Modern Furniture, Kottakkal V. DCIT, Calicut

ITA 675/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61509 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: A MURALEEDHARAN

Judgement Text

1 ITA NO. 669 TO 675/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.TA NO. 669/COCH/2010 - A.Y. 2002-03 I.TA NO. 670/COCH/2010 - A.Y. 2003-04 I.TA NO. 671/COCH/2010 - A.Y. 2004-05 I.TA NO. 672/COCH/2010 - A.Y. 2005-06 I.TA NO. 673/COCH/2010 - A.Y. 2006-07 I.TA NO. 674/COCH/2010 - A.Y. 2007-08 I.TA NO. 675/COCH/2010 - A.Y. 2008-09 M/S MODERN FURNITURE VS THE DY.CIT, CENT.CIR.2 MAIN ROAD, KOTTAKKAL KOZHIKODE PAN : AADFM8698M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A MURALEEDHARAN RESPONDENT BY : SHRI K.K. JOHN DATE OF HEARING : 07-05-2012 DATE OF PRONOUNCEMENT : 25-05-2012 O R D E R PER N.R.S. GANESAN (JM) ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE INDEPENDENT ORDERS OF COMMISSIONER OF INCOME-TAX(A)-I, KOCHI FOR THE ASSE SSMENT YEARS 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09. SI NCE COMMON ISSUES ARISE FOR CONSIDERATION IN ALL THE APPEALS, WE HEARD THEM TOG ETHER AND DISPOSE OF BY THIS COMMON ORDER. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO REJ ECTION OF BOOKS OF ACCOUNT. 2 ITA NO. 669 TO 675/COCH/2010 3. SHRI A MURALEEDHARAN, THE LD.COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. ACCORDING TO THE LD.REPRESENTATIVE, ALL THE TRANSACTIONS WERE ENTERE D IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE; THEREFORE, THERE IS NO QUESTION OF ANY REJECTION OF BOOKS OF ACCOUNT. 4. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT THERE WAS A SEARCH IN THE BUSINESS PREMISES OF SUPREME AGENCIES ON 12/09/ 2007 AND BOOKS OF ACCOUNT AND DOCUMENTS WERE SEIZED DURING THE COURSE OF SEARCH O PERATION. ACCORDING TO THE LD.REPRESENTATIVE, THE REVENUE AUTHORITIES SEIZED T HE DOCUMENTS A-13 CONTAINING LOOSE SHEETS. LIKEWISE, DOCUMENTS MARKED AS KK-2 WAS ALSO SEIZED DURING THE COURSE OF SEARCH OPERATION FROM THE PREMISES OF THE ASSESSEE ON 12-09-2007. DURING THE COURSE OF EXAMINATION U/S 132(4), SHRI ADATTIL POCKER HAJI ADMITTED THAT THE TRANSACTION FOUND IN THE LOOSE SHEETS MARKED AS A-13 IS THE ACTUAL SALE TRANSACTION OF THE MODERN FURNITURE OF THE PRESENT ASSESSEE. THE LD.DR FURTH ER SUBMITTED THAT THE DOCUMENTS MARKED AS KK-2 DID ALSO DISCLOSE SIMILAR TRANSACT IONS AS FOUND IN A-13. THE PARTNER OF THE ASSESSEE ADMITTED THAT THE TRANSACTIONS FOUND I N THE LOOSE SHEETS ARE THE ACTUAL TRANSACTIONS OF THE ASSESSEE. WHEN THE BOOKS OF AC COUNT MAINTAINED BY THE ASSESSEE DO NOT DISCLOSE THE ACTUAL TRANSACTION, ACCORDING TO T HE LD.DR, THE ASSESSING OFFICER RIGHTLY REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PRO FIT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE REVE NUE AUTHORITIES FOUND DOCUMENT MARKED AS A-13 FROM THE PREMISES OF SUPREME AGENC IES AND DOCUMENT MARKED AS KK- 2 FROM THE PREMISES OF THE ASSESSEE. THESE DOCUME NTS, ACCORDING TO THE PARTNER OF THE ASSESSEE, DISCLOSE THE ACTUAL TRANSACTIONS. THEREF ORE, THE BOOKS OF ACCOUNT SAID TO BE MAINTAINED BY THE ASSESSEE DO NOT DISCLOSE THE ACTU AL TRANSACTIONS. WHEN THE BOOKS OF ACCOUNT DO NOT DISCLOSE THE ACTUAL TRANSACTIONS, TH E PROFIT OF THE ASSESSEE CANNOT BE COMPUTED FROM SUCH BOOKS OF ACCOUNT. THEREFORE, TH E ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PRO FIT ON THE BASIS OF THE MATERIAL 3 ITA NO. 669 TO 675/COCH/2010 FOUND DURING THE COURSE OF SEARCH OPERATION. IN VI EW OF THE ABOVE, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE REGARDING REJECTION OF BOOKS OF ACCOUNT. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE ESTIMATION OF VALUE OF THE STOCK. 7. SHRI A MURALEEDHARAN, THE LD.REPRESENTATIVE SUBM ITTED THAT THE ASSESSING OFFICER ESTIMATED THE OPENING STOCK AS ON 01-04-2007 AT RS. 20,95,012. AFTER ADDING THE PURCHASE, THE ASSESSING OFFICER ESTIMATED THE EXCES S STOCK TO THE EXTENT OF RS.21,76,327. ACCORDING TO THE LD.REPRESENTATIVE FOR THE ASSESSEE , THE ASSESSING OFFICER ESTIMATED THE STOCK BY ADOPTING GROSS PROFIT RATE. SINCE THE COS T OF THE STOCK WAS READILY AVAILABLE IN THE BOOKS OF ACCOUNT, ACCORDING TO THE LD.REPRESENT ATIVE, THERE IS NO NECESSITY FOR ESTIMATING THE VALUE OF THE STOCK. THE LD.REPRESEN TATIVE SUBMITTED THAT THE PURCHASE BILLS IN RESPECT OF EACH OF THE ITEMS ARE AVAILABLE FOR VERIFICATION. THEREFORE, THE ESTIMATION MADE BY THE ASSESSING OFFICER IS NOT JUS TIFIED. 8. ON THE CONTRARY, THE LD.DR SUBMITTED THAT DURING THE COURSE OF SEARCH OPERATION STOCK OF RS. 47,72,716 WAS FOUND. AFTER RE-CONCILI ATION WITH THE BOOKS OF ACCOUNT AND THE MATERIALS FOUND DURING THE COURSE OF SEARCH OPE RATION THE ASSESSING OFFICER ARRIVED AT THE EXCESS STOCK TO THE EXTENT OF RS. 21,76,327. THE ASSESSEE COULD NOT PRODUCE THE PURCHASE BILLS FOR THE STOCK FOUND DURING THE COURS E OF SEARCH OPERATION. SOME OF THE PURCHASE BILLS PRODUCED BY THE ASSESSEE COULD NOT B E MATCHED WITH COST OF THE ITEM AND THE TOCK AVAILABLE. SINCE THERE WAS LOT OF VARIATI ON BETWEEN THE STOCK FOUND AND SOME OF THE PURCHASE BILLS PRODUCED BY THE ASSESSEE THE ASSESSING OFFICER HAS TAKEN THE STOCK AT THE SALE VALUE AND AFTER DEDUCTING GROSS PROFIT @20% THE EXCESS STOCK WAS ARRIVED AT RS.21,76,327. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THERE WA S A DIFFERENCE IN STOCK PHYSICALLY FOUND AND THAT FOUND IN THE BOOKS OF ACCOUNT. THE ONLY CONTENTION OF THE ASSESEE IS 4 ITA NO. 669 TO 675/COCH/2010 THAT THERE WAS NO NECESSITY FOR ESTIMATING THE VALU E OF THE STOCK SINCE THE COST OF PURCHASE OF THE STOCK IS READILY AVAILABLE IN THE B OOKS OF ACCOUNT. THE SEIZED MATERIALS A-13 AND KK-2 CLEARLY SHOW THAT THE BOOKS OF AC COUNT DO NOT REFLECT THE ACTUAL TRANSACTION. THEREFORE, REFERENCE TO THE BOOKS OF ACCOUNT FOR VALUATION OF THE STOCK CANNOT BE MADE. A FEW PURCHASE BILLS PRODUCED BY T HE ASSESSEE WOULD NOT REVEAL THE STOCK AVAILABLE. ONE OF THE PARTNERS, SHRI ADATTIL POCKER HAJI IN HIS STATEMENT U/S 132(4) ADMITTED THAT THE STOCK WAS TAKEN CORRECTLY BY THE DEPARTMENT. THEREFORE, WHEN THE STOCK PHYSICALLY FOUND WAS DIFFERENT FROM THAT APPE ARED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE COULD NOT PRODUCE THE PURCHASE BILLS FOR A LL THE STOCK PHYSICALLY FOUND, THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSING OFFIC ER HAD NO OTHER WAY BUT TO ESTIMATE THE VALUE OF THE STOCK ON THE BASIS OF THE MATERIAL AVA ILABLE ON RECORD. ACCORDINGLY, THE ASSESSING OFFICER HAS WORKED OUT THE VALUE OF THE S TOCK ON THE BASIS OF THE SALE AT RS.59,65,895. AFTER DEDUCTING THE GROSS PROFIT OF 20% THE VALUE OF THE STOCK WAS ESTIMATED AT 47,72,716 AND THE STOCK WAS ARRIVED AT RS.21,76,327. THIS TRIBUNAL, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 10. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EST IMATION OF GROSS PROFIT. 11. THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE HAS DISCLOSED GROSS PROFIT OF 10.3% AS AGAINST 19.97% DECLARED IN THE PRECEDING YEAR. HOWEVER, THE ASSESSING OFFICER ESTIMATED THE PROFIT AT 19.97% AN D THE DIFFERENCE WAS ADDED AS INCOME. ACCORDING TO THE LD.REPRESENTATIVE, WHEN T HE BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE THERE IS NO QUESTION OF ESTIMATION OF PROFIT. 12. ON THE CONTRARY, THE LD.DR SUBMITTED THAT AS TH E BOOKS OF ACCOUNT WERE REJECTED AND THE SALES WERE COMPUTED ON THE BASIS OF THE MAT ERIAL FOUND DURING THE COURSE OF SEARCH OPERATION, THE ASSESSING OFFICER HAS RIGHTLY ESTIMATED THE PROFIT. 5 ITA NO. 669 TO 675/COCH/2010 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE RECORDS. THE BOOKS OF ACCOUNT MAINTAINED BY THE AS SESSEE DID NOT REFLECT THE CORRECT TRANSACTION OF THE ASSESSEE AND THE PARTNER OF THE ASSESSEE FIRM ADMITTED THAT LOOSE SHEETS FOUND DURING THE COURSE OF SEARCH OPERATION REFLECTING THE ACTUAL TRANSACTIONS MADE BY THE ASSESSEE. THEREFORE, THE PROFIT HAS TO BE ESTIMATED ON THE BASIS OF THE ENTRIES FOUND IN THE LOOSE SHEETS WHICH WERE ALSO A DMITTED BY THE PARTNER OF THE ASSESSEE AS THE ACTUAL SALES. THEREFORE, THIS TRIB UNAL IS OF THE OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY ESTIMATED THE PROFIT. HOWEVER, THE ASSESSING OFFICER ESTIMATED THE PROFIT AT DIFFERENT RATES FOR DIFFERENT YEARS. FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER ESTIMATED THE PROFIT AT 19.97%; F OR ASSESSMENT YEAR 2007-08 THE ASSESSING OFFICER ADOPTED THE PROFIT AT 19.9%.; FO R ASSESSMENT YEAR 2006-07 AT 20%; FOR ASSESSMENT YEAR 2005-06 IT IS 20%; FOR ASSESSMENT Y EAR 2004-05 IT IS 22.38%; AND FOR ASSESSMENT YEAR 2003-04 IT IS 24%. THIS TRIBUNAL I S OF THE OPINION THAT FORT THE ASSESSMENT YEARS UNDER CONSIDERATION THE PROFIT RAT IO SHALL BE FIXED UNIFORMLY. AFTER TAKING INTO CONSIDERATION THE PROFIT RATIO DECLARED BY THE ASSESSEE AND THE PROFIT OF THE EARLIER ASSESSMENT YEAR, THIS TRIBUNAL IS OF THE OP INION THAT ADOPTING THE PROFIT UNIFORMLY AT 19% FOR ALL THE YEARS UNDER CONSIDERATION WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE ORDERS OF AUTHORITIES BELOW ARE MO DIFIED AND THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE PROFIT AT 19% FOR ALL THE YEA RS UNDER CONSIDERATION. 14. IN THE RESULT, ALL THE APPEALS OF THE ASSESEE S TAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH MAY, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 25 TH MAY, 2012 PK/- 6 ITA NO. 669 TO 675/COCH/2010 COPY TO: 1. M/S MODERN FURNITURE, MAIN ROAD, KOTTAKKAL 2. THE DY.CIT, CENT.CIR.2, KOZHIKODE 3. THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH