. NO.504 ETC./COCH/2013 25 26. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESS EE HAS RAISED ADDITIONAL GROUND. THE LD. CIT(A) HAS IN PARA 84(J) OF HIS O RDER HAS REJECTED THE CLAIM OF DISALLOWANCE U/S. 40A(3) OF THE ACT. HOWE VER, IN PARA 85.3, THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE AND HAS GIVEN A SPEAKING ORDER AS EVIDENCED FROM PARAS 85.4 AND 85.5 AND HAS GIVEN THE FINDINGS IN PARA 85.6 TO THE EFFECT THAT THE DISALLOWANCE MADE U/S. 40A(3) HAS BEEN SET ASIDE. THE ASSESSEE HAS CONTENDED THAT THIS IS AT T HE BEST A TYPOGRAPHICAL MISTAKE AND PRAYED THAT THE FINDINGS IN PARA 84(J) MAY BE SET ASIDE. 27. WE HAVE CONSIDERED THE ADDITIONAL GROUND RA ISED BY THE ASSESSEE AND WHO IS OF THE OPINION THAT THE FINDING IN PARA 84(J) IS INCONSISTENT WITH THE FINDING IN PARA 85.4, 85.5 AND 85.6. THEREFORE , WE ARE INCLINED TO CORRECT THE ANOMALY AND HOLD THAT THE FINDING IN PA RA 84(J) IS BAD IN LAW AND THE DISALLOWANCE U/S. 40A(3) TO THE EXTENT OF PAYME NTS MADE TO THE FARMERS IS BAD IN LAW. ACCORDINGLY, THE APPEALS OF THE REVENUE AND ASSESSEE ARE DISMISSED IN ALL THE YEARS EXCEPT FOR ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2006-07, WHICH IS PARTLY ALLOWED (P ARA 26). I.T.A. NO.504 ETC./COCH/2013 26 28. IN THE RESULT, I) THE APPEALS OF THE REVENUE IN I.T.A. NOS. 604 T O 611/COCH/2013 ARE DISMISSED. II) THE APPEALS OF THE ASSESSEE IN I.T.A. NOS. 504 , 505 AND 507/COCH/2013 ARE DISMISSED. III) THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 506/ COCH/2013 FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED AS INDIC ATED IN PARA 26 HEREINABOVE. PRONOUNCED IN THE OPEN COURT ON 12-02-2016. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 12TH FEBRUARY, 2016 GJ COPY TO: 1. PATTAMBI FRUITS CO., T.K. COMPLEX, PALLIPURAM RO AD, PATTAMBI, PALAKKAD. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE, THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . . 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL KOCHI. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN