Shri Varghese Mathew, Ernakulam V. DCIt, Ernakulam

ITA 560/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61521 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 28-10-2010
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Business income; Search and seizure; Opportunity of being heard
• Section: 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NOS. 560-564/COCH/2010 ASSESSMENT YEARS: 2004-05-2008-09 SHRI VARGHESE MATHEW, EMBASSERIL HOUSE, KURUPPAMPADY, PERUMBAVOOR P.O., ERNAKULAM- 693 545. [PAN: ACEPM 8649R] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) I.T.A NOS. 576-580/COCH/2010 ASSESSMENT YEARS: 2004-05-2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. VS. SHRI VARGHESE MATHEW, EMBASSERIL HOUSE, KURUPPAMPADY, PERUMBAVOOR P.O., ERNAKULAM- 693 545. [PAN: ACEPM 8649R] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) ASSESSEE BY SHRI T.M. SREEDHARAN, SR. ADV. REVENUE BY SMT. VIJAYAPRABHA, JR. DR DATE OF HEARING 23-03-2012 DATE OF PRONOUNCEMENT 25-05-2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDERS PASSED BY LD CIT(A)-I, KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS 2004- 05 TO 2008-09. SINCE MAJORITY OF THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE AND FURTHER THEY ARE ARISING OUT I.T.A. NOS. 560-564 & 576-580/COCH/2010 2 OF COMMON SET OF FACTS, THESE APPEALS WERE HEARD TO GETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. IN ORDER TO APPRECIATE THE ISSUES URGED BY B OTH THE PARTIES, IT IS PERTINENT TO DISCUSS THE RELEVANT FACTS FIRST. THE ASSESSEE IS CARRYING ON THE BUSINESS OF RUNNING A LIQUOR BAR, BESIDES CARRYING OTHER BUSINESS ACTIVIT IES. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT IN THE HANDS OF THE ASSESSEE ON 09-08- 2007 AND IT ALSO CONDUCTED A SURVEY OPERATION U/S 1 33A OF THE ACT AT HIS BUSINESS PREMISES NAMED M/S EMBASSERY TOURIST HOME, A HOTEL A TTACHED WITH BAR. CONSEQUENT TO THE SEARCH, THE ASSESSMENTS OF THE YEARS UNDER C ONSIDERATION WERE COMPLETED U/S 153A OF THE ACT. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE AO TOOK THE VIEW THAT THE ASSESSEE HAS NOT PROPERLY DISCLOSED THE AC TUAL TURNOVER OF LIQUORS SOLD IN THE BAR OWNED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT IT IS SELLING LIQUORS NOT ONLY IN PEG MEASURES BUT ALSO IN FULL/HALF BOTTLES AND ABOU T 70% OF ITS TOTAL SALES CONSISTED OF BOTTLE SALES ONLY. IT WAS FURTHER SUBMITTED THAT T HE SELLING PRICE OF LIQUOR, WHEN SOLD IN BOTTLES, IS LESSER BY ABOUT 20%. HOWEVER, THE AO D ID NOT ACCEPT THE SAID CLAIM MADE BY THE ASSESSEE AND TOOK THE VIEW THAT THE BAR ATTA CHED TO A HOTEL IS PERMITTED TO SELL LIQUORS, ONLY IN PEG MEASURES AND BY CLAIMING BOTTL E SALES, THE ASSESSEE IS ONLY SUPPRESSING THE ACTUAL TURN OVER UNDER THE GARB OF BOTTLE SALES. HENCE, THE AO PROCEEDED TO COMPUTE THE ANNUAL TURNOVER ON SALE OF LIQUORS ON THE BASIS OF QUANTITY DETAILS OF PURCHASES, OPENING STOCK AND CLOSING STO CK AND ALSO BY TAKING SELLING PRICE PER PEG FROM THE COMPUTER DISC SEIZED FROM THE ASSE SSEE. ACCORDINGLY THE AO COMPUTED THE TURNOVER OF VARIOUS YEARS AND ADDED TH E DIFFERENCE IN THE TURNOVER AS UNDISCLOSED INCOME OF THE ASSESSEE. THE DETAILS OF THE SAME ARE FURNISHED BELOW:- ASST. YEAR TURNOVER ESTIMATED TUR NOVER DISCLOSED DIFFERENCE BY A.O. BY ASSESSEE 2004-05 1,71,32,225 1,49,82,727 21,49,498 2005-06 2,70,48,416 2,20,69,076 49,79,340 2006-07 3,06,74,229 2,42,99,321 63,74,908 2007-08 3,39,34,854 2,83,53,025 55,81,829 2008-09* 1,90,61,244 1,29,15,998 61,45,246 (* UP TO 08-08-2007, I.E., THE DATE OF SURVEY) I.T.A. NOS. 560-564 & 576-580/COCH/2010 3 3. IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE THAT HE HAS SOLD LIQUORS NOT ONLY IN PEG M EASURES BUT ALSO IN HALF/FULL BOTTLES AT DISCOUNTED RATE. BASED ON SELLING PRICE OF SAMPLES TAKEN BY LD CIT(A), THE FIRST APPELLATE AUTHORITY DETERMINED THAT THE SELLING RAT E OF LIQUOR SOLD IN BOTTLES IS LESSER BY 18%. BASED ON THE BOOK RESULTS, THE LD CIT(A) DETE RMINED THE RATIO OF BOTTLE SALES AT 55% FOR ASSESSMENT YEAR 2006-07 AND AT 60% IN OTHER YEARS. THE LD CIT(A) ALSO NOTICED THAT THE AO DID NOT CONSIDER THE CORRECT AM OUNT OF TURNOVER FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. THE LD CIT(A) NOTICED T HAT THE CORRECT AMOUNT OF TURNOVER DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2 004-05 AND 2005-06 WAS RS.1,48,62,708/- AND RS.2,15,30,553/- RESPECTIVELY, WHICH HE PROCEEDED TO CORRECT WHILE DETERMINING THE SUPPRESSED SALES. ACCORDINGL Y, THE LD CIT(A) DETERMINED THE ADDITION AS DETAILED BELOW:- ASST. YEAR TURNOVER AS TURNOVER AS TURNOVER AS PER ADDITION PER A.O. PER CIT(A) A SSESSEE SUSTAINED 2004-05 1,71,32,235 1,52,81,954 1,48,62,708 4,19,246 2005-06 2,70,48,416 2,41,27,187 2,15,30,553 25,96,634 2006-07 3,06,74,229 2,76,37,480 2,42,99,321 33,38,159 2007-08 3,39,34,854 3,02,69,890 2,83,53,025 19,16,865 2008-09* 1,90,61,244 1,70,02,630 1,29,15,998 40,86,632# (* FROM 1.4.2007 TO 8.8.07) (# THE ASSESSEE HAD CLAIMED THAT THERE WAS MISTA KE IN CALCULATING THE SALES QUANTITY OF MUSCAT BRAND RUM. IF THE CLAIM OF THE ASSESSE E IS PROVED TO BE CORRECT, THE ADDITION WOULD COME DOWN BY RS.11,51,435/-. HENCE , THE LD CIT(A) HAS SET ASIDE THE MATTER TO THE FILE OF AO FOR CARRYING OUT NECESSARY VERIFICATION.) 4. IN THE RETURN OF INCOME FILED ORIGINALLY, TH E ASSESSEE HAD OFFERED ADDITIONAL INCOME AS STATED BELOW:- ASST. YEAR ADDITIONAL INCO ME OFFERED 2004-05 25,47,0 60 2005-06 12,33,0 00 2006-07 16,20,0 00 2007-08 18,11,0 00 I.T.A. NOS. 560-564 & 576-580/COCH/2010 4 THE ASSESSEE CLAIMED THAT THE ABOVE SAID ADDITIONAL INCOME SHOULD BE TELESCOPED/SET OFF AGAINST THE ADDITION SUSTAINED BY THE LD CIT(A) . HOWEVER, THE SAID CLAIM WAS REJECTED BY THE LD CIT(A) ON THE GROUND THAT THE AB OVE SAID ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE VOLUNTARILY PRIOR TO THE SE ARCH OPERATIONS AND FURTHER THE ASSESSEE DID NOT LINK THE SAID ADDITIONAL INCOME TO THE LIQUOR BUSINESS. 5. AGGRIEVED BY THE ORDER OF LD CIT(A), BOTH TH E PARTIES ARE IN APPEAL BEFORE US. THE GROUNDS RAISED BY THE ASSESSEE, WHICH ARE COMMO N IN ALL THE YEARS UNDER CONSIDERATION, GIVE RISE TO THE FOLLOWING ISSUES:- (A) WHETHER THE REJECTION OF BOOKS OF ACCOUNT AND CONSEQUENT ESTIMATION OF SALES TURNOVER IS CORRECT IN THE FACTS AND CIRCUMST ANCES OF THE CASE. (B) WHETHER THE ENHANCEMENT OF TURNOVER AND ADDI TION OF ENTIRE AMOUNT OF ENHANCED TURNOVER IS JUSTIFIED. (C) WHETHER THE LD CIT(A) IS JUSTIFIED IN NOT ALL OWING SET OFF/TELESCOPING OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE AGAINST T HE ADDITIONS SUSTAINED BY HIM. 6. IN ALL THE YEARS UNDER CONSIDERATION, THE REVENUE IS CHALLENGING THE DECISION OF LD CIT(A) IN ACCEPTING THE CLAIM OF THE ASSESSEE TH AT THE LIQUORS WERE ALSO SOLD IN BOTTLES AT A DISCOUNTED RATE AND THEREBY REDUCING T HE TURNOVER ESTIMATED BY THE AO. 7. WE SHALL FIRST DEAL WITH THE COMMON ISSUES C ITED ABOVE, SINCE THEY ARE THE MAJOR ISSUES IN ALL THE APPEALS UNDER CONSIDERATION. TH E FIRST ISSUE CONTESTED BY THE ASSESSEE IS WHETHER THE TAX AUTHORITIES ARE JUSTIFIED IN REJ ECTING THE BOOK RESULTS. DURING THE COURSE OF SURVEY OPERATIONS CARRIED AT THE BUSINESS PREMISES, THE DEPARTMENT HAS SEIZED A PRICE LIST WHICH WAS SAID TO BE EFFECTIVE FROM 1.4.2007. THE DEPARTMENT ALSO SEIZED THE COMPUTER HARD DISC MAINTAINED BY THE ASS ESSEE. IT IS AN ADMITTED FACT THAT THE DEPARTMENT DID NOT SEIZE ANY OTHER INCRIMINATIN G MATERIAL EXCEPT THE TWO ITEMS STATED ABOVE. EVEN WITH REGARD TO THE PRICE LIST RE FERRED ABOVE, IT IS NOT SHOWN BY THE AO THAT THE ASSESSEE IS ACCOUNTING THE SALE OF LIQU ORS AT A PRICE WHICH IS LOWER THAN THAT MENTIONED IN THE PRICE LIST. THE ONLY POINT NOTICE D BY THE AO WAS THAT THE ASSESSEE WAS SEEN ACCOUNTING SALES BOTH IN PEG MEASURE SALES AND IN BOTTLE SALES AND THE PRICE I.T.A. NOS. 560-564 & 576-580/COCH/2010 5 OF BOTTLE SALES WAS LOWER THAN THE PEG MEASURE RATE S. NOW THE QUESTION THAT ARISES IS WHETHER THE AO WAS JUSTIFIED IN REJECTING THE CLAIM OF SALES IN BOTTLES AT A DISCOUNTED RATE. THE OBSERVATIONS MADE BY THE AO IN THIS REGA RD ARE SUMMARISED BELOW:- (A) A STATEMENT WAS TAKEN FROM THE MANAGER OF THE BAR NAMED SHRI N.K.SHAIJAN, WHO HAS STATED THAT THE SALES ARE MADE AS PER PRICE LIST PREPARED BY THE ASSESSEE. (B) THE DATA ARE FED INTO THE COMPUTERS BY A PART TIME ACCOUNTANT AFTER A GAP OF 2-3 DAYS. HENCE THERE IS NO TRUTH IN THE CL AIM OF THE ASSESSEE THAT THE SALES BILLS ARE ISSUED AT THE TIME OF SALES. (C) BOTTLE SALES ARE NOT PERMITTED IN THE BAR, I. E., THE BAR CAN SELL LIQUORS IN PEG MEASURE ONLY. BOTTLE SALES ARE PERMITTED TO BE MADE ONLY THROUGH THE STATE OWNED KERALA STATE BEVERAGES CORPORATION OUTL ETS. (D) THE BAR IS MANAGED BY THE BAR MEN. THEY HAVE TO ACCOUNT FOR THE TOTAL BOTTLES ENTRUSTED TO THEM ON A PARTICULAR DAY ONLY IN PEG RATES AT THE CLOSE OF BUSINESS. HENCE THE BARMEN CANNOT CLAIM THAT HE HAS SOLD LIQUORS IN BOTTLES. 8. THE LD CIT(A) DID NOT ACCEPT THE ABOVE SAID OBSERVATIONS MADE BY THE A.O. THE RELEVANT OBSERVATIONS MADE BY LD CIT(A) IN THIS REG ARD ARE EXTRACTED BELOW:- FOR REJECTING THE CLAIM OF BOTTLE SALES, THE AO G AVE REASONING THAT BOTTLES SALES ARE NOT PERMITTED IN BARSON GOING THROUGH THE PRIC E LIST, I FIND THAT THE PRICE LIST CLEARLY MENTIONS PRICE OF THE LIQUOR WHEN ORDE RED IN PEGS OR WHEN ORDERED IN BOTTLES MEASURING 1000 ML, 500 ML, 750 ML & 375 ML. BROADLY, THE RATES IN RESPECT OF BOTTLES ARE CONCESSIONAL IF COMPARED WI TH THE PEG RATES. THIS PRICE LIST, SOUGHT TO BE RELIED UPON BY THE ASSESSING OFF ICER FOR THE PURPOSE OF ESTIMATING THE SALES, CLEARLY INDICATE THAT THE APP ELLANT WAS QUOTING DIFFERENTIAL PRICE FOR PEG SALES AND BOTTLE SALES. THE OBSERVAT IONS OF THE ASSESSING OFFICER THAT BOTTLE SALES WERE NOT PERMITTED IN BARS WAS TH OUGH LEGALLY CORRECT BUT THE BARS WERE NOT PROHIBITED FROM OFFERING DISCOUNTED R ATES FOR QUANTUM PURCHASES OF LIQUOR WHEN BOTTLES CAN BE OPENED AND SERVED. T HE SAME WAS NOT LEGALLY PROHIBITED.. THIS PRACTICE IS BROADLY IN VOGUE IN THE MARKET IS FURTHER ESTABLISHED FROM THE FACT THAT GOVERNMENT OF KERALA VIDE GAZZETTE NOTIFICATION I.T.A. NOS. 560-564 & 576-580/COCH/2010 6 HAS INTRODUCED COMPOUNDING OF TAX ON LIQUOR BUSINES S WHEN THE TURNOVER SHOWN BY ANASSESSEE IS OVER 135% OF THE PURCHASES AND THE TURNOVER SHOWN BY THE APPELLANT BROADLY FULFILS THIS REQUIREMENT AND ACCO RDINGLY TURNOVER SHOWN BY THE APPELLANT WAS ALSO ACCEPTED BY THE SALES TAX AUTHOR ITIES. THE OTHER OBSERVATIONS OF THE ASSESSING OFFICER, REGARDING THE BEHAVIORAL PATTERN OF CUSTOMERS AND THAT THE BAR WAS MANAGED BY THE BAR MAN ARE ONLY CONJECT URES AND NOT SUPPORTED BY ANY EVIDENCE PARTICULARLY WHEN THE PRICE LIST RECOV ERED DURING THE COURSE OF SURVEY, ITSELF WAS INDICATING DIFFERENTIAL AND CONC ESSIONAL PRICING FOR BOTTLES VIS-- VIS PEGS AND WHEN THE COMPUTER HARD DISK VKP 1(10) WAS FOUND TO BE CONTAINING COMPUTER RECORDS OF BILLS ISSUED FOR SALE OF LIQUOR WITH DIFFERENTIAL PRICING ON DAY TO DAY AND ON REGULAR BASIS. IN FACT THESE BILLS H AVE BEEN FINALLY AND BROADLY RELIED UPON BY THE ASSESSING OFFICER, FOR ADOPTING PEG RATES OF VARIOUS BRANDS OF LIQUORS IN VARIOUS ASSESSMENT YEARS AND PARTICULARL Y UP TO ASSESSMENT YEARS 2005-06 FOR ESTIMATING SALES OF THE APPELLANT. THE ASSESSING OFFICER, HOWEVER, HAS IGNORED THE BOTTLE SALES AS INDICATED IN THESE BILLS, MAINLY WITH THE REASONING THAT THE ACCOUNTS WERE PREPARED AFTER A GAP OF TWO TO THREE DAYS. THIS ACTION OF THE ASSESSING OFFICER ALSO DOES NOT HAVE MUCH MERIT , FOR THE REASON THAT THERE IS NO EVIDENCE ON RECORD TO CONTRADICT THE CLAIM OF TH E APPELLANT THAT A CUSTOMER WAS TO MAKE PAYMENT FIRST AND ON THE STRENGTH OF TH E BILL ISSUED, THE LIQUOR WAS SUPPLIED TO HIM. THE COMPUTERIZED BILLS FOUND IN T HE HARD DISK, THERE FORE, CAN BE PRESUMED TO BE ISSUED ON DAY TO DAY BASIS DURING THE COURSE OF BUSINESS AND THE ACCOUNTING FOR THE SAME COULD BE DONE BY THE AC COUNTANT WITH A GAP OF 2 TO 3 DAYS. FURTHER TO ABOVE I FIND THAT THOUGH ASSESS ING OFFICER REJECTED APPELLANTS CLAIM OF BOTTLE SALES AT CONCESSIONAL RATES FOR ASS ESSMENT YEARS 2004-05 TO 2007- 08 AND UP TO 8.8.2007 FOR ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER ACCEPTED SUCH CLAIM FOR THE PRIOD 09.08.07 TO 31.03 .08 PERTAINING TO ASSESSMENT YEAR 2008-09 WHEREIN ALSO 61.59% OF THE TOTAL SALES CONSISTED OF BOTTLE SALES AT CONCESSIONAL RATES. IN VIEW OF THE ABOVE, I HOLD THAT CLAIM OF THE APPELLANT OF BOTTLE SALES OF A PORTION OF TURNOVER AT CONCESSION AL RATES WAS FACTUALLY CORRECT AND COULD NOT BE REJECTED IN A SUMMARY MANNER. THE SAME, THEREFORE, NEEDS TO BE CONSIDERED ON MERITS AFTER TAKING INTO ACCOUNT A LL RELEVANT FACTORS. I.T.A. NOS. 560-564 & 576-580/COCH/2010 7 9. ON A CAREFUL CONSIDERATION OF THE OBSERVATIO NS MADE BY THE ASSESSING OFFICER AS WELL AS THE OBSERVATIONS OF THE LD CIT(A), WE ARE O F THE VIEW THAT THE DEPARTMENT/AO DID NOT BRING ON RECORD ANY INCRIMINATING MATERIAL TO SUSPECT THE VERACITY OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSE SSEE. AS STATED EARLIER, IT IS NOT SHOWN THAT THE ASSESSEE WAS ACCOUNTING SALES AT A R ATE LOWER THAN THAT MENTIONED IN THE PRICE LIST IMPOUNDED DURING THE COURSE OF SURVE Y OPERATION. AS OBSERVED BY LD CIT(A), THERE IS NO MATERIAL TO DISBELIEVE THE CLAI M OF THE ASSESSEE THAT HE IS SELLING LIQUORS IN HALF/FULL BOTTLES AT A DISCOUNTED RATE. ON THE CONTRARY, AS NOTICED BY LD CIT(A), THE PRICE LIST IMPOUNDED DURING THE COURSE OF SURVEY CLEARLY INDICATES THE SELLING RATE IN PEG MEASURES AS WELL AS IN BOTTLES. FOR T HE PURPOSE OF COMPUTING THE TURNOVER, THE AO HAS PLACED RELIANCE ON THE DATA AVAILABLE IN THE COMPUTER HARD DISC SEIZED BY THE DEPARTMENT. HOWEVER, IT IS NOT SHOWN THAT THE SALES TURNOVER ACCOUNTED IN THE BOOKS OF ACCOUNT IS DIFFERENT FROM THAT FOUND IN TH E COMPUTER HARD DISC. THUS, IN OUR VIEW ALSO, THE AO HAS REJECTED THE BOOK RESULTS ONL Y ON SURMISES AND CONJECTURES. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE OBSERVAT IONS MADE BY THE LD CIT(A), WHICH ARE EXTRACTED ABOVE. 10. WE FURTHER NOTICE THAT BOTH THE TAX AUTHORIT IES HAVE FULLY RELIED UPON THE DATA AVAILABLE IN THE COMPUTER HARD DISC AND THE BOOKS O F ACCOUNT FOR MAKING THEIR OWN ESTIMATE OF THE ANNUAL TURNOVER. AS STATED EARLIER , THE AO DID NOT ACCEPT THE CLAIM OF BOTTLE SALES. HENCE HE PROCEEDED TO COMPUTE THE AN NUAL TURNOVER ON THE BASIS OF SELLING PRICE RELATING TO PEG MEASURE. FOR THAT PU RPOSE, THE AO HAS TAKEN DATA FROM THE BOOKS OF ACCOUNT/COMPUTER DISC ONLY, I.E. HE HAS TA KEN THE QUANTITY DETAILS AS WELL AS THE SELLING RATE FROM THE BOOKS OF ACCOUNT/COMPUTER DISC ONLY. WHILE DOING SO, THE ASSESSING OFFICER HAS ALSO MADE CERTAIN ASSUMPTIONS . IN ASSESSMENT YEAR 2008-09, THE AO HAS INITIALLY COMMITTED MISTAKE IN WORKING OUT T HE SALES VALUE OF OLD MASCOT BRAND RUM, WHICH WAS LATER CORRECTED WHILE FINALISING THE ASSESSMENT. THE LD CIT(A) HAS AGAIN SET ASIDE THE ABOVE SAID MATTER TO THE FILE O F THE AO FOR CARRYING OUT FURTHER VERIFICATION. I.T.A. NOS. 560-564 & 576-580/COCH/2010 8 11. THE LD CIT(A) HAS ALSO RELIED UPON THE BOOK RESULTS ONLY FOR DETERMINING THE DISCOUNTED RATE OF BOTTLE SALES AND ALSO THE QUANTU M OF BOTTLE SALES. FOR DETERMINING THE SELLING PRICE OF BOTTLES, THE LD CIT(A) HAS ADO PTED CERTAIN SAMPLE FIGURES, WHICH WERE TAKEN FROM THE RECORDS MAINTAINED BY THE ASSES SEE. THE RATIO OF BOTTLE SALES TO THE TOTAL SALES WAS TAKEN FROM THE BOOKS MAINTAINED BY THE ASSESSEE. 12. THE FOREGOING DISCUSSIONS SHOW THAT THE TAX AUTHORITIES DID NOT BRING ON RECORD ANY INCRIMINATING MATERIAL WHICH WOULD WARRANT REJE CTION OF BOOKS OF ACCOUNT, INSTEAD THEY HAVE FULLY RELIED UPON THE BOOKS OF ACCOUNT MA INTAINED BY THE ASSESSEE FOR MAKING THEIR OWN ESTIMATE OF TURNOVER. THE DIFFERENCE IN T URNOVER HAS ARISEN ONLY ON ACCOUNT OF ASSUMPTIONS MADE BY THE AO AS WELL AS THE LD CIT(A) . IN FACT, THE LD CIT(A) HAS REBUTTED ALL THE OBSERVATIONS MADE BY THE AO FOR NO T PLACING RELIANCE ON THE BOOKS RESULTS. HOWEVER, THE LD CIT(A) HAS AGAIN PROCEEDE D TO ESTIMATE THE TURNOVER AND FOR THAT PURPOSE, HE HAS TAKEN THE TURNOVER COMPUTED BY THE AO AS THE BASE. AS STATED EARLIER, THE AO HAS MADE CERTAIN ASSUMPTIONS WHILE ESTIMATING THE ANNUAL TURNOVER AND HENCE PLACING RELIANCE ON THE TURNOVER ESTIMATED BY THE AO, IN OUR VIEW, DOES NOT APPEAR TO BE A CORRECT APPROACH ON THE PART OF LD C IT(A). ONE MORE POINT WHICH MERITS CONSIDERATION IS THAT THE AO HAS ACCEPTED THE CLAIM OF BOTTLE SALES FOR POST SURVEY PERIOD, I.E., FOR THE PERIOD FROM 09.8.2007 TO 31.3 .2008. THUS, ACCEPTING THE CLAIM OF BOTTLE SALES AT A DISCOUNTED RATE FOR PART OF THE Y EAR AND REJECTING THE SAME FOR THE REMAINING PART DOES NOT APPEAR TO BE A JUDICIAL APP ROACH. THE ASSESSEE HAS ALSO SUBMITTED THAT THE TURNOVER DECLARED BY HIM HAS BEE N ACCEPTED BY THE SALES TAX DEPARTMENT, WHICH FACT HAS NOT BEEN REBUTTED BY THE AO. IN VIEW OF THE FOREGOING DISCUSSIONS AND IN THE ABSENCE OF ANY INCRIMINATING MATERIAL, WE DO NOT FIND ANY REASON TO SUSPECT THE TURNOVER DECLARED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. SINCE THE DEPARTMENT HAS NOT BROUGHT ON RECORD ANY MATERIAL, WHICH WOULD WARRANT REJECTION OF BOOK RESULTS, IN OUR VIEW, THE TAX AUTHORITIES WERE NOT RIGHT IN LAW IN REJECTING THE BOOK RESULTS. ACCORDINGLY, WE SET ASIDE THE ORDERS OF L D CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITIONS MADE ON ACCOUNT OF DIFFE RENCE IN SALES TURNOVER. SINCE WE HAVE NOT UPHELD THE REJECTION OF BOOKS OF ACCOUNT, THE OTHER TWO ISSUES RAISED BY THE ASSESSEE HAS BECOME ACADEMIC AND HENCE WE DECLINE T O ADDRESS THE SAME. I.T.A. NOS. 560-564 & 576-580/COCH/2010 9 13. NOW WE SHALL ADDRESS THE OTHER ISSUES RAISE D IN THE APPEALS FILED BY BOTH THE PARTIES. IN THE APPEAL FILED BY THE ASSESSEE, TH E ASSESSEE IS CHALLENGING THE ADDITION OF UNDISCLOSED INVESTMENT OF RS.30.00 LAKHS ASSESSE D IN ASSESSMENT YEAR 2007-08 AND THE INTEREST THEREON ASSESSED IN ASSESSMENT YEARS 2 007-08 AND 2008-09. THE DEPARTMENT IS CONTESTING THE RELIEF OF RS.5.62 LAKH S GRANTED BY LD CIT(A). THESE ISSUES ARE BASED UPON IDENTICAL FACTS. HENCE THESE ISSUES ARE DISPOSED OF TOGETHER. THE FACTS RELATING TO THEM ARE DISCUSSED IN BRIEF. THE DEPAR TMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF A PERSON NAMED SHRI T.K. SALIM. THE ASSESSEE HAD ENTERED INTO A PARTNERSHIP WITH THE ABOVE SAID PERSON FOR P ROMOTION OF VILLAS UNDER THE NAME AND STYLE GREENLAND EMBASSERRY VENTURE. DURING TH E COURSE OF SEARCH OPERATIONS IN THE HANDS OF SHRI T.K.SALIM, THE DEPARTMENT SEIZED A REGISTER AND THE SAME WAS MARKED AS SJK-A 144. THE NAME OF THE ASSESSEE WAS RECOR DED IN THAT REGISTER IN HIS PET NAME VIZ., SOJAN. THE SAID REGISTER CONTAINED E NTRIES (FINANCIAL TRANSACTIONS) IN PAGES 1 TO 13 AND AGAIN IN PAGE 159. THERE WERE 15 ENTRI ES CONCERNING THE ASSESSEE IN PAGES 1 TO 13 AGGREGATING TO RS.15,43,415/- AND THE SAME WAS ACCEPTED BY THE ASSESSEE. HOWEVER THE ASSESSEE COULD NOT SUBMIT S OURCES BEFORE THE AO FOR AN AMOUNT OF RS.5,62,650/- WHICH WERE MADE DURING THE PERIODS FROM 22.5.2007 TO 12.07.2007. HENCE THE AO ADDED THE ABOVE SAID AMOU NT OF RS.5,62,650/- IN THE HANDS OF THE ASSESSEE IN ASSESSMENT YEAR 2008-09. AT PAG E NUMBER 159, SOME MORE ENTRIES WERE FOUND RECORDED IN THE NAME OF SOJAN (LOAN), I.E., ASSESSEES PET NAME. DURING THE COURSE OF SEARCH OPERATION, SHRI T.K. SALIM SUB MITTED THAT HE HAD TAKEN A LOAN OF RS.25.00 LAKHS FROM THE ASSESSEE HEREIN. THE ENTRIE S NOTED IN PAGE NO. 159 ARE EXTRACTED BELOW:- 2006 SOJAN (LOAN) (13.5%) OCT. 1000000 8 TH NOV 2000000 OCT INTEREST 10000 NOV INTEREST 30000 DEC INTEREST 30000 JAN 30000 FEB 30000 MARCH 30000 I.T.A. NOS. 560-564 & 576-580/COCH/2010 10 PAID INTEREST (GREENS ALUVA) 160000 8/5/07 PAID 500000 (FIVE L AKHS) (13.5%) APRIL 30 000 MAY 25000 JUNE 28125 THE AO PRESUMED THAT SHRI T.K. SALIM HAS STATED ABO UT THE NET OUTSTANDING (RS.30.00 LAKHS LESS RS.5.00 LAKHS) IN HIS SWORN STATEMENT. BEFORE AO, THE ASSESSEE FILED A LETTER WHEREIN HE DENIED THESE TRANSACTIONS. IN THAT LETT ER HE HAS ALSO STATED THAT SHRI T.K. SALIM HAS ALSO AFFIRMED THAT HE HAS NOT RECEIVED AN Y LOAN FROM THE ASSESSEE. HOWEVER, THE AO PROCEEDED TO ADD THE ABOVE SAID AMOUNT OF RS .30.00 LAKHS AS ASSESSEES INCOME OUT OF UNDISCLOSED SOURCES. THE AO ALSO ADD ED THE INTEREST AMOUNT MENTIONED ABOVE IN BOTH THE ASSESSMENT YEARS 2007-08 AND 2008 -09. THE LD CIT(A) CONFIRMED THE ADDITION OF RS.30.00 LAKHS AND ALSO CONFIRMED T HE ADDITION OF INTEREST INCOME OF RS.1,60,000/- IN ASSESSMENT YEAR 2007-08 AND RS.83, 125/- IN ASSESSMENT YEAR 2008- 09. WITH REGARD TO THE ADDITION OF RS.5,62,650/- MADE IN THE ASSESSMENT YEAR 2008- 09, THE LD CIT(A) DELETED THE SAME AS THE ASSESSEE COULD PROVE THE SOURCES FOR THE SAME. 14. WE HAVE HEARD THE PARTIES ON THESE ISSUES. WITH REGARD TO THE ADDITION OF RS.30.00 LAKHS AND THE INTEREST ACCRUED THERE ON, W E NOTICE THAT THE AO HAS MADE THE SAID ADDITIONS BY DRAWING CERTAIN INFERENCES. BASI CALLY, THE AO RELIED UPON THE SWORN STATEMENT GIVEN BY SHRI T.K. SALIM. WHEREAS THE CO NTENTION OF THE ASSESSEE IS THAT THE VERY SAME SHRI T.K.SALIM HAS AFFIRMED TO HIM THAT H E HAS NOT RECEIVED ANY LOAN FROM THE ASSESSEE. THE ASSESSEE HAS FILED A LETTER IN THIS REGARD BEFORE THE AO. WE NOTICE THAT THE AO DID NOT CONSIDER THE SAID LETTER AND WE ALSO NOTICE THAT THE ASSESSEE WAS NOT PROVIDED AN OPPORTUNITY TO CROSS EXAMINE SHRI T .K. SALIM. BEFORE US, THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS THE R ESPONSIBILITY OF SHRI T.K.SALIM TO EXPLAIN THE CASH CREDITS FOUND IN HIS BOOKS AND IF IT WERE NOT SATISFACTORILY EXPLAINED, ADDITION SHOULD HAVE BEEN MADE IN HIS HANDS U/S 68 OF THE ACT. WE NOTICE THAT THE AO HAS NOT CONSIDERED THIS LEGAL POSITION. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES RE-EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THE ISSUE OF A DDITION OF RS.30.00 LAKHS AND INTEREST I.T.A. NOS. 560-564 & 576-580/COCH/2010 11 ACCRUED THEREON AND RESTORE THEM TO THE FILE OF AO WITH THE DIRECTION TO RE-EXAMINE THOSE ISSUES IN ACCORDANCE WITH LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS ALSO DIRECTED TO FURNISH NE CESSARY DETAILS THAT MAY BE CALLED FOR BY THE AO IN THIS REGARD. 15. THE ADDITION OF RS.5,62,650/- WAS MADE BY T HE AO, AS THE ASSESSEE FAILED TO FURNISH SATISFACTORY EXPLANATION. BEFORE THE LD CI T(A), THE ASSESSEE HAS PROVED THE SOURCES FOR THE ABOVE SAID INVESTMENT AND HENCE THE FIRST APPELLATE AUTHORITY HAS DELETED THE ABOVE SAID ADDITION. HOWEVER, THE CASE OF THE AO WAS THAT THE ASSESSEE DID NOT FURNISH SATISFACTORY EXPLANATION, WHICH MEA NS THAT THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS OF SOURCES FOR MAKING THE INVES TMENT OF RS.5,62,650/- BEFORE THE AO. HENCE, WE ARE OF THE VIEW THAT THE LD CIT(A) SHOULD HAVE CALLED FOR A REMAND REPORT FROM THE AO BEFORE GRANTING RELIEF TO THE ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH E SAME TO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE DETAILS OF SOURCES AND TAK E APPROPRIATE DECISION IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO FURNISH NECESSARY DETAILS THAT MAY BE CALLED FOR BY THE AO. 16. THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE COMMISSION INCOME ESTIMATED BY THE AO IN ASSESSMENT YEAR 2007- 08 AND 2008-09. IT WAS NOTICED THAT A SUM OF RS.21,436/- WAS FOUND CREDITED IN THE S.B A/C OF THE ASSESSEE ON 27.07.2007, I.E. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2008-09. THE ASSESSEE DID NOT FURNISH ANY EXPLANATION ABOUT THE SOURCES THEREOF. THE AO PRESUMED THAT THE SAME REPRESENTS COMMISSION INCOME AND ACCO RDINGLY PROCEEDED TO ESTIMATE THE COMMISSION INCOME FOR VARIOUS YEARS AS UNDER: ASSESSMENT YEAR 2004-05 30,000 ASSESSMENT YEAR 2005-06 40,000 ASSESSMENT YEAR 2006-07 50,000 ASSESSMENT YEAR 2007-08 50,000 ASSESSMENT YEAR 2008-09 75,000 ----------- 2,45,000 ======== I.T.A. NOS. 560-564 & 576-580/COCH/2010 12 THE LD CIT(A) CONFIRMED THE ADDITIONS MADE IN ASSES SMENT YEARS 2004-05 TO 2006-07, BUT DELETED THE ADDITIONS MADE IN ASSESSMENT YEARS 2007-08 AND 2008-09. IN ASSESSMENT YEAR 2007-08, THE ASSESSEE EXPLAINED THA T HE HAS OFFERED COMMISSION INCOME AS UNDER:- ASSESSMENT YEAR 2007-08 2,37,075 ASSESSMENT YEAR 2008-09 97,641 ------------- 3,34,716 ======== SINCE THE ASSESSEE HAS OFFERED COMMISSION INCOME IN ASSESSMENT YEARS 2007-08 AND 2008-09, THE LD CIT(A) DELETED THE ADDITIONS MADE B Y THE AO ON ESTIMATED BASIS. 17. WE DO NOT FIND ANY INFIRMITY IN THE SAID DE CISION OF LD CIT(A). THE ASSESSEE DID NOT OFFER ANY COMMISSION INCOME IN ASSESSMENT YEARS 2004-05 TO 2006-07. HENCE THE LD CIT(A) HAS CONFIRMED THE ADDITION ON ACCOUNT OF COMMISSION INCOME. HOWEVER THE COMMISSION INCOME OFFERED BY THE ASSESSEE IN ASSESS MENT YEARS 2007-08 AND 2008-09 WERE MORE THAN THE ESTIMATE MADE BY THE AO. HENCE THE LD CIT(A) HAS DELETED THE ESTIMATE MADE BY THE AO. IN VIEW OF THE ABOVE, WE UPHOLD THE DECISION OF LD CIT(A) ON THIS ISSUE. 18. IN THE RESULT, THE APPEALS FILED BY THE ASSE SSEE FOR ASSESSMENT YEARS 2004-05 TO 2006-07 ARE ALLOWED. THE APPEALS FILED BY THE ASSE SSEE FOR ASSESSMENT YEARS 2007-08 AND 2008-09 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2004-05 TO 2007-08 ARE DISMISSED. THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2008-09 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 25-05-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25TH MAY 2012 GJ I.T.A. NOS. 560-564 & 576-580/COCH/2010 13 COPY TO: 1. SHRI VARGHESE MATHEW, EMBASSERIL HOUSE, KURUPPAM PADY, PERUMBAVOOR P.O., ERNAKULAM- 693 545. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE-1, ERNAKULAM 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT,COCHIN