M/s.Parameswaran & Co., Cochin V. ACIT, Ernakulam

ITSSA 7/COCH/2003

• Counselvise Citation: [2014] 121 COUNSELVISE.COM (IT) 9985 (ITAT-COCHIN)
• Duration Of Justice: 10 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 19-11-2013
• Assessment Year: misc
• Appeal Filed On: 28-03-2003
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: R KRISHNA IYER
• Keywords: Business income; Search and seizure; 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 B.R.BASKAR AN, AM I.T.(SS)A. NO. 07/COCH/2003 BLOCK PERIOD : 01-04-1987 TO 23-10-1997 M/S. PARAMESWARAN & CO., 34/1648, BTS ROAD, EDAPPALLY, KOCHI-24. [PAN:P-301 VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI R. KRISHNA IYER, CA REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 19/11/2013 DATE OF PRONOUNCEMENT 10/01/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 15- 01-2003 PASSED BY LD CIT(A)-I, KOCHI AND IT RELATES TO THE BLOCK PERIOD ENDING 23-10-1997. 2. THIS APPEAL WAS ORIGINALLY DISPOSED OF BY THE CO -ORDINATE BENCH OF THE TRIBUNAL ON 30-01-2004. THEREAFTER, THE REVENUE PR EFERRED AN APPEAL CHALLENGING THE ORDER PASSED BY THE TRIBUNAL BEFORE THE HONBLE HIGH COURT OF KERALA. THE HONBLE HIGH COURT RESTORED THE MATTER BACK TO THE FILE OF THE TRIBUNAL WITH THE FOLLOWING ORDER: HEARD SENIOR STANDING COUNSEL FOR THE DEPARTMENT W HICH HAS FILED THE APPEAL AND SRI P. BALAKRISHNAN, COUNSEL APPEARING F OR THE RESPONDENT. AFTER HEARING BOTH SIDES, AND AFTER GOING THROUGH T HE TRIBUNALS ORDER, WE FIND THAT THE TRIBUNAL HAS ALLOWED THE APPEAL BY EXTRACTING ABSTRACT I.T.(SS)A. NO. 07/COCH/2003 2 LAW BUT WITHOUT REFERENCE TO FACTS. IN FACT THE FI NDING OF THE TRIBUNAL IN PARAGRAPH 11 IS AS FOLLOWS: IT IS TRUE THAT THE DETAILS OF SALES TURNOVER RELA TING TO THE TODDY BUSINESS OF THE ASSESSEE-FIRM AS WELL AS THE SISTE R CONCERN, M/S. KUNJACHAN & ASSOCIATES WERE COLLECTED IN THE COURS E OF SEARCH. THE FINDING SIMILAR TO THE ABOVE IS THERE IN THE AS SESSMENT ORDER AS WELL AS IN THE FIRST APPELLATE ORDER. ASSESSMENT U /S. 158BD IS PERMISSIBLE IF DURING THE COURSE OF SEARCH U/S. 132 UNDISCLOSED INCOME OF THE PERSON PROCEEDED AGAINST IS DETECTED. IF TH E TURNOVER OF BUSINESS OF 50 SHOPS FOR 3-1/2 MONTHS DETECTED IN T HE SEARCH PERTAINS TO ASSESSEES BUSINESS, THEN CERTAINLY THE CORRECTN ESS OF THE INCOME RETURNED FOR REGULAR ASSESSMENT HAS TO BE TESTED AG AINST THE INCOME TO BE DETERMINED FROM THE TURNOVER TO BE ESTIMATED FOR THE WHOLE YEAR BY TAKING UP THE TURNOVER FOR 3-1/2 MONTHS. IN OUR VIEW THE TRIBUNAL BEING A FACT FINDING AUTHORITY HAD THE DUTY TO VERI FY THE RECORDS AND SEE WHETHER ASSESSMENT U/S. 158BD IS MADE BASED ON MATERIALS COLLECTED ABOUT THE ASSESSEE IN THE COURSE OF SEARC H OF ANOTHER PERSON. IN THIS CASE, THE SEARCH IS STATED TO BE I N RESPECT OF A SISTER CONCERN OF THE ASSESSEE AND THEREFORE LIKELIHOOD OF THE RECORDED DOCUMENTS AS PERTAINING TO ASSESSEES BUSINESS IS V ERY MUCH THERE. EVEN THOUGH THE TRIBUNAL TALKS ABOUT THE ASSESSEE-FI RM, IT HAS NOT EXAMINED AS TO WHO ARE THE COMMON PARTNERS TO MAKE IT THE SEARCHED ASSESSEE A SISTER CONCERN. IN OUR VIEW, THE TRIBUN AL HAS RENDERED THE DECISION WITHOUT REFERENCE TO FACTS AND WITHOUT NOT ICING THE FINDINGS IN THE ASSESSMENT AS WELL AS IN THE ORDER OF THE FIRST APPELLATE AUTHORITY. WE THEREFORE SET ASIDE THE ORDER OF THE TRIBUNAL A ND REMAND THE MATTER BACK TO THE TRIBUNAL FOR RECONSIDERATION ON MERITS AFTER GOING THROUGH THE RECORDS AND AFTER HEARING BOTH SIDES. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF 11 PARTNERS AND IS E NGAGED IN THE BUSINESS OF SELLING TODDY AND FOREIGN LIQUOR. THE DEPARTMENT C ARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE RESIDENTIAL PREMISES OF TWO OF IT S PARTNERS AND ALSO IN THE BUSINESS PREMISES OF ASSESSEES SISTER CONCERN. DU RING THE COURSE OF SEARCH, CERTAIN DOCUMENTS RELATING TO THE ASSESSEE-FIRM WER E SEIZED. ACCORDINGLY, PROCEEDINGS U/S. 158BD OF THE ACT WAS INITIATED IN THE HANDS OF THE ASSESSEE. I.T.(SS)A. NO. 07/COCH/2003 3 THE LD A.R HAS POINTED OUT THAT THE COMMON PARTNERS OF THE ASSESSEE FIRM AND M/S A.T KUNJACHAN & ASSOCIATES ARE AS UNDER:- A) SHRI K.K. PARAMESWARAN B) SHRI K.B. SAI C) SHRI A.T. KUNJACHAN D) SHRI C.K. RAMAKRISHNAN E) SHRI P.N. KRISHNA LAL F) SHRI P.N. KRISHNAN UNNI. 4. THE DETAILS OF THE DOCUMENTS SEIZED ARE NARRATED AS UNDER IN THE ASSESSMENT ORDER: IN THE COURSE OF SEARCH AT THE TODDY DEPOT AT CHER AI OWNED BY THE ASSESSEES SISTER CONCERN A.T. KUNJACHAN AND ASSOCI ATES, CERTAIN CASH MEMO REGISTERS WERE SEIZED AND MARKED CPM-A. THE RE GISTER MARKED CPM-A-2 RELATES TO THE ASSESSEE FIRM AND SHOWS THE DAILY SALE PROCEEDS OF EACH TODDY SHOP IN NARAKKAL RANGE. THE ASSESSEE WAS RUNNING 50 TODDY SHOPS IN THAT RANGE VIZ. T.S. NOS. 38 TO 87. THE CASH MEMO REGISTER HAS 33 COLUMNS SHOWING MAINLY OP ENING STOCK, THAT DAYS ADDITION BY TAPING, SALES, BALANCE COOLL Y, PF, MISC. EXPENSES, NET CASH TRANSFER TO HEAD OFFICE ETC. THE SALES OF TODDY HAVE BEEN RECORDED IN QUANTITY AND ALSO IN VALUE. EVERY PAGE S HOWS THE ABOVE DETAILS OF A PARTICULAR DATE. THE REGULAR CPM-A-2 STARTS FROM 16-12-92. PAGE 1 TO 106 GIVES THE DETAILS FROM 16-12-92 TO 31 -3-93. THE DAILY SALES OF THE SHOPS AT NARAKKAL RANGE FROM 16-12-92 TO 31-3-93 AS PER THE ABOVE REGISTER IS REPRODUCED IN ANNEXURE-I OF T HIS ORDER. THAT WORKS OUT AS UNDER:- SALES FROM 16-12-92 TO 31-12-92 5 ,07,608/- SALES FROM 1-1-93 TO 31-1-93 9,86,477/- 1-2-93 TO 28-2-93 9,40,274/- 1-3-93 TO 31-3-93 10,11,389/- 34,47,744/- FOR THE FINANCIAL YEAR 1.4.93 TO 31.3.94, THE REVEN UE SEIZED CASH MEMOS PERTAINING TO THE NARAKKAL RANGE FOR THE WHOLE YEAR . FOR THE FINANCIAL YEAR 1.4.95 TO 31.3.96, THE AO NOTICED CASH SHORTAGE IN THE BOOKS IMPOUNDED BY HIM. THUS, WE NOTICE THAT THE ASSESSING OFFICER HAS PROC EEDED TO DETERMINE THE UNDISCLOSED INCOME OF THE ASSESSEE ON THE BASIS OF THE DOCUMENTS CITED ABOVE FOR THE THREE FINANCIAL YEARS CITED ABOVE. I.T.(SS)A. NO. 07/COCH/2003 4 4.1 FOR THE FINANCIAL YEAR 1.4.92 TO 31.3.93, T HE TOTAL SALES FOR 3-1/2 MONTHS FOR 50 SHOPS WAS WORKED OUT AT RS.34,47,744/- ON TH E BASIS OF SEIZED RECORDS. ACCORDINGLY, THE AO COMPUTED THE AVERAGE SALES FOR ONE MONTH FOR 50 SHOPS AT RS.9,85,070/-. SINCE THE ASSESSEE WAS RUNNING 110 SHOPS, THE AO ARRIVED AT THE ANNUAL TURNOVER FOR THE FINANCIAL YEAR 1.4.92 TO 31 .3.1993 FOR ALL THE 110 SHOPS AS UNDER:- 9,85,070/50 X 110 SHOPS X 12 MONTHS = RS.2,60, 05,848/-. THE AO ESTIMATED THE NET PROFIT AT 8% OF THE TURNOV ER AND ACCORDINGLY ARRIVED AT THE NET PROFIT ON THE ABOVE SAID TURNOVER AT RS.20, 80,468/-. THE AO DEDUCTED THE INCOME OF RS.4,96,010/- ASSESSED IN THE REGULAR ASSESSMENT PROCEEDINGS AND ACCORDINGLY ARRIVED AT THE UNDISCLOSED INCOME OF RS .15,84,458/- FOR THE PERIOD FROM 1.4.92 TO 31.3.1993 IN THE BLOCK PERIOD. 4.2 FOR THE FINANCIAL YEAR 1.4.93 TO 31.3.1994, T HE DEPARTMENT SEIZED CASH MEMOS FOR NARRAKKAL RANGE CONSISTING OF 50 SHOPS. AS PER THE CASH MEMO CITED ABOVE, THE AGGREGATE COLLECTIONS NET OF EXPENSES FO R THE WHOLE YEAR WAS NOTICED AT RS.99,87,831/-. THE AO ESTIMATED INCOME AT 5% O F THE ABOVE SAID AGGREGATE COLLECTIONS AND ACCORDINGLY ARRIVED AT A PROFIT OF RS.4,99,391/-. AS IN EARLIER YEAR, THE ASSESSEE WAS RUNNING 60 MORE SHOPS AT MARRAPPIL LY AND VARAPUZHA RANGES. IN THE REGULAR ASSESSMENT, THE INCOME FOR 110 SHOPS WERE ASSESSED AT RS.2,46,116/-. ACCORDINGLY, THE PROPORTIONATE INCO ME FOR 50 SHOPS WAS WORKED OUT BY THE AO AT RS.1,11,870/- AND GAVE SET OFF OF THE SAME AGAINST THE PROFIT WORKED OUT BY HIM. ACCORDINGLY, THE AO DETERMINED THE UNDISCLOSED INCOME FOR THE FINANCIAL YEAR 1.4.93 TO 31.3.1994 AT RS.3,87,5 21/- IN THE BLOCK PERIOD. 4.3 IN THE FINANCIAL YEAR 1.4.95 TO 31.3.96, THE CASH BOOK IMPOUNDED BY THE DEPARTMENT REVEALED A CASH SHORTAGE OF RS.58,753/- ON 13.4.95. THE AO ASSESSED THE SAME AS UNDISCLOSED INCOME OF THE ASSE SSEE FOR THE FINANCIAL YEAR 1.4.95 TO 31.3.96 IN THE BLOCK PERIOD. I.T.(SS)A. NO. 07/COCH/2003 5 5. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) ESTIMATED THE TURNOVER FOR THE PERIOD FROM 1.4.92 TO 31.3.93 AT RS.2.00 CRORES (RS .1.00 CRORE FOR NARAKKAL RANGE SHOPS AND ANOTHER 1.00 CRORE FOR OTHER TWO RANGES). THE LD CIT(A) REDUCED THE NET PROFIT RATE TO 6%. ACCORDINGLY, HE ESTIMATED T HE INCOME AT RS.12.00 LAKHS, I.E., 6% OF RS.2.00 CRORES. SINCE THE INCOME ASSES SED IN THE REGULAR ASSESSMENT PROCEEDINGS UNDER WENT A CHANGE IN THE APPELLATE PR OCEEDINGS, HE DIRECTED THE AO TO GIVE SET OFF OF CORRECT AMOUNT OF ASSESSED IN COME. FOR THE FINANCIAL YEAR 1.4.93 TO 31.3.94, THE LD CIT(A) IN PRINCIPLE ACCEP TED THE INCOME DETERMINED BY THE AO. HOWEVER, THE AMOUNT DEDUCTED BY THE AO AS RELATABLE TO THE INCOME ASSESSED IN THE REGULAR ASSESSMENT PROCEEDINGS WAS NOT FOUND TO BE CORRECT. ACCORDINGLY, HE DIRECTED THE AO TO ALLOW SET OFF OF ONLY RS.38,636/- IN THE PLACE OF RS.1,11,870/- ALLOWED BY THE AO. THE ADDITION M ADE FOR THE FINANCIAL YEAR 1.4.95 TO 31.3.96 WAS CONFIRMED BY LD CIT(A). 6. ACCORDING TO LD A.R, THE ASSESSEE HAS DECLA RED A TURNOVER OF RS.94.41 LAKHS FOR THE FINANCIAL YEAR 1.4.92 TO 31.3.93. TH E TURNOVER NOTICED FOR 3-1/2 MONTHS IN THE SEIZED RECORD WAS ONLY RS.34.47 LAKHS . ACCORDINGLY HE SUBMITTED THAT THE TURNOVER FOUND IN THE SEIZED RECORD WAS AL READY ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNT AND HENCE THERE IS NO CASE FOR MAK ING ANY ADDITION IN THE BLOCK ASSESSMENT PROCEEDINGS. IN THE ALTERNATIVE, THE LD A.R SUBMITTED THAT THE TURN OVER FOUND IN THE SEIZED RECORD AN AT BEST BE TREAT ED AS UNACCOUNTED TURNOVER, ON WHICH THE PROFIT MAY BE ESTIMATED AT 6%, AS DETE RMINED BY LD CIT(A). THE LD A.R FURTHER SUBMITTED THAT THE TRIBUNAL, IN THE EARLIER ROUND, HAS MADE A SPECIFIC OBSERVATION, VIZ., THE ASSESSING OFFICER H AD NO CASE THAT THE ASSESSEE FIRM HAD NOT ACCOUNTED FOR THAT TURNOVER. 7 IT WAS POINTED OUT TO THE LD A.R THAT THE HON BLE HIGH COURT HAS DIRECTED THE TRIBUNAL TO CONSIDER THE MATTER ON MERITS AFTER GOI NG THROUGH THE RECORDS AND ACCORDINGLY HE WAS ASKED TO PRODUCE THE ORIGINAL RE CORDS. HOWEVER, THE LD A.R I.T.(SS)A. NO. 07/COCH/2003 6 EXPRESSED HIS INABILITY TO PRODUCE THE BOOKS OF ACC OUNTS. IN THIS REGARD, HE FILED AN AFFIDAVIT GIVEN BY ONE OF THE PARTNERS OF THE FI RM, WHEREIN HE HAS DEPOSED AS UNDER:- 14) IT IS SUBMITTED THAT AFTER A PERIOD OF 20 Y EARS, THE FIRM IS NOT IN A POSITION TO PRODUCE THE BOOKS OF ACCOUNT TO VERIFY AND CONFIRM THAT THE TURNOVER OF THE NARAKKAL RANGE AS PER SEIZED REGIST ER HAS BEEN INCLUDED OR NOT. HOWEVER IT IS CLEAR THAT THE TOTAL TURNOVE R FOR THE 1993-94 WAS ONLY RS.94.42 LAKHS. 15) MORE OVER, FIRM HAS ALSO DISCONTINUED BUSINESS YEAR S BACK AND SOME OF THE PARTNERS HAVE ALSO EXPIRED. 16) FOR THE REASONS STATED ABOVE, I AM UNABLE TO PRODUC E THE BOOKS OF ACCOUNTS FOR AY 1992-93. 8. THE LD D.R SUBMITTED THAT THE ASSESSEE WAS NO T ABLE TO PROVE THAT THE TURNOVER NOTICED IN THE SEIZED RECORD WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. HENCE, THE AO WAS JUSTIFIED IN ESTIMATING THE SUPPR ESSION FOR THE WHOLE YEAR ON THE BASIS OF THE TURNOVER NOTICED IN THE SEIZED REC ORD. THE LD D.R FURTHER SUBMITTED THAT THE LD CIT(A) HAS MADE REASONABLE AD JUSTMENTS AND ACCORDINGLY CONTENDED THAT THE ORDER OF LD CIT(A) BE SUSTAINED. 9. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSU E. THE FOLLOWING OBSERVATIONS MADE BY THE HONBLE HIGH COURT, WHICH WAS EXTRACTED ABOVE, ARE RELEVANT HERE. IF THE TURNOVER OF BUSINESS OF 50 SHOPS FOR 3-1/2 MONTHS DETECTED IN THE SEARCH PERTAINS TO ASSESSEES BUSINESS, THEN CERTAI NLY THE CORRECTNESS OF THE INCOME RETURNED FOR REGULAR ASSESSMENT HAS TO B E TESTED AGAINST THE INCOME TO BE DETERMINED FROM THE TURNOVER TO BE EST IMATED FOR THE WHOLE YEAR BY TAKING UP THE TURNOVER FOR 3-1/2 MONTHS. THE ABOVE SAID OBSERVATIONS MADE BY HONBLE JURISDI CTIONAL HIGH COURT MAKE IT CLEAR THAT THE TURNOVER FOR THE WHOLE YEAR HAS TO B E ESTIMATED BY TAKING UP THE TURNOVER FOR 3-1/2 MONTHS AND THEN THE CORRECTNESS OF INCOME RETURNED BY THE ASSESSEE FOR THE REGULAR ASSESSMENT HAS TO BE TESTE D AGAINST THE INCOME I.T.(SS)A. NO. 07/COCH/2003 7 ESTIMATED OUT OF THE TURNOVER SO ESTIMATED. FURTHE R THE HONBLE HIGH COURT HAS DIRECTED THE TRIBUNAL TO CONSIDER THE ISSUES AFTER GOING THROUGH THE RECORD AND AFTER HEARING BOTH SIDES. 9.1 HOWEVER, THE ASSESSEE HAS EXPRESSED ITS INA BILITY TO PRODUCE THE ORIGINAL BOOKS OF ACCOUNTS. HENCE, THE TRIBUNAL IS UNABLE T O TEST THE CORRECTNESS OF INCOME RETURNED FOR REGULAR ASSESSMENT AGAINST THE INCOME TO BE DETERMINED FROM THE ESTIMATED TURNOVER. THERE SHOULD NOT BE A NY DOUBT THAT THE RESPONSIBILITY TO SHOW THAT THE INCOME OR TURNOVER FOUND IN THE SEIZED RECORDS WAS ALREADY BEEN ACCOUNTED FOR OR DISCLOSED SHALL L IE UPON THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS EXPRESSED ITS INABIL ITY TO PRODUCE THE BOOKS OF ACCOUNTS, MEANING THEREBY, THE ASSESSEE HAS FAILED TO SHOW THAT THE TURNOVER NOTICED IN THE SEIZED RECORDS HAVE ALREADY BEEN ACC OUNTED FOR IN THE BOOKS OF ACCOUNTS. UNDER THESE CIRCUMSTANCES, WE PROCEED TO DEAL WITH THE CONTENTIONS OF THE ASSESSEE ON THE BASIS OF AVAILABLE MATERIALS TREATING THE TURNOVER FOUND IN THE SEIZED RECORDS AS ACTUAL TURNOVER, EXTRAPOLATIN G THE SAME FOR THE WHOLE YEAR AS HELD BY HONBLE HIGH COURT AND THEN COMPARE THE SAME AGAINST THE REPORTED TURNOVER IN THE REGULAR ASSESSMENT PROCEEDINGS. 9.2 WE NOTICE THAT THE SEIZED RECORDS PERTAINED TO NARAKKAL RANGE CONSISTING OF 50 SHOPS. THE ASSESSEE OWNED 60 MORE SHOPS IN T WO OTHER RANGES, THUS MAKING THE TOTAL SHOPS TO 110. IN THE FINANCIAL Y EAR 1.4.92 TO 31.3.93, THE AO HAS DETERMINED THE TURNOVER FOR ALL THE 110 SHOPS O N THE BASIS OF TURNOVER NOTICED IN THE SEIZED RECORD PERTAINING TO 50 SHOPS FALLING IN NARAKKAL RANGE FOR 3-1/2 MONTHS. HOWEVER WE NOTICE THAT, IN THE SUCCE EDING YEAR, THE AO HAS PROCEEDED TO DETERMINE THE UNDISCLOSED INCOME IN RE SPECT OF 50 SHOPS ONLY. APPLYING THE SAME PRINCIPLE, IN OUR VIEW, IT IS NOT CORRECT TO ESTIMATE THE TURNOVER AND INCOME FOR THE ENTIRE 110 SHOPS FALLING IN THRE E RANGES, WHEN THE SEIZED RECORD PERTAINED TO ONLY ONE RANGE CONSISTING OF 50 SHOPS. ACCORDINGLY, IN OUR VIEW, THE UNDISCLOSED INCOME CAN BE DETERMINED FOR NARAKKAL RANGE ONLY, SINCE I.T.(SS)A. NO. 07/COCH/2003 8 THE SEIZED RECORD PERTAINED TO THOSE SHOPS ONLY. A CCORDINGLY, WE PROCEED TO DETERMINE THE UNDISCLOSED INCOME FOR THE SHOPS FALL ING IN NARAKKAL RANGE. WE NOTICE THAT THE LD CIT(A) HAS DETERMINED THE WHOLE YEARS TURNOVER FOR NARAKKAL RANGE AT RS.1.00 CRORE. SINCE THE REVENUE DID NOT FILE ANY APPEAL AGAINST THE ORDER OF LD CIT(A), THE TURNOVER SO DETERMINED BY H IM HAS ATTAINED FINALITY. AS PER THE ASSESSEE THE TOTAL TURNOVER DECLARED BY IT FOR 110 SHOPS IN THE REGULAR RETURN OF INCOME WAS RS.94.41 LAKHS. THE AVERAGE T URNOVER OF 50 SHOPS FALLING IN NARAKKAL RANGE SHALL BE 94.41 LAKHS/110 X 50 = 42.91 LAKHS OR SAY 43.00 L AKHS HENCE THE UNDISCLOSED TURNOVER FOR 50 SHOPS WILL BE RS.57 LAKHS, I.E., RS.100 LAKHS LESS RS.43 LAKHS. IN OUR VIEW, THE UNDISCLOS ED INCOME HAS TO BE ESTIMATED ON RS.57 LAKHS. WE HAVE ALREADY NOTICED THAT THE A O HAS ADOPTED THE NET PROFIT RATE AT 8% AND THE LD CIT(A) HAS TAKEN THE NET PROF IT RATE AT 6%. HOWEVER, IN THE SUCCEEDING YEAR, THE AO HAS ADOPTED THE NET PRO FIT RATE AT 5%. IN OUR VIEW, IN ORDER TO MAINTAIN CONSISTENCY, THE NET PROFIT RA TE MAY BE ADOPTED AT 5% IN THIS YEAR ALSO. ACCORDINGLY, THE UNDISCLOSED INCOM E CALCULATED @ 5% ON THE SUPPRESSED TURNOVER OF RS.57.00 LAKHS SHALL WORK OU T TO RS.2.85 LAKHS. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) AND D IRECT THE AO TO ASSESS THE AMOUNT OF RS.2.85 LAKHS AS THE UNDISCLOSED INCOME F OR THE FINANCIAL YEAR 1.4.92 TO 31.3.93. 10. WITH REGARD TO THE UNDISCLOSED INCOME DETERM INED FOR THE PERIOD FROM 1.4.93 TO 31.3.94, THE REVENUE HAS SEIZED CERTAIN D OCUMENTS SHOWING NET COLLECTIONS OF EVERY DAY FOR THE 50 SHOPS FALLING I N NARAKKAL RANGE. ACCORDINGLY, THE AO HAS COMPUTED AGGREGATE AMOUNT OF NET COLLECT IONS FOR THE WHOLE YEAR AT RS. 99,87,831/- AND CALCULATED THE INCOME @ 5% OF THE NET COLLECTIONS STATED ABOVE. HOWEVER, WE ARE NOT ABLE TO COMPARE THE SAME WITH THE BOOKS OF ACCOUNTS, SINCE THE ASSESSEE HAS EXPRESSED ITS INAB ILITY TO PRODUCE THE BOOKS. WE ALSO NOTICE THAT THE ASSESSEE DID NOT MAINTAIN B OOKS OF ACCOUNTS FOR THIS YEAR AND HENCE IT HAD OFFERED INCOME ON ESTIMATED BASIS ONLY DURING THE COURSE OF I.T.(SS)A. NO. 07/COCH/2003 9 REGULAR ASSESSMENT PROCEEDINGS. WE HAVE ALREADY NOT ICED THAT THE AO HAS ESTIMATED INCOME OF 50 SHOPS FALLING IN NARAKKAL RA NGE @ 5% OF THE NET COLLECTIONS AND GAVE SET OFF OF THE INCOME RETURNED BY THE ASSESSEE IN THE REGULAR ASSESSMENT PROCEEDINGS. THE LD CIIT(A) HA S UPHELD THIS ADDITION WITH SLIGHT MODIFICATION. 10.1 ACCORDING TO THE ASSESSEE, THERE WAS NO MAT ERIAL FOR THE DEPARTMENT TO SHOW THAT THE SEIZED MATERIALS REPRESENTED UNACCOUN TED INCOME. ACCORDINGLY, IT WAS SUBMITTED THAT THE INCOME HAS BEEN ESTIMATED IN AN ARBITRARY MANNER. HOWEVER, ACCORDING TO LD D.R, THE AO HAS ESTIMATED THE AGGREGATE AMOUNT OF COLLECTIONS FROM THE SEIZED MATERIALS. 10.2 WE HAVE ALREADY NOTICED THAT IT IS THE RES PONSIBILITY OF THE ASSESSEE TO PROVE THAT THE ENTRIES FOUND IN THE SEIZED MATERIAL S HAVE ALREADY BEEN ACCOUNTED FOR. IN THIS YEAR, THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND HENCE IT HAS OFFERED INCOME ON ESTIMATED BASIS DURING THE CO URSE OF REGULAR ASSESSMENT PROCEEDINGS ALSO. IN THE ABSENCE OF REGULAR BOOKS OF ACCOUNTS, IN OUR VIEW, THE AO WAS JUSTIFIED IN TAKING THE AGGREGATE AMOUNT OF COLLECTIONS AS THE TURNOVER OF THE ASSESSEE AND ESTIMATING INCOME THEREON. WE HAV E ALREADY NOTICED THAT THE ASSESSING OFFICER HAS GIVEN SET OFF OF PROPORTIONAT E AMOUNT RELATABLE TO THE 50 SHOPS FALLING IN NARAKKAL RANGE WHILE ARRIVING AT T HE UNDISCLOSED INCOME OF THE ASSESSEE FOR THIS YEAR. THE LD CIT(A) HAS UPHELD T HE SAME AFTER POINTING OUT THE ERRORS IN THE COMPUTATION. HENCE, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) ON THIS ISSUE. 11. WITH REGARD TO THE UNDISCLOSED INCOME DETER MINED FOR THE PERIOD FROM 1.4.95 TO 31.3.96 ALSO, NO ARGUMENT WAS ADVANCED BY THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF LD CIT(A) ON T HIS ISSUE ALSO. I.T.(SS)A. NO. 07/COCH/2003 10 12. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS PARTLY ALLOWED. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 10TH JANUARY, 2014 GJ COPY TO: 1. M/S. PARAMESWARAN & CO., 34/1648, BTS ROAD, EDAPP ALLY, KOCHI-24. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2(2), ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN