ACIT, Ernakulam V. M/s.Khyber foods, Cochin

ITSSA 65/COCH/2004

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9130 (ITAT-COCHIN)
• Duration Of Justice: 8 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-05-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-05-2013
• Assessment Year: misc
• Appeal Filed On: 18-06-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T M SREEDHARAN SENIOR COUNS EL
• Assessee Lawyers: M ANIL KUMAR
• Keywords: Business income; Depreciation; Document seized; Documents seized

Judgement Text

1 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T(SS)A NO. 59/COCH/2004 (BLOCK PERIOD 1988-89 TO 1997-98 & BROKEN PERIOD 01 -04-98 TO 10-03-1999) M/S KHYBER FOODS VS DY.CIT (INV), CIR.2 D.H. ROAD, JOS JUNCTION DIVISION-1, ERNAKULAM ERNAKULAM, COCHIN-16 PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) I.T(SS)A NO. 65/COCH/2004 (BLOCK PERIOD 1988-89 TO 1997-98 & BROKEN PERIOD 01 -04-98 TO 10-03-1999) THE A.C.I.T., CIR.1(3) VS M/S KHYBER FOODS ERNAKULAM JOS JUNCTION, COCHIN (APPELLANT) (RESPONDENT) ASSESSEE BY :SHRI T.M. SREEDHARAN, SENIOR COUNS EL RESPONDENT BY : SHRI M ANIL KUMAR DATE OF HEARING : 21-05-2013 DATE OF PRONOUNCEMENT : 29-05-2013 O R D E R PER N.R.S. GANESAN (JM) BOTH REVENUE AND THE ASSESSEE FILED APPEAL AGAINST THE ORDER PASSED BY THE CIT(A)-III, KOCHI DATED 24-03-2004 FOR THE B LOCK PERIOD 1988-89 TO 1997-98 & BROKEN PERIOD 01-04-98 TO 10-03-1999. 2 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 2. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT ON T HE BASIS OF THE MATERIALS FOUND DURING THE COURSE OF SEARCH OPERATI ON AND THE STATEMENT RECORDED DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER ESTIMATED THE UNDISCLOSED INCOME. ACCORDING TO THE LD.DR THE SEI ZED MATERIALS INDICATE DAY TO DAY EXPENDITURE. HOWEVER, THE OTHER EXPENDI TURE LIKE, ELECTRICITY BILL, RENT, PURCHASE OF GOODS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. ON VERIFICATION OF BILLS, THE REVENUE AUTHORITIES FOUN D THAT EXPENDITURE RELATING TO ELECTRICITY BILL, RENT, PURCHASE OF GOODS WAS NO T RECORDED IN THE DIARIES. THEREFORE, THESE EXPENDITURES WHICH WERE IN FACT IN CURRED, COULD HAVE BEEN MET ONLY OUT OF THE AMOUNT SIPHONED OFF FROM THE BU SINESS INCOME WHICH WERE NOT DISCLOSED TO THE DEPARTMENT. THE SEIZED M ATERIAL CLEARLY INDICATES THE PAYMENT MADE OUTSIDE THE BOOKS OF ACCOUNT IN CO DE WORDS. ACCORDING TO THE LD.DR, THE TOTAL EXPENDITURE INCURRED OUTSID E THE BOOKS OF ACCOUNT COMES TO RS.11,88,498 AND THE NET PROFIT EARNED BY THE ASSESSEE BEFORE DEPRECIATION COMES TO RS.5,71,337. THE LD.DR FURTH ER POINTED OUT THAT IN FACT THE ASSESSEE OBJECTED TO THE ESTIMATION OF PRO FIT AS WELL AS THE PROJECTED TURNOVER ARRIVED AT BY THE ASSESSING OFFI CER. HOWEVER, BEFORE THE 3 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 JOINT COMMISSIONER IT WAS DECIDED TO FIX THE NET PR OFIT AT 10% ON 85% OF THE PROJECTED TURNOVER. 85% OF THE PROJECTED TURNOVER CAME TO RS.2,21,06,219. THEREFORE, ACCORDING TO THE LD.DR, SINCE THE PROJEC TED TURNOVER WAS TAKEN ONLY AT 85%, THE ASSESSING OFFICER HAS RIGHTLY FIXE D THE PROFIT AT 10%. HOWEVER, ACCORDING TO THE LD.DR, THE CIT(A) COMMITT ED A MISTAKE IN SAYING THAT THE SUPPRESSED TOTAL INCOME SHOULD BE TAKEN ON LY FOR ASSESSMENT YEARS 1997-98 AND 1998-99 INSTEAD OF WHOLE BLOCK PE RIOD. ACCORDING TO THE LD.DR, THE STATEMENT RECORDED DURING THE COURSE OF SEARCH OPERATION CLEARLY DISCLOSES THAT SOME PORTION OF SALES WAS SUPPRESSED FOR THE WHOLE BLOCK PERIOD. THEREFORE, THE CIT(A) OUGHT TO HAVE CONFIR MED THE ADDITION FOR THE WHOLE BLOCK PERIOD. 3. ON THE CONTRARY, SHRI T.M. SREEDHARAN, THE LD.SE NIOR COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM WAS ASSES SED TO INCOME-TAX FROM THE ASSESSMENT YEAR 1991-92 ONWARDS. ON THE BASIS OF THE SEARCH CARRIED OUT BY THE DEPARTMENT, THE ASSESSING OFFICER ESTIMA TED THE TURNOVER AND PROFIT OF THE ASSESSEE. HOWEVER, THE CIT(A) FOUND THAT THE SEIZED MATERIAL RELATES TO ASSESSMENT YEARS 1997-98 TO 1999-2000 AN D NOT FOR THE 4 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 ASSESSMENT YEARS 1989-90 TO 1996-97. THE CIT(A) RE STRICTED THE ESTIMATED INCOME FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99 AND ALSO ESTIMATED THE NET PROFIT @10% ON 85% OF THE PROJECTED TURNOVE R. ACCORDING TO THE LD.SENIOR COUNSEL, IN THE CASE OF P.A. ABDUL GAFOOR WHO IS ALSO RUNNING A SIMILAR RESTAURANT, THE NET PROFIT WAS ESTIMATED FO R THE BLOCK PERIOD AT 5.5% BY CIT(A). THIS TRIBUNAL CONFIRMED THE ORDER OF CI T(A) AND THE ORDER BECAME FINAL. EVEN THOUGH THE TURNOVER WAS ESTIMAT ED FOR THE PERIOD OF 10 YEARS, THE CIT(A) FOUND THAT THE SEIZED MATERIAL RE LATED TO THE YEARS 1997- 98, 1998-99 AND 1999-2000. THE CIT(A) FOUND THAT T HE TURNOVER HAS TO BE ESTIMATED ONLY FOR 300 DAYS AND NOT FOR 365 DAYS. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, IN THIS CASE ALSO, THE TURNO VER SHALL BE ESTIMATED ONLY FOR 300 DAYS AND THE PROFIT HAS TO BE ESTIMATED AT 5.5% AND NOT AT 10%. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. 5. THESE APPEALS OF THE ASSESSEE AND THE REVENUE WE RE ACTUALLY DISPOSED OF BY THIS TRIBUNAL BY AN ORDER DATED 30-0 4-2007 HOLDING THAT THE 5 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 ASSESSMENT MADE U/S 158BC IS VOID SINCE THE WARRANT OF AUTHORIZATION WAS NOT ISSUED IN THE NAME OF THE ASSESSEE. HOWEVER, O N APPEAL BY THE REVENUE, THE HIGH COURT SET ASIDE THE ORDER OF THE TRIBUNAL AND RESTORED THE APPEAL BACK TO THE FILE OF THE TRIBUNAL FOR DEC ISION ON MERIT. ACCORDINGLY, THESE APPEALS WERE HEARD AGAIN AND ARE BEING DISPOSED OF AFTER HEARING BOTH PARTIES. 6. THE CONTENTION OF THE ASSESSEE IS THAT THE SEIZE D MATERIAL RELATES TO ASSESSMENT YEARS 1997-98 AND 1998-99 AND NO SEIZED MATERIAL IS AVAILABLE FOR ASSESSMENT YEARS 1989-90 TO 1996-97. FROM THE MATERIAL AVAILABLE ON RECORD, IT APPEARS THAT ONE SHARAFUDDIN, THE MANAGE R OF THE ASSESSEE FIRM WAS EXAMINED DURING THE COURSE OF SEARCH OPERATION AND HE ADMITTED THAT ALL THE SALES WERE NOT BEING RECORDED IN THE BOOKS OF ACCOUNT AND THE NOTINGS FOR TOTAL SALES FOR EARLIER PERIOD WERE SUB SEQUENTLY DESTROYED. FROM THE ASSESSMENT ORDER IT APPEARS THAT DURING TH E COURSE OF SEARCH OPERATION, TWO DIARIES AND TWO NOTE BOOKS WERE FOUN D AND SEIZED. THE NOTINGS IN THE SEIZED DOCUMENTS ARE FOR THE PERIOD 14-03-1998 TO 09-03- 1999. DURING THE COURSE OF EXAMINATION, SHRI SHARA FUDDIN ADMITTED THAT 6 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 PAG SALES WERE NOT RECORDED IN THE BOOKS OF ACCOUNT AND IT IS UNACCOUNTED SALES. HE ALSO EXPLAINED THAT MK 9 & 10 CONTAIN NO TINGS FOR SUBSEQUENT PERIOD. THE ASSESSING OFFICER FURTHER FOUND THAT T HE MATERIALS AVAILABLE ON RECORD REVEALED THAT THE ASSESSEE HAS BEEN FOLLOWIN G THE SAME KIND OF PRACTICE FOR EARLIER YEARS ALSO. PAGE NOS.13, 14 & 15 OF SEIZED DOCUMENT KPU 159 SHOWS THE NOTINGS FOR 1996-97 & 1997-88 AS ALSO KPV 146, MORE PARTICULARLY, PAGES 221 AND 222 WHICH INDICATED SAL ES FOR 1997. THEREFORE, IT CANNOT BE CORRECT TO SAY THAT THE SEIZED MATERIA LS RELATE ONLY FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99. EVEN FOR OTH ER YEARS, THERE ARE SOME MATERIALS IN THE SEIZED DOCUMENT TO INDICATE T HAT THE ASSESSEE SUPPRESSED THE SALES TURNOVER. ON EXAMINATION OF S HRI SHARAFUDDIN, THE MANAGER, WHO IS LOOKING AFTER THE AFFAIRS OF THE FI RM REVEALS THAT THIS PRACTICE WAS ADOPTED FOR OTHER YEARS ALSO. HOWEVER , THE COPIES OF THE STATEMENT SAID TO BE RECORDED FROM SHRI SARAFUDDIN IS IN VERNACULAR LANGUAGE. THE ENGLISH TRANSLATION WAS NOT FILED BY EITHER PARTY. THEREFORE, WE ARE UNABLE TO GO THROUGH THE VERNACULAR VERSION OF THE STATEMENT SAID TO BE RECORDED FROM SHRI SARAFUDDIN. 7 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 7. THE ANDHRA PRADESH HIGH COURT IN THE CASE OF RAJ NIK & CO 251 ITR 561 (AP) FOUND THAT THOUGH THE DETECTION WAS FOUND FOR CERTAIN PERIOD ON THE BASIS OF THE SWORN STATEMENT OF THE PARTNER OF THE FIRM, THE ADDITION CAN BE MADE FOR EARLIER ASSESSMENT YEAR ALSO. THOU GH THE DEPARTMENT CLAIMS THAT SHRI SHARAFUDDIN ADMITTED IN THE SWORN STATEMENT THAT THE SAME PRACTICE WAS FOLLOWED FOR EARLIER ASSESSMENT Y EARS, WE ARE UNABLE TO CONFIRM THE SAME SINCE THE ENGLISH TRANSLATION OF S TATEMENT OF SAID SHRI SHARAFUDDIN WAS NOT FILED BEFORE THIS TRIBUNAL. TH EREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE CONSIDERED BY THE ASSESSING OFFICER. 8. WE HAVE ALSO GONE THROUGH THE JUDGMENT OF THE KE RALA HIGH COURT IN CIT VS HOTEL MERIYA (2011) 332 ITR 537 (KER). THE KERALA HIGH COURT FOUND THAT THE STATEMENT OF PARTNER AS WELL AS OF THE PER SON IN-CHARGE OF THE HOTEL AND THE DOCUMENT SEIZED ARE RELEVANT DOCUMENTS TO P ROVE THE CONCEALMENT. THEREFORE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE STATEMENT RECORDED FROM THE PARTNER AND THE PERSON IN-CHARGE OF THE RESTAURANT NEED TO BE CONSIDERED ALONG WITH THE MAT ERIAL FOUND DURING THE 8 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 COURSE OF SEARCH OPERATION. SINCE THE STATEMENT OF SHRI SHARAFUDDIN IS IN THE VERNACULAR LANGUAGE THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OF FICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDER ATION. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH AND THEREAFTER DE CIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH MAY, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 29 TH MAY, 2013 PK/- 9 IT(SS)A NO.59/COCH/2004 IT(SS)A NO. 65/COCH/2004 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH