Mamatha Motels, Thrissur V. ACIT, Thrissur

ITSSA 6/COCH/2008

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7894 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-10-2011
• Assessment Year: misc
• Appeal Filed On: 21-01-2008
• Court: TRIBUNAL
• Keywords: Document seized; Opportunity of cross examination; Block assessment; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.(SS)(A NO. 06/COCH/2008 BLOCK PERIOD : 1.4.1986 TO 12.12.1996 MAMATHA MOTELS, BY K.R.SETHUMADHAVAN, ERSTWHILE PARTNER, KOZHIPRA, P.O. PONNUKKARA, THRISSUR- 680306 [PAN: AALFM 2115R] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), RANGE-2, THRISSUR. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI K.KITTU, ADV.-AR REVENUE BY SHRI S.R.SENAPATI, SR.DR DATE OF HEARING 05/10/2011 DATE OF PRONOUNCEMENT 09/12/2011 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE CHALLENGING ITS ASSESSMENT UNDER CHAPTER XIV- B OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTE R) DATED 11.12.2007, PASSED U/S. 158BC R.W.SS. 158BD AND 254 OF THE ACT. 2. THE ASSESSEE IS A FIRM RUNNING A BAR AND RESTAUR ANT AT KECHERY. IT WAS SUBJECT TO SEARCH ON 12.12.1996, AND THE ASSESSMENT IN ITS CAS E, ACCORDINGLY, FRAMED VIDE ORDER DATED 26.8.1998 FOR THE BLOCK PERIOD FROM 01.4.1986 TO 12.12.1996. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE APPELLATE TRIBUNAL, WHICH, AS PER EXTANT LAW, WAS THE FIRST APPELLATE AUTHORITY IN RESPECT OF A SEARCH U/S. 132 OR A REQUISITION U/S. 132A OF THE ACT BEFORE 01.01.1997. THE TRIBUNAL DISPOSED OF THE ASS ESSEES APPEAL VIDE ITS ORDER DATED I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 2 28.3.2007 (IN IT (S&S) A.NO. 5/COCH/2002) (COPY ON RECORD/PB PGS. 94-109), PARTLY ALLOWING THE ASSESSEES APPEAL FOR STATISTICAL PURP OSES. IN FACT, THERE HAD BEEN A PRELIMINARY OBJECTION RAISED BY THE REVENUE TO THE MAINTAINABILITY OF THE ASSESSEES APPEAL ON EARLIER OCCASIONS, AND WHICH STOOD REJECT ED BY THE TRIBUNAL VIDE ITS ORDER DATED 31.10.2003, ALLOWING THE APPEAL (PB PGS. 80-93). IN FACT, THIS IS THE FOURTH OCCASION THAT THE MATTER HAS COME UP BEFORE THE TRIBUNAL; IT FIND ING THE ASSESSEES ASSESSMENT AS VALIDLY MADE ON THE ASSESSEE CHALLENGING THE `SINGLE ASSES SMENT FRAMED ON IT (FOR THE BLOCK PERIOD), I.E., IN VIEW OF SEVERAL CHANGES IN ITS C ONSTITUTION OVER THE BLOCK PERIOD, AND RESTORING THE MATTER BACK TO THE FILE OF THE ASSESS SING OFFICER (AO) FOR FRESH ASSESSMENT AFTER AFFORDING AN OPPORTUNITY OF HEARING TO ALL TH E PARTIES VIDE ITS ORDER DATED 08.12.2000 (PB PG. 27 TO 60). CONSEQUENTLY, FRESH ASSESSMENT W AS FRAMED VIDE ORDER DATED 25.3.2002 (PB PGS. 62-75). VIDE ITS ORDER DATED 28.3.2007 SUP RA, THE TRIBUNAL REMANDED BACK THE MATTER TO THE FILE OF THE AO QUA SOME ISSUES WITH SPECIFIC DIRECTIONS. THE AO, AFTE R CONSIDERING THE SAME, HAS ADJUDICATED THE ASSESSEE S APPEAL VIDE THE IMPUGNED ORDER. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFORE US. 3. THE FIVE GROUNDS, I.E., GROUND NOS. 1 TO 5, RAI SED BY THE ASSESSEE, ARE GENERAL IN NATURE, WITHOUT DEFINING PRECISELY THE INFIRMITY TH AT IN ITS OPINION ATTENDS THE IMPUGNED ORDER, SO AS TO BE EFFECTIVELY ADDRESSED. IN FACT, WE FIND NO CORRESPONDING GROUNDS IN THE ASSESSEES MEMORANDUM OF APPEAL, WHICH AS PER THE T RIBUNALS RULES HAVE TO BE SPECIFIC AND PRECISE. SO, HOWEVER, VIDE THE WRITTEN SUBMISSI ONS DATED 23.6.2011, 29.6.2011 AND 05.10.2011 (THE DATE OF HEARING), THE SPECIFIC GRIE VANCE/S STANDS PROJECTED BY THE LD. AR. THE SAME HAS NOT BEEN OBJECTED TO BY THE REVENUE, W HICH IN FACT WAS HEARD IN RESPECT OF THE SAID ISSUES. WE, THEREFORE, PROCEED TO ADJUDICA TE THE INSTANT APPEAL ON THE BASIS OF THE SAID GRIEVANCE/S, WHICH FALLS WITHIN THE SCOPE OF T HE GENERAL GROUNDS ASSUMED BY THE ASSESSEE PER ITS GROUNDS OF APPEAL (FORM NO. 36). WE SHALL TAKE THE SAME ON A YEAR- WISE BASIS. I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 3 A.Y. 1993-94 4. THE AO COMPUTED THE INCOME FOR THE YEAR ON THE B ASIS OF THE SEIZED MATERIAL, I.E., THE PROFIT AND LOSS ACCOUNT FOR THE PERIOD 12.10.19 92 TO 31.3.1993 (PB PG. 14). THE PURCHASES OF LIQUOR AS DEBITED TO THE SAID ACCOUNT IS AT ` 1250865/-. THE SAME, HOWEVER, TOTALS TO ` 1393882/-, AS WOULD BE EVIDENCED FROM THE COPY OF T HE LEDGER ACCOUNT OF THE SAID ACCOUNT (LF 51/52) (AT PGS. 24-26 OF THE ENCLO SURES TO THE APPEAL MEMO). ACCORDINGLY, IT IS CONTENDED THAT THERE HAS BEEN A MISTAKE IN RECORDING THE FIGURE OF PURCHASES, AND ITS INCOME ERRONEOUSLY INCREASED BY THE AMOUNT OF DIFFERENCE OF ` 143017/- ( ` 1393882 ` 1250865), SO THAT THE ASSESSEE IS ENTITLED TO A REL IEF FOR THE SAID AMOUNT. IN FACT, THE AO HIMSELF, AT PARA 11 OF THE IMPUGNED ORDER, CONCEDES TO THE SAID DIFFERENCE IN THE AMOUNT OF PURCHASES OF LIQUOR, TH OUGH, HOWEVER, HAS NOT ALLOWED ANY RELIEF TO THE ASSESSEE IN VIEW OF THE SPECIFIC FIND INGS BY THE TRIBUNAL IN THE FIRST ROUND. THE TRIBUNAL HAD DISPOSED OF THE ASSESSEES CASE FOR TH E YEAR PER PARA 7 OF ITS ORDER DATED 28/3/2007, WITH ITS ADJUDICATION AND FINAL FINDINGS APPEARING AT PARA 19, WHICH READS AS UNDER:- 19. AS FAR AS DETERMINATION OF UNDISCLOSED INCOME FOR ASST. YEAR 1993-94 IS CONCERNED, THE PARTNERS OF THE ASSESSEE FIRM CLAIM ED THAT THE NET PROFIT WAS RS. 6,09,091/- (THE CORRECT FIGURE IS RS. 6991/-). TH E ASSESSEE CLAIMED THAT IT HAS PAID RS. 3 LACS AS A BAR LICENSE FEE BUT THAT WAS REJEC TED BY THE AO. ON THE PERUSAL OF THE FIRST ASSESSMENT ORDER, IT APPEARS THAT THE AO HAS DETERMINED THE INCOME OF RS. 7,23,754/- WHICH APPEARS TO BE THE TOTAL INCOME AS THE FIRM HAD NOT FILED ANY RETURN OF INCOME. IT APPEARS THAT THE CLAIM OF R S. 3 LACS WAS NOT FOR CONSIDERATION BEFORE THE AO WHILE FRAMING THE FIRST ASSESSMENT O RDER. IF THE ASSESSEE HAS PAID RS. 3 LACS AS A LICENSE FEE, IN OUR OPINION, THE BENEFIT OF DEDUCTION SHOULD BE GIVEN TO THE ASSESSEE AS ADMITTEDLY THE AO HAS D ETERMINED THE TOTAL INCOME FOR THE ASST. YEAR 1993-94 AT RS. 7,23,754/- WHICH IS TREATED AS AN UNDISCLOSED INCOME. WE, THEREFORE, DIRECT THE AO TO ALLOW THE DEDUCTIO N OF RS. 3 LACS IN RESPECT OF THE BAR LICENSE FEE AFTER VERIFICATION OF THE PROOF OF PAYMENT FOR THE SAME. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE REASONING OF THE AO IN RESPECT OF OTHER ITEMS SAVE THE LICENCE FEE. (PB PG. 106) IT IS APPARENT, THEREFORE, THAT THE TRIBUNAL HAS CO NFIRMED THE ASSESSMENT AS FRAMED, I.E., SAVE THE ASSESSEES CLAIM IN RESPECT OF THE LICENSE FEE FOR ` 3 LAKHS, REMANDING THE SAME TO I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 4 THE FILE OF THE AO FOR VERIFICATION, AND WHO HAS, I N FACT, ALLOWED THE SAME PER IMPUGNED ORDER (REFER PARA 10 THEREOF). THE LIMITED ISSUE, THEREFORE, FOR WHICH THE MATTER WAS REMANDED BACK BY THE TRIBUNAL TO THE ASSESSING AUTH ORITY, HAS BEEN DECIDED, IN FACT, IN ITS FAVOUR, LEADING TO NO GRIEVANCE IN ITS RESPECT. TH E GRIEVANCE BEING NOW RAISED, AS CORRECTLY POINTED OUT BY THE AO, IS A FRESH OR A NE W ISSUE, WHICH CANNOT BE ENTERTAINED. THE TRIBUNAL IS PRECLUDED BY LAW FROM REVIEWING ITS ORDER, WHOSE POWERS IN THE SET ASIDE PROCEEDINGS, FROM WHICH THE INSTANT PROCEEDINGS ARI SE, BEING RESTRICTED AND DEFINED BY THE TERMS OF THE SET ASIDE BY IT. AS SUCH, WE FIND THE ASSESSEES CLAIM AS NOT MAINTAINABLE IN VIEW OF THE SPECIFIC FINDINGS BY THE TRIBUNAL IN TH E FIRST INSTANCE, WHICH REMAIN UNCHALLENGED, SO THAT THE SCOPE OF THE SUBSEQUENT P ROCEEDINGS IS LIMITED TO THE ISSUES ARISING THERE-FROM. WE DECIDE ACCORDINGLY. A.Y. 1994-95 5.1 THE AO HAS ESTIMATED THE ASSESSEES INCOME FOR THIS YEAR AT ` 4 LAKHS. IN THE FIRST ROUND, THE ASSESSEES CASE WAS THAT THE ENTIRE INCO ME FOR THAT YEAR HAS BEEN COMPUTED ON THE BASIS OF THE PROFIT AND LOSS ACCOUNT SEIZED FRO M ONE, SMT. E.L. GRACY, WHO WAS NO LONGER THE PARTNER OF THE FIRM, HAVING RETIRED FROM THE SAME VIDE RETIREMENT DEED DATED 26.5.1996. NO OPPORTUNITY TO CROSS EXAMINE HER WAS ALLOWED TO THE ASSESSEE. THE TRIBUNALS ADJUDICATION PER PARA 20 OF ITS ORDER DA TED 28/3/2007, READS AS:- 20. AS FAR AS DETERMINATION OF UNDISCLOSED INCOME FOR ASST. YEAR 1994-95 IS CONCERNED, WE HAVE ALREADY HELD THAT THE ENTIRE CO MPUTATION IS DONE ON THE BASIS OF PROFIT AND LOSS ACCOUNT SEIZED FROM SMT. E.L.GR ACY AND NO OPPORTUNITY TO CROSS- EXAMINE IS GIVEN. WE, THEREFORE, CONSIDER IT FIT T O RESTORE THE ISSUE OF DETERMINATION OF UNDISCLOSED INCOME FOR THE ASST. YEAR 1994-95 TO THE FILE OF THE AO WITH A DIRECTION THAT THE AO SHOULD ENFORCE THE ATTENDANCE OF SMT. E.L. GRACY AS PER THE PROVISIONS OF LAW AND ONLY AFTER AFFORD ING OPPORTUNITY OF CROSS EXAMINATION TO THE ERSTWHILE PARTNERS OF THE ASSES SEE FIRM AND THE THEN TO DETERMINE THE UNDISCLOSED INCOME FOR THE ASST. YEA R 1994-95. HENCE, THE ISSUE IN RESPECT OF THE UNDISCLOSED INCOME FOR THE ASSTT. Y EAR 1994-95 IS RESTORED TO THE AO. (PB PG. 107) I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 5 THE ASSESSEE WAS, ACCORDINGLY, ALLOWED CROSS EXAMIN ATION IN THE SET ASIDE PROCEEDINGS (ON 23/10/2007), OF SMT. E.L. GRACY, ITS EX-MANAGIN G PARTNER, FROM WHOSE RESIDENCE THE IMPUGNED PROFIT AND LOSS ACCOUNT, ON THE BASIS OF W HICH THE ASSESSMENT FOR THE RELEVANT YEAR STOOD FRAMED BY ADOPTING THE AMOUNT OF THE PRO FIT AS DISCLOSED BY THE SAID ACCOUNT ( ` 1 485024/-). SMT. GRACY CONFIRMED HER EARLIER STATEME NTS DATED 12/12/1996 AND 15.02.2002, CONFIRMING THE SAID ACCOUNT TO BE OF TH E ASSESSEE, CLARIFYING TO HAVE SIGNED THE STATEMENTS ONLY AFTER READING THE CONTENTS THER EOF. FURTHER, SHE ALSO CLARIFIED THAT IT WAS ONLY THE PAPERS RELATING TO MAMATHA MOTELS, THE ASSESSEE, THAT CAME TO HER HOUSE FOR SIGNATURE; THE RELEVANT `ACCOUNT BEARING HER SIGNA TURE. IN THE VIEW OF THE AO, THE DEPONENT HAVING ADMITTED, AND AGAIN CONFIRMED THAT THE PAPERS SEIZED FROM HER RESIDENCE AND BEING RELIED UPON AS RELATING TO THE ASSESSEE-F IRM ONLY, I.E., AFTER AFFORDING THE ASSESSEE AN OPPORTUNITY FOR CROSS EXAMINING HER, TH E SAME COULD BE VALIDLY RELIED UPON. HOWEVER, HE GAVE CREDENCE TO THE ASSESSEES CLAIM T HAT THE BUSINESS DURING THE YEAR WAS ONLY FOR THE PART OF THE YEAR, I.E., FROM 21.12.199 3, I.E., THE DATE ON WHICH THE BAR LICENSE WAS RENEWED, UP TO 31.3.1994. AS SUCH, HE ESTIMATE D THE UNDISCLOSED INCOME FOR THE YEAR BY SCALING IT DOWN TO ` 4 LAKHS, I.E., IN CORRESPONDENCE WITH THE TIME FOR WHICH THE FIRM WAS ADMITTEDLY IN OPERATION. 5.2 THE ASSESSEE HAS CHALLENGED THE SAID ASSESSMENT ON THE BASIS THAT THE SAME IS NOT PERMISSIBLE IN BLOCK ASSESSMENT, WHICH COULD ONLY B E ON THE BASIS OF ANY EVIDENCE FOUND DURING SEARCH AND/OR FURTHER MATERIALS IN RELATION TO THAT EVIDENCE. HAVING HIMSELF IGNORED THE SAID PROFIT AND LOSS ACCOUNT AS BEING N OT RELIABLE FOR THE PURPOSE, THE AO THUS HAD NO MATERIAL, PARTICULARLY THAT CAN BE SAID TO H AVE BEEN FOUND IN SEARCH, FOR ASSESSING ITS UNDISCLOSED INCOME FOR THE RELEVANT YEAR, AND W HICH FURTHER STANDS ESTIMATED BY HIM, WHICH IS AGAIN NOT PERMISSIBLE. THE REVENUES CASE, ON THE OTHER HAND, IS THAT ESTIMATION IS NOT PER SE EXCLUDED IN FRAMING THE BLOCK ASSESSMENT, SO THAT WHERE THERE ARE MATERIALS TO SUGGEST UNDISCLOSED INCOME, THE SAME CAN BE ESTI MATED; THE ONLY QUALIFICATION BEING THAT THE SAME SHOULD BE REASONABLE AND COGENT, AND BASED ON RELEVANT MATERIALS. RELIANCE IS PLACED ON THE DECISION IN THE CASE OF RAJINDER KUMAR LAHOTY V. DY. CIT , 266 ITR 621 I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 6 (P&H); RAJNIK & CO. V. CIT (ASSTT.) , 251 ITR 561 (AP); AND DR. S. SURENDRANATH REDDY V. CIT (ASSTT.) , 72 ITD 205 (HYD.). 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 6.1 THE MATTER STANDS DISCUSSED AT LENGTH VIDE P ARAS 12 TO 25 (PGS. 4 TO 11) OF THE BLOCK ASSESSMENT ORDER (BOA). THE CROSS EXAMINATION, FOR WHICH THE TRIBUNAL HAD REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING AUTHORITY ON AN EARLIER OCCASION, HAS NOT LED TO ANY POSITIVE EVIDENCE IN TERMS OF THE IMPUGNED STATEMEN T (OF ACCOUNT) AS BEING NOT OF THE ASSESSEE-FIRM. THE DEPONENT HAS, IN FACT, CONFIRMED HER STAND OF THE PAPERS FOUND FROM HER RESIDENCE AS BEING OF THE ASSESSEE-FIRM ONLY. OF COURSE, WHEN QUERIED ON THE SPECIFIC FIGURE, SHE HAS ISSUED A DISCLAIMER, THAT SHE DOES NOT REMEMBER THE SAME CORRECTLY. THIS IS PERFECTLY UNDERSTANDABLE IN VIEW OF THE TIME LAG TH AT ELAPSED BETWEEN THE EVENT ON WHICH SHE WAS QUESTIONED (I.E., F.Y. 1993-94) AND THE TIM E WHEN SHE WAS BEING QUESTIONED IN ITS RESPECT (OCTOBER, 2007). IN FACT, IF THE SAID STATE MENT/DOCUMENT (P&L ACCOUNT) (PB PGS. 15 TO 17) DID NOT BELONG TO THE ASSESSEE-FIRM, THER E WOULD BE A NUMBER OF EVIDENCES WHICH COULD BE ADVERTED OR PRESSED INTO SERVICE TO ESTABLISH SO, PUTTING THEM ACROSS TO THE DEPONENT IN CROSS EXAMINATION. SO, HOWEVER, THE QUESTION BEFORE US, AND WHICH HAS NOT BEEN DISPUTED; RATHER, ARISING OUT OF THE ASSESSEE S OWN CLAIM OF HAVING OPERATED ONLY FOR A PART OF THE YEAR, I.E., FROM 21.12.1993 ONWARDS, IS WHETHER THE UNDISCLOSED INCOME IS POSSIBLE TO BE ESTIMATED ? THE AO HAS, IN ESTIMATING THE SAME, CONSIDERED T HE FACT THAT THE ASSESSEE HAD ITSELF ACCEPTED UNDISCLOSED INCOME FOR THE IMMEDIATELY PRECEDING YEAR, AS WELL AS FOR THE FOLLOWING YEAR (A.Y. 1995-96) TO THE TUNE OF ` 18 LAKHS. 6.2 THE SHORT QUESTION THEREFORE BEFORE US IS THE V ALIDITY OR THE MAINTAINABILITY IN LAW OF THE ESTIMATION OF THE UNDISCLOSED INCOME AT ` 4 LAKHS FOR A.Y. 1994-95 COMPRISED IN THE BLOCK PERIOD. WITHOUT DOUBT, THE COMPUTATION O F UNDISCLOSED INCOME HAS NECESSARILY TO BE ON THE BASIS OF THE EVIDENCE FOUND AS A RESUL T OF SEARCH (OR REQUISITION OF BOOKS OF ACCOUNTS) AND SUCH OTHER MATERIALS OR INFORMATION A VAILABLE WITH THE AO IN RELATION TO THE SAID EVIDENCE (S. 158BB). AS SUCH, THE FIRST QUEST ION IS WHETHER THERE IS ANY EVIDENCE TO SUPPORT THE COMPUTATION OF UNDISCLOSED INCOME FOR F .Y. 1993-94, I.E., THE RELEVANT I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 7 FINANCIAL YEAR. THE SECOND WOULD BE THE REASONABILI TY OF THE ESTIMATION, WHICH SHALL ONLY FOLLOW ON AN AFFIRMATIVE ANSWER TO THE FIRST QUESTI ON. TOWARD THIS, HOWEVER, IT WOULD BE NECESSARY TO RECOUNT THE BACKGROUND FACTS OF THE CA SE, LEADING TO THE IMPUGNED ASSESSMENT ORDER. THE ASSESSEE-FIRM WAS CONSTITUTED ON 03.12.1990, THOUGH AS PER COPIES OF THE PARTNERSHIP AND RETIREMENT DEEDS AS ADDUCED, THE EARLIEST PARTNERSHIP DEED IS DATED 23.3.1991, COMPRISING 15 PARTNERS. THE FIRM WAS RE CONSTITUTED ON 23.5.1996, 26.5.1996 AND 14.8.1996, WHEREAT IT CAME UNDER THE PARTNERSHI P OF ONE SHRI K.V.RAMAKRISHNAN AND SMT. K.S.THANKAM. SMT. E.L.GRACY WAS THE MANAGING PARTNER OF THE FIRM, AT LEAST FROM 23.3.1991, UP TO HER RETIREMENT ON 14.8.1996, RESPO NSIBLE FOR THE DAY TO DAY CONTROL AND MANAGEMENT OF THE FIRM. THE FIRM DID NOT FILE ANY RETURN OF INCOME (ROI) WITH THE I.T. DEPARTMENT UP TO THE DATE OF SEARCH, I.E., FOR A.Y. 1992-93 TO A.Y. 1994-95, EVEN AS IT WAS ASSESSED TO SALES-TAX, ALSO PAYING EXCISE DUTY AS WELL AS LICENSE FEES TO THE EXCISE DEPARTMENT FOR THOSE YEARS. ITS FIRST RETURN WAS FO R A.Y. 1995-96, FILED ONLY ON 22.2.1996, AND WHICH WAS IN FACT FOR A LOSS OF ` 56530/-. EVEN THEREAFTER NO RETURNS HAVE BEEN FILED BY THE ASSESSEE. THAT IS, NO RETURN OF INCOME HAS BEEN FILED BY THE ASSESSEE-FIRM FOR ALL THE YEARS THAT IT WAS OPERATIVE UP TO THE DATE OF S EARCH, BEING THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEARS 1993-94 TO 1996-97, SAVE FOR A. Y. 1995-96, WHICH WAS AT A LOSS. THE UNDISCLOSED INCOME FOR ALL THESE YEARS, INCLUDING F OR A. Y. 1995-96, HAS BEEN ARRIVED AT PRIMARILY ON THE BASIS OF THE ASSESSEE-FIRMS PROFI T AND LOSS ACCOUNT COMPILED FROM THE SEIZED DOCUMENTS, VIZ. DAY BOOK AND LEDGER (REFER P ARA 6.3). THE SAME WERE FOUND AND SEIZED FROM THE RESIDENCE OF, SMT. E.L. GRACY, ITS MANAGING PARTNER (FOR THE RELEVANT YEARS) AND NOT A THIRD PERSON, AS CONTENDED. SHE CO NFIRMED THE SAME AS BEING THE FULL ACCOUNT OF THE FIRMS BUSINESS FOR THE RELEVANT YEA RS, THOUGH NOT DISCLOSED TO THE DEPARTMENT. THE SAID FACT IS NOT IN DISPUTE. THE A SSESSEE HAS ADMITTED THE SAME, AND EVEN TO THE ADOPTION OF THE ENTIRE NET PROFIT AS DI SCLOSED THEREBY AS REPRESENTING THE FIRMS INCOME, SAVE THE DISCREPANCY/S IT CLAIMS THE SAME T O BEAR, BEING IN THE NATURE OF OMISSIONS HAVING OCCURRED AT THE END OF THE AO IN P REPARING THE SAME FROM THE SEIZED DOCUMENTS WHICH WERE IN MALAYALAM. COPIES OF THE SA ID STATEMENTS (AS WELL AS THEIR ENGLISH TRANSLATIONS) ARE ON RECORD. THE BASIS OF T HE ASSESSMENT FOR LAST YEAR, I.E., A.Y. 1997-98, THE YEAR OF SEARCH (1.4.1996 TO 12.12.1996 ), IS A TRIAL BALANCE (AS ON 12.12.1996) I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 8 OBTAINED FROM THE ASSESSEES OFFICE PREMISES AT KOO RKANCHERRY. IT WAS FOUND THAT IT WAS NOT DISCLOSING THE SALES OF LIQUOR PURCHASED FROM O THER THAN BEVERAGES CORPORATION, TO THE VARIOUS DEPARTMENTAL AUTHORITIES. THE DIFFERENCE BE TWEEN SUCH SALES ( ` 53.66 LAKHS) AND THE CORRESPONDING PURCHASES ( ` 21.40 LAKHS), AGAIN, REFLECTED IN THE TRIAL BALANCE , I.E., ` 32.25 LAKHS, WAS, THUS, CONSIDERED AS UNDISCLOSED PROFIT AND ADDING ANOTHER ` 0.92 LAKHS FOR SUNDRY SALES, ETC., BEING TRADING RECEIPTS, THE INCOME FOR THE YEAR WAS ASSESSED AT ` 33.17 LAKHS. THE SAME IS, AGAIN, ACCEPTED, EVEN AS THE ASSESSEE RETURNED AN UNDISCLOSED INCOME OF ONLY ` 22.10 LAKHS FOR THE ENTIRE BLOCK PERIOD. 6.3 COMING TO A.Y. 1994-95, NO BOOKS OF ACCOUNTS WE RE ADMITTEDLY FOUND OR SEIZED DURING THE SEARCH. HAND WRITTEN P&L ACCOUNT, SHOWI NG A PROFIT OF ` 1485024/- WAS, HOWEVER, FOUND AND SEIZED, AGAIN, FROM THE RESIDENC E OF SMT. GRACY. THE SAME DID NOT BEAR MENTION OF THE PERIOD TO WHICH IT RELATED OR A GREE WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE SEIZED FOR ANY OF THE YEARS (REFER TABLE B ELOW, PARA 6.2 FOR AY 1997-98), NOR DID IT BEAR THE NAME OF THE ASSESSEE-FIRM. SMT. GRACY CONFIRMED (VIDE HER DEPOSITION U/S. 132(4) DATED 12.12.1996) IT TO BE THE ACCOUNT OF M/ S. MAMATHA MOTELS AND, FURTHER, FOR AN INITIAL YEAR (NOR DID IT BEAR THE NAME OF THE ASSES SEE-FIRM FOR THE PERIOD TO WHICH IT RELATED). ACCORDINGLY, THE SAME WAS TAKEN AS THE A CCOUNT OF THE ASSESSEE-FIRM FOR THE MISSING YEAR, I.E., F.Y. 1993-94, AND THE ASSESSEE HAVING NOT FILED ANY REGULAR RETURN FOR THE YEAR, THE ENTIRE NET PROFIT OF ` 14.85 LAKHS, REFLECTED THEREBY, ADOPTED AS UNDISCLO SED INCOME FOR A.Y. 1994-95. HERE, IT MAY BE PERTINENT TO ADD THAT THERE IS NO DISCREPANCY WITH REGARD TO THE PRIMARY FACTS, AND THAT THE SALE S AS WELL AS PROFIT FOR THIS YEAR MATCHES WITH THAT FOR THE PRECEDING AND SUCCEEDING YEARS, W HICH ARE TABULATED AS UNDER:- (AMOUNT IN ` LAKHS) ASST.YR. PREVIOUS YEAR . SALES NET PROFIT STATUS REFERENCE 1993-94 12/10/1992 TO 25.93 4.24 ADMITTED PB PG. 14 READ WITH PARA 31/3/1993 10 OF BOA DT. 11.12.2007 1994-95 1/4/1993 TO 67.84 14.85 DISPUTED PB PG. 15 TO 17 R/W PARAS 12 31/3/1994 TO 25/BOA DTD. 11.12.2007 I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 9 1995-96 1/4/1994 70.2 2 17.59 ADMITTED PB PG. 18 READ WITH PARA TO 31/3/1995 27 OF BOA DT. 11.12.2007 1996-97 1/4/995 TO 87.05 31.52 ADMITTED PB PG.19 READ WI TH PARA 31/3/1996 28 OF BOA DT.11.12.2007 1997-98 1/4/1996 TO 104.56 33.17 ADMITTED PB PG.13 READ WITH PARA 12/12/1996 31 OF BOA DT.11 .12.2007 IN APPEAL, THE ASSESSEE DISPUTED THE OWNERSHIP OF PROFIT AND LOSS ACCOUNT FOR F.Y. 1993-94, STATING THAT NO PART OF THE ACCOUNT WAS CO NNECTED TO IT. THE PAPER DID NOT BEAR ITS NAME NOR THE PERIOD TO WHICH IT PERTAINED. SMT. GR ACY WAS ALSO THE MANAGING PARTNER OF M/S. SAYOOJ HOTEL, EDAPPAL, AND WHICH SHE CONTINUED UP TO 31.3.1997. THE MATTER WAS, THEREFORE, REMANDED BY THE TRIBUNAL BACK TO THE FIL E OF THE AO TO ALLOW THE ASSESSEE TO CROSS EXAMINE SMT. GRACY IN RESPECT OF THE SAID P&L STATEMENT VIDE ITS ORDER DATED 28.3.2007 (PB PGS. 94 TO 107/PARA 20 ). ACCORDINGLY , FRESH SUMMONS WERE ISSUED ON 23.10.2007, AND OPPORTUNITY TO CROSS EXAMINE SMT.GR ACY GRANTED TO THE ASSESSEE. SMT. GRACY AFFIRMED HER DEPOSITION DATED 12.12.1996, AS WELL AS THE SUBSEQUENT STATEMENT DATED 15.2.2002, CONFIRMING TO HAVE SIGNED THE SAME ONLY AFTER READING ITS CONTENTS. THE SAME IS EVEN OTHERWISE IMPLIED FROM HER CONDUCT IN- AS-MUCH AS THE STATEMENT/S HAS NOT BEEN RETRACTED BY HER AT ANY TIME. MORE IMPORTANTL Y, SHE HAS CONFIRMED THE IMPUGNED P&L STATEMENT AS BELONGING TO THE ASSESSEE-FIRM, CL ARIFYING THAT IT WAS ONLY THE PAPERS OF M/S. MAMATHA MOTELS THAT CAME TO HER FOR SIGNATURE. THE CROSS EXAMINATION HAS NOT PROVED EITHER HER STATEMENT AS NOT CORRECT OR OTHER WISE PROVED THE SAID ACCOUNT AS NOT BELONGING TO IT. AS POINTED OUT BY THE AO, THE ASSE SSEE COULD EASILY DO SO WITH REFERENCE TO THE BOOKS OF ACCOUNTS OF THE FIRM FOR THAT YEAR. IN FACT, WE OBSERVE THAT THE SAME BEARS NO LESS THAN FIVE AMOUNTS IN RELATION TO PAYMENT OF STATUTORY LIABILITIES VIZ. EXCISE ( ` 75,622/-); TURNOVER TAX ( ` 149034); LICENSE FEE ( ` 5 LAKHS); SALES-TAX ( ` 23029) AND INCOME-TAX ( ` 6755), THAT WOULD BE SUPPORTED BY CHALLAN ONLY IN T HE NAME OF THE ASSESSEE/PERSON ON WHOM THE SAID DEMAND STANDS RAIS ED. IT CLAIMS ITS TURNOVER FOR THE YEAR AT ` 18.79 LAKHS ON THE BASIS OF THE SALES TAX ASSESSMEN T ORDER FOR THAT YEAR, WHICH I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 10 COULD NOT BE DENIED BY SMT. E.L. GRACY. IN FACT, S HE NEED NOT, THE FIRM UNARGUABLY NOT DISCLOSING ITS FULL SALES TO THE TAX AUTHORITIES. 6.4 IN FACT, IT (THE ASSESSEE) CONVENIENTLY FORGETS THAT IT HAS NOT DISCLOSED ANY INCOME WHATSOEVER FOR THE YEAR TO THE REVENUE, SO THAT EVE N GOING BY THE ADOPTED TURNOVER OF ` 18.79 LAKHS, THERE HAS BEEN AN OMISSION TO DISCLOSE AT LEAST THE SAME TO THE REVENUE. THAT IS, THE SUPPRESSION OF SALES FOR THE YEAR, AT LEAST TO THE EXTENT OF ` 18.79 LAKHS, IS PROVED. AND, FURTHER, WHICH CAME TO SURFACE ONLY AS A RESU LT OF SEARCH. UNDER THE CIRCUMSTANCES, HOW, ONE MAY ASK, COULD THE AO BE FA ULTED FOR ESTIMATING THE UNDISCLOSED INCOME FOR THE YEAR AT ` 4 LAKHS, AND WHICH (AT 21.29%) RATHER WORKS OUT TO LESS THAN THE RATIO OF NET PROFIT AS FOUND TO HAVE BEEN EARNED FO R THE OTHER YEARS, WHICH STAND ASSESSED AND, IN FACT, ACCEPTED? THE ASSESSEE HAS NOT BROUGH T ANY MATERIAL ON RECORD TO SHOW THAT IT HAD NOT EARNED ITS NORMAL AVERAGE RATIO OF PROFIT ( WHICH VARIES FROM 22% TO 36%). ALL THE FOREGOING FACTS, ON WHICH THE ASSESSMENT, INCLU DING ITS QUANTUM, IS BASED, IS ONLY ON THE STRENGTH OF THE EVIDENCE FOUND AS A RESULT OF S EARCH AND THE MATERIAL AND INFORMATION WITH THE AO IN RELATION THERE-TO. ESTIMATION IS NO T AN ANATHEMA IN BLOCK ASSESSMENT, TO WHICH (ASSESSMENT) THE REGULAR PROVISIONS OF THE AC T AS WELL AS THE NORMAL PROCEDURE OF ASSESSMENT ARE APPLICABLE, AS EXPLAINED PER THE DEC ISIONS, AMONG OTHERS, CITED BY THE REVENUE. IN FACT, ESTIMATION IS INTRINSIC TO ANY A SSESSMENT EXERCISE, AND THE ONLY QUALIFICATION IS THAT IT SHOULD BE REASONABLE AND C OGENT, BEARING A NEXUS WITH THE RELEVANT MATERIALS OR EVIDENCE, WHICH IN CASE OF A BLOCK ASS ESSMENT IS THAT FOUND AS A RESULT OF SEARCH OR AS AVAILABLE WITH THE AO IN RELATION THER ETO, AND WHICH IS INDEED THE CASE. NO DOUBT, THE REASON FOR THE AO IN RESTRICTING THE PRO FIT TO ` 4 LAKHS, AS AGAINST ` 14.85 LAKHS AS REFLECTED PER P&L ACCOUNT STATEMENT, WAS THE EVI DENCE OF THE BAR LICENSE FOR THE YEAR HAVING BEEN RENEWED BY THE ASSESSEE, AND WHICH COUL D, AGAIN, NOT BE CONTROVERTED BY SMT. GRACY. HOWEVER, THE SAME IS CORROBORATIVE AND TO THE SAME EFFECT AND, IN FACT, REINFORCES THE REVENUE CASE. WE MAY CLARIFY THAT W HILE WE SAID SO, WE ARE NOT HOLDING OR CONFIRMING THAT THE FIRM IN FACT FUNCTIONED ONLY DU RING THE RELEVANT PART OF THE YEAR, I.E., FROM 21.12.1993 TO 31.3.1994. THERE IS NOTHING ON R ECORD TO SHOW THAT THE FIRM SUSPENDED ITS OPERATIONS FROM 1.4.1993 ONWARDS, AS A SHUT DOWN OF OPERATIONS WOULD, IN I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 11 FACT, YIELD A VARIETY AND HOST OF EVIDENCES IN THE NORMAL COURSE. FURTHER, THE PRODUCTION OF BOOKS AS MAINTAINED IN THE REGULAR BOOKS, WOULD EXH IBIT THE SAME. THE QUESTION IS NOT OF THE DATE OF THE RENEWAL OF THE LICENSE, BUT THE DAT E FROM WHICH THE RENEWAL IS EFFECTIVE, WHICH MAY WELL BE FROM 1.4.1993 ONWARDS. BUT ONLY T HAT, THAT ON THE BASIS OF MATERIAL ON RECORD, THE INFERENCE OF IT HAVING EARNED ` 4 LAKHS FOR THE YEAR IS UNMISTAKABLE; THERE BEING NO EVIDENCE THAT THE SAME WAS NOT A `NORMAL YEAR, TOWARD WHICH NO CONTENTION STANDS RAISED NOR PUT TO SMT. GRACY, SO THAT THE PRESUMPTI ON WOULD BE IT BEING ONLY SO, I.E., A NORMAL YEAR, WITH AN ADMITTED TURNOVER OF ` 18.79 LAKHS. WE, THEREFORE, FIND NO MERIT IN THE ASSESSEES CHALLENGE TO THE SAME, AND UPHOLD TH E ORDER PASSED IN THE AFFIRMATIVE. WE DECIDE ACCORDINGLY. A.Y. 1996-97 7. FOR A.Y. 1996-97, THE ASSESSEE CLAIMS TWO MIST AKES TO ATTEND THE COMPUTATION OF ITS UNDISCLOSED INCOME: I) THE P&L ACCOUNT CONTAINS NO DEBIT WITH REGARD TO THE RESTAURANT PURCHASES AND WHICH IS AT ` 615865/- (LF 26 TO 35), WHILE THE CREDIT SIDE OF TH E ACCOUNT CONTAINS THE ENTRY IN RESPECT OF RESTAURANT SALES AT ` 1005841/- (PB PG. 19). II) THE CLOSING STOCK AS ON 31.3.1995 ( ` 256966/- / PB 18), DOES NOT FIND REFLECTION IN THE OPENING STOCK FOR THE FOLLOWING YEAR (I.E., F.Y. 19 95-96/PB PG. 19). THE CLOSING STOCK AS AT 31.3.1996 AS PER THE SEIZED RECORD IS ` 59977/-, SO THAT THE NET EFFECT IS A PROFIT INFLATI ON BY ` 197689/-. THE COMBINED EFFECT OF THE TWO DISCREPANC IES (I.E., NON-ACCOUNTING OF STOCK AND THE RESTAURANT PURCHASES) IS THAT THE PRO FIT FOR THE YEAR IS IN EXCESS BY ` 813554/- ( ` 615865 + ` 197689). THE AO HAS DENIED RELIEF IN VIEW OF THE FINDING THA T THE TRIBUNAL HAS RESTORED THE MATTER BACK FOR A LIMITED PURPOSE ONLY, WHICH STANDS CARRI ED OUT. THE TRIBUNALS ORDER DATED 28.3.2007 (SUPRA), CONSEQUENT TO WHICH THE RESTORAT ION TO THE AO WAS MADE, AND WHICH IS NOT CHALLENGED, SO THAT IT ASSUMES FINALITY, IS SEL F-CONTAINED, TOWARD WHICH WE REPRODUCE ITS FINDING (PARA 22), AS UNDER:- . NOW, AS FAR AS DETERMINATION OF UNDISCLOSED INCOME FOR THE ASST. YEAR 1996-97IS IS CONCERNED, IN THE ORIGINAL ASSESSME NT, THE AO DETERMINED THE UNDISCLOSED INCOME AT RS.32,51,910/- AND AS THE FIRM HAD NOT FI LED ANY RETURN OF INCOME THE ENTIRE INCOME WAS TREATED AS AN UNDISCLOSED INCOME. IT A PPEARS THAT THE DAY BOOK AND I.T.(SS)A. NO. 06/COCH/2008 MAMATHA MOTELS V. ASSTT. CIT, THRISSUR 12 LEDGER FOR THE YEAR ENDED 31.3.1996 HAD BEEN SEIZE D FROM THE RESIDENCE OF SMT. E.L. GRACY AND ON THE BASIS OF THE BASIS OF THE SA ME, THE AO HAD WORKED OUT THE UNDISCLOSED INCOME. ON THE PERUSAL OF THE SECOND A SSESSMENT ORDER, WE FIND THAT THE PARTNERS OF THE ASSESSEE FIRM HAVE AVAILED TH E OPPORTUNITY TO VERIFY THE SEIZED RECORD AND THE PARTNERS HAVE PREPARED PROFIT AND L OSS ACCOUNT FROM THE SEIZED RECORD DECLARING THE NET PROFIT OF RS. 19,94,556/- . WE HAVE PERUSED THE REASONING GIVEN BY THE AO FOR CONFIRMING THE SAME BUT WE FIN D SOME SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL THAT THE LICENSE FEE P AID BY THE ASSESSEE SHOULD HAVE BEEN CONSIDERED. AS FAR AS THE ASST. YEAR 1996-97 IS CONCERNED, THERE SHOULD NOT BE A GRIEVANCE OF THE PARTNERS OF THE ASSESSEE TH AT THE SEIZED MATERIAL WERE NOT MADE AVAILABLE TO THEM ON THE BASIS OF WHICH THE A O DETERMINED THE TOTAL UNDISCLOSED INCOME. WE, THEREFORE, DIRECT THE AO T O CONSIDER THE CLAIM OF PAYMENT OF LICENSE FEE AS, ADMITTEDLY, THE ENTIRE TOTAL IN COME OF THE ASSESSEEIS TREATED AS AN UNDISCLOSED INCOME IF THE SAME HAS NOT BEEN CONSID ERED. HENCE, TO THAT LIMITED EXTENT, WE RESTORE THE DETERMINATION OF THE UNDISC LOSED INCOME FOR THE ASST. YEAR 1996-97 TO THE FILE OF THE AO. (PB PG. 108) WITHOUT DOUBT, THE RESTORATION TO THE AO WAS FOR A LIMITED PURPOSE ONLY, AND WHICH STANDS CARRIED OUT. ACCORDINGLY, THERE IS NO SCOPE FOR ANY INTERPRETATION AT OUR END. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS D ISMISSED. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: DECEMBER 9, 2011 GJ COPY TO: 1. MAMATHA MOTELS, BY K.R.SETHUMADHAVAN, ERSTWHILE PARTNER, KOZHIPRA, P.O. PONNUKKARA, THRISSUR- 680306 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -2(1), RANGE 2, THRISSUR. 3. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 4. GUARD FILE .