Per CHANDRA POOJARI, ACCOUNTANT MEMBER: These appeals filed by different assesses and the Revenue are directed against the different orders of the CIT(A)-IV, Kochi and pertain to different assessment years.
2. There was a delay of 93 days in filing the appeal in ITA No. 372/Coch/2016 for the assessment year 2008-09 before the Tribunal. The assessee has filed a petition accompanied with affidavit dated 25/07/2018 stating that the tax matters of the assessee was handled by an accountant who abruptly left him without informing about the actual position. The assessee was under the honest belief that the appeal was filed and necessary steps were taken thereafter. After realizing that the appeal was not filed, he took immediate step to file the appeal, resulting in delay of 93 days. The assessee submitted that he had no intention to jeopardize the interests of the revenue by delaying the filing of the appeal and prayed to condone the delay for which the Ld. DR has not opposed it. In our opinion, there is good and sufficient reason for condoning I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 3 the short delay of 93 days. Accordingly, we condone the delay and the appeal in ITA No. 372/Coch/2016 is taken up for adjudication. ITA No. 372/Coch/2016: Assessee This appeal by the assessee is directed against the order of the CIT(A)-IV, Kochi dated 31/03/2016 for the assessment year 2008-09.
2. The first ground raised by the assessee is with regard to sustenance of addition made towards estimation of G.P. at Rs.40,88,636/-.
3. The facts of the issue are that on the basis of documents/books of account found and seized and information gathered during the course of search at its business premises on 21/08/2007, a notice u/s. 142(1) of the was issued to the assessee on 28/04/2009. In response to the above notice, the return of income for the assessment year 2008-09 was filed on 22/09/2009 declaring a loss of Rs.27,65,223/-. The original assessment in this case for the assessment year 2008-09 was completed u/s. 143(3) on 31/12/2009 fixing the total income at Rs.19,68,690/-.
3.1 During the course of search at the assessees business premises on 21/08/2007, it was noticed that the assessee had effected sales by issue of estimate slips instead of sale bills and the sale bills were prepared for accounting I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 4 purposes only in few cases. It was also noticed that the sales on estimate slips were not accounted resulting in under recording of sales and suppression of turnover. Subsequent to the search, on verification of the accounts maintained by the assessee, it was noticed that the sales on the basis of estimate slips were not accounted by them, either in the computer or in any other books. Similar estimate slips were issued from the different shops of the Sunny Jacob Jewellers Group while selling gold ornaments. The contention of the assessee that they were issuing estimate slips only for showing the customer, but they were issuing bills on finalization of the sales, was rejected by the AO.
3.2 During the course of search at the premises of M/s. Sunny Jacob Gold Hyper Market, Kollam on 21/08/2007, 3 note books marked as MSP(1), MSP(2) and MSP(3) were seized. These note books contained accounts of purchases and issue of gold ornaments and when compared with the regular stock register maintained by them, i.e., MSP(113), it was noticed that there was wide variations in accounting purchases and issues as per these registers. A very good percentage of business of the show room at Kollam., i.e., about 84.39% was outside the books of accounts and only 15.61% was accounted.
3.3 During the course of search at the premises of M/s. Sunny Jacob Jewellers & Wedding Centre, Kottarakkara on 21/08/2007, daily summary sheet, Sheet No, 16 AWA 19 relating to 20/08/2007, i..e, the day previous to the date of search I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 5 found and seized. In the daily statement there were 37 sales, as per which
157.190 gms. of gold was sold and seized. Considering the sale rate of gold for that i.e., Rs.830/- per gm., the total sales should have been Rs.1,30,457/-, but the actual sales recorded in the day book for that day was Rs.40,237 only, i.e., only 30.84% of the real sales. The assessee could not provide any explanation for the above.
3.4 On checking the log-in time of the computer maintained in M/s. Sunny Jacob 916 Jewellery showroom, Trivandrum, it was found that the entries in the computer show that all the sales for a day are recorded in the computer within a short time of 2 to 3 minutes which gives more credence to the view that sale bills generated in the computer are made up for accounting purposes only and they do not reflect the actual sales.
3.5 Further many discrepancies were noticed in the books of accounts found and seized during the course of search regarding the amount withdrawn and debited. The assessee could not offer any satisfactory explanation for the discrepancies. But during the course of hearing at the time of original assessment, the assessee produced computer printed cash book and ledger where the above discrepancies were removed The cash book and the ledger produced on 28/12/2009 were impounded u/s. 131(3) of the. As the account books based on which the assessee had made up the accounts, were held to be I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 6 not reliable and income was estimated on estimated turnover, the above discrepancies did not affect the computation of income.
3.6 During the shop inspection by the Commercial Taxes, many incriminating records were recovered. The dealer admitted that he had failed to maintain true and correct accounts for 2005-06 and requested for compounding u/s. 74 of the KVAT Act, 2003 by filing a letter and willingness dated 31/03/2006 which was compounded on the same day. It was found that the assessee did not maintain a daily stock account of ornaments in Form No. 14A as prescribed under Rule 58(13) of the KVAT Rules 2005. The assessee did not maintain tax invoice in Form No. 8J as per Rule 58(1) of the KVAT Rules which goes to show that the assessee was practicing suppression in sales as well as in purchases. It was found that there was no increase in sales during festival and marriage season as per the accounts. Further, the assessees declared sales figure had no relation to the actual sales. On the basis of estimation based on average daily sales and average running stock, the sales recorded was found to be 1/12 th of the actual sales. The self assessments made by filing VAT refund in Form No. 10 for the return period of 05/05, 06/05 and 02/06 was untrue and incorrect. From the above it can be seen that the issue of suppression of sales in the case of Sunny Jacob Jewellers, Kottayam was very well established. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 7
3.7 It was also found that while purchasing old gold ornaments, they were getting a margin of nearly 16% and while selling new gold ornaments also they are getting a margin of 15%. The AO concluded that the assessee was accounting only 30% of the real turn over in their books of accounts.
3.8 The assessee explained that they were issuing sale bills for all sales and that estimate slips were issued only in cases where the customer did not make the final selection and where there was possibility of exchange or return. It was explained that estimate slips mentioned in the sales were entered in the sale bills on subsequent dated. The assessee wanted opportunity to cross examine the persons which was granted. On cross-examination and re-examination, the AO found that the statement given by Shri A. Baby, retired KSRTC Driver, Kollam that he was not issued any purchase bill in respect of purchase of new gold ornaments in exchange of old gold ornaments was correct. From the statement of Shri Joshi Abraham, erstwhile cashier of M/s. Sunny Jacob 916 Jewellery showroom, Trivandrum, it was clear that the estimate slips made on the last selection was handed over to Shri Mathew Eapen, former Floor Supervisor of M/s. Sunny Jacob 916 Jewellery, Trivandrum who was issuing the sale bills to the customer. Hence, according to him no estimate slips, where final selection was made could go out of the shop and it is only in the cases where there were possibilities of an immediate exchange, estimate slips were given after affixing cash received seal. Shri Mathew Eapen in his statement dated 21/08/2007 had I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 8 stated that his shop was not issuing sale bills for all sales and purchase bills for all purchases but on re-examination, he stated that his shop was issuing sale bills for all sales and purchases bills for all purchase. Similarly, Shri Bejimon S., erstwhile Manager of M/s. Sunny Jacob Jewellers and Wedding Centre, Kottarakkara tried to explain that the shop at Kottarakkara was not using computer but on re-examination he stated that the computer was used at least sparingly. The statement given by Shri Pintu T. Jacob, Computer Operator, M/s. Sunny Jacob 916 Jewellery, was a clarification to the effect that he was only printing estimate slips and not sale bills and he was only entrusted with the work of printing estimate slips and sale bills were written by Shri Mathew Eapen. According to the AO, none of the above statements was sufficient enough to prove that the business establishments in the group were not issuing estimate slips, instead their statements establish that they were destroying the estimate slips. After having a total appraisal of the statements given by different persons at the time of search, cross-examination, re-examination and on the basis of the information collected during the course of search and pre-search enquiries, it was found that the business concerns of M/s. Sunny Jacob Group of Jewellers were resorting to suppression of sales by effecting a major portion of sales through estimate slips not accounted in the books of account. According to the AO, the inspection by the Sales Tax Department in the business premises of M/s. Sunny Jacob Jewellers, Kottayam also revealed that the assessee was also following the same modus operandi as seen followed by other concerns of the I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 9 group. Considering the issues came to light during the inspection by the Sales Tax Department, the AO found that the conclusion that the assessee was accounting 30% of the real turnover in their books of account arrived at the time of original assessment appeared to be a very liberal view. In view of the above, the AO rejected the objections raised by the assessee against estimating the turnover by grossing up the admitted turnover which was found to be only 30% of actual turnover.
3.9 According to the AO, in the original assessment, the profit was adopted at 22% of the turnover fixed by above estimation. It was noticed that the assesses themselves were showing different gross profits ranging from 10% to 40% in their different shops at Kottayam, Kollam, Kottarakkara and Trivandrum during the past few years. Considering the average profit declared by the assessees themselves and other assesses and taking into account the request of the assessee, the gross profit of the business was computed at 22% of the turnover in the original assessment order.
3.9.1 The assessee submitted that the profit on purchase of old gold ornaments adopted was very high as during procession of the old gold for purification substantial loss was incurred by the assessee. The AO rejected the argument of the assessee by stating that the assessee was itself showing G.P. rate of 7.92% to 30.33% for various years and the average G.P. adopted for the I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 10 AYs 2002-03 to 2008-08 was 18.23%. The assessee requested to adopt G.P. of 10%, however, the AO did not find any merit in this claim of the assessee. Since the average profit adopted by the assessee voluntarily was 18.23%, the AO adopted the gross profit at 19% of the turnover estimated as the total income of the assessee.
4. On appeal, the CIT(A) held that the AOs order, to the extent of the profit on suppression of sales, was upheld by his Predecessor where he had distinguished the estimates of profit based on seized incriminating materials found in respect of the period relevant to AY 2008-09 vis--vis applying the same principle for estimating the suppression of sales during the AY 2002-03 to 2007-08 without having any specific materials seized in respect of these assessment years. Since the previous CIT(A) had made threadbare analysis of the suppressed income for the AY 2008-09, to which the present CIT(A) fully concurred with, following the findings such suppression was upheld in principle. As regards, the estimation of the quantum of G.P. by applying a rate of 19% instead of 22% in the original assessment order by the AO, the same was upheld.
5. Against this, the assessee is in appeal before us. The Ld. AR submitted that the above appeals respectively relate to Assessment Years 2002-03, 2003- 04, 2004-05, 2005-06, 2006-07 and 2007-08. It was submitted that the I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 11 Departmental appeals were filed against the common order of the Commissioner of Income Tax(Appeals)-lV, Kochi dated 31.03.2016 in Appeal Nos. ITA-350- 357/CIT(A)/IV/2014-15 and the CIT (A) disposed of 6 appeals from 2002-03 to 2008-09 as per common order. It was submitted that the appeals for the Assessment Years 2002-03 to 2007-08 were fully allowed and the appeal for Assessment Year 2008-09 was partially allowed.
5.1 It was submitted that on earlier occasion the assessee was in appeal before the Tribunal for the Assessment Year 2008-09 which was partially allowed by confirming/sustaining the additions made in the assessment year. The grounds of appeal reveal that the CIT(A) deleted the additions for the different Assessment Years as follows: 2002-03 31,06,361/- 2003-04 57,07,941/- 2004-05 50,35,300/- 2005-06 39,68,730/- 2006-07 1,16,89,027/- 2007-08 1,92,29,529/- 2008-09 47,34,209/-
5.2 The Ld. AR further submitted that in the assessment order for 2008-09, the Assessing Officer computed the assessable income at Rs.36,38,220/- that is to I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 12 say Rs.40,88,636/- as profit from suppressed turnover, which was estimated at Rs.2,15,19,136/-. On the above suppressed turnover, profit was estimated at 19% amounting to Rs.40,88,636/- which was added.
5.3 According to the Ld. AR, the Assessing Officer further added Rs.23,14,809/- as per discussion in paragraphs 25 and 25A of the Assessment Order. The taxable income was assessed at Rs.36,38,220/- which is disputed in appeal. The CIT(A) in his common order dealt with the Assessment Year 2008-09 from Page 26 onwards and finally concluded that the addition of Rs.23,14,809/- should be confirmed. The partial relief allowed is by modifying the original addition of Rs.26,80,305/- which is reduced to Rs.23,14,809/- while completing the assessment so that the taxable income finally determined is Rs.36,38,220/-. Declared loss - (-) 27,65,223/- Estimate of profit @ 19% .. 40,88,636/- Addition to closing stock .. 23,14,809/- .. 64,03,445/- Net Profit .. 36,38,220/- Confirmed.
5.4 The Ld. AR submitted that the assessee approached the Honble Apex Court against the order of the High Court vide SLP 14765-14767 of 2015 along with other connected cases. The Honble Apex Court restored back the issues to be examined by the CIT(A) who passed the present impugned appellate order. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 13 The CIT(A) has given a tabulation showing the income returned and assessed for the Assessment Years 2002-03 to 2008-09 and Para 7 deals with the Statement of Facts. The ld. AR relied on the CIT(A) s observations and findings wherein it was found that the order passed by his learned predecessor covered the entire span of facts of the case and at the same time the Assessing Officer had not brought on record any new fact on record. It was held that the addition based on estimate of GP rate on the estimated suppressed turnover had no basis. The additions were accordingly deleted. Having regard to the fact that there were no seized materials covering the earlier years, except for the Assessment Year 2008-09, the CIT(A) found that there was no evidence that the assessee had suppressed its turnover for prior years. No incriminating material was found concerning the prior years. The order of the CIT (A) in deleting addition of prior years cannot be faulted. The facts of the case in CIT Vs. Meriya Hotel (332 ITR
537) are entirely different from the facts of the present case and clearly distinguishable. In that case also, the Honble High Court found that what is possible is only to have a best judgment assessment on the basis of the evidence collected during search. In the assessees case, the estimate of income was relevant only for the assessment year 2008-09. For all other previous assessment orders, the alleged suppression is based on presumption. In that context, the CIT(A) found that only the real income can be taxed and no notional income can be assessed based on assumptions and presumptions. It was therefore submitted that the appeals filed by the Department for 2002-03 to 2007-08 are I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 14 without merit and it is therefore, humbly prayed that the revenue appeals may be dismissed.
5.5 The Ld. AR submitted that the turnover and its consequent gross profit ratio addition of Rs.40,88,636/- was estimated only on the basis of estimate slip seized during the course of search. The Ld. AR submitted that the seized estimate slips are not actual sales and hence cannot be taken as basis for any estimation in respect of any assessee. The Ld. AR submitted that the assessment was completed only on the basis of probability of situations using multiplication formula and on the basis of some incriminating documents of some other assessee and for an altogether different assessment year. It was submitted that in the case of Sunny Jacob Jewellers Gold Hyper Mart, Kollam, variation between stock in the note book MSP(1) and stock register MSP(113) was not reconciled at the time of search. These were pre-audit figures and have been fully rectified/reconciled at the time of audit and the returns filed were based on the rectified/reconciled figures even in the case of the assessee. Hence, estimation on the basis of that ground by the AO was also not warranted. It was further submitted that few estimate slips cannot be taken as a base for estimating the suppressed turnover of the whole year or for any of the previous year. It was submitted that the gross profit percentage fixed by the CIT(A) was on the higher side. According to the Ld. AR, only the net profit is to be taxed i.e., gross profit minus indirect expenses. It was submitted that the addition I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 15 based on extrapolation/estimation of income not based on materials obtained during the course of search is bad in law.
5.6 The Ld. AR further submitted that the original assessment order that has been set aside by theAT, Cochin Bench and the same additions that have been deleted by the CIT(A) have been fully reproduced except for a small reduction in the Gross Profit percentage from 22% to 19%. No fresh evidences from the seized documents nor any fresh findings/reasons to support the addition as directed by theAT, Cochin Bench while setting aside the said assessment order have been put forth by the assessing authorities while completing the assessment. The reasons for the additions are the same which has already been considered by the CIT(A) and hence, it is a covered matter.
6. On the other hand, the Ld. DR relied on the orders of the lower authorities.
7. We have heard the rival submissions and perused the record. There was a search in the business premises of the firm on 20/08/2007. During the course of search, it was found that the assessee was maintaining its accounts in computerized form. The CPUs used for the purpose at Kottayam and Kottarakkara were seized during the course of search. From the Pazhavangadi, Trivandrum shop one pen drive was seized on the point that it was containing data relating to the accounts. The data thus stored in electronic devices have I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 16 been obtained It was observed that the data in computers at Kollam, Kottarakkara and Trivandrum were the ones meant for production before the Income Tax Department alongwith return of income. In respect of Kottayam showroom, the computer was having no data in it. In respect of data in computerized form, it was found that the computerized data relating to the volume of the business were only a small portion of the volume. It was seen that these computerized data were only 30.84% of the real volume in respect of Kottarakkara show room. In respect of Kollam and Trivandrum shops the data relating to volume of business is still low and it is 15.61% and 16.22% respectively. Taking a liberal view, the Assessing Officer held that volume of business as per computerized data was only 30% of the real turnover or the volume of business in the various showrooms of the Group. On verification of the data in respect of the show room at Trivandrum, it was observed that the data regarding the volume of business relating to a particular date is logged into the computer at a particular time one after the another. For example, on 08/05/2007 there are in all 4 sales as per bill Nos. 201, 201, 203 and 204 which were entered into the computer at 1:12:06 p.m., 1:12:41 p.m., 1:31;25 p.m. and 1:13:25 p.m. This showed that the bills under reference were not prepared during the course of the business but it was prepared at a stretch one after another at a particular time of the day. The cluster of bills at a particular point of time proved beyond any doubt that the computerized data were not reflecting the real business but only imaginary or virtual ones and are not having any I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 17 nexus to real ones. Hence, the Assessing Officer determined the estimated income on the basis of suppression of sales. It was observed that assessee was concealing 70% of its real turnover. Therefore, on the suppressed turnover, the GP rate of 22% was adopted to arrive at the concealed income of the assessee. It was also observed that sales recorded on estimate slips issued between 24/07/2007 to 20/08/2007 had not been found recorded in the regular books of account.
7.1 The observations of the Assessing Officer in paras 21 & 22 are reproduced below: "21 The business concerns of M/s. Sunny Jacob Group of Jewelleries are printing estimate slips on computer when a customer comes and selects a gold ornament for purchase. As a customer may change his selection more than once, more than one estimate slips are likely to be issued in such cases. But, the estimate slips handed over to the sales man for preparation of final bill, which according to the assessee, is written manually, is the final estimate slip where the purchases of the customer is recorded. If there is no likelihood of return or exchange of the ornaments immediately, a customer is issued a sale bill. He is not given estimate slip. But in case there is a possibility of exchange or return immediately instead of sale bill, the estimate slip with the seal of "cash received" is handed over to the customer with the jewellery. All the estimate slips other than those which are handed over to the customers are destroyed/thrown into the waste basket. Hence, a customer can have an estimate slip with him only if that purchase is one where the immediate exchange or return is expected. Though the assessee is printing estimate slips in the computer, the assessee is not saving the data in the computer. Also, the estimate slips other than those handed over to the customers are destroyed. Hence, it is evident that the assessee is particular that the data regarding estimate slips are not known to anyone else i.e., the accounts are not transparent. Estimate slips showing different Sl. Nos., issued by the different shops of this group has been obtained by the Income-tax Department. Similarly, another estimate slip issued, from the Pazhavangadi shop of the assessee was found with a customer on 21-8-I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 18
2007. These are evidences enough to conclude that the assessee is effecting, sales on estimate slips. The Sl. Nos. of estimate Slips obtained from the shops are 2, 17, 31 etc. which shows that the firm had issued so many numbers of. estimate slips on those days. But the sales accounted on that dale is 6 in number. That shows that the sales on estimate slips are much larger than that on sale bills. If the assessees statement that estimate slips are issued to the customer only when there is possibility of exchange or return is expected, it will result in a situation where a large percentage of customers are returning or exchanging ornaments bought from them within a few days. This is a highly improbable situation. The contention of the assessee in this regard is not at all reasonable considering the natural probability.
22. The Sales Tax Department had conducted a search at the premises of all the 5 business concerns in 2006 and it was found that there was large scale sale on estimate slips. The consequent assessment made is, as per the assessee disputed before the High Court, The fact that the Sales-Tax Department also could come to the findings that the assessee had sold, ornaments on estimate slips corroborates the findings made during the course of search. From the above facts it can be concluded that the assessee is making sales on estimate slips. "
7.2 Further, the Assessing Officer has made the following observations:
5.5. In para 10 of the assessment order the AO has referred to 3 note books marked as MSP-1, MSP-2 and MSP-3 which have been found and seized from the premises of M/s. Sunny Jacob Gold Hyper Market, Kollam on 21.08.2007. These note books contained accounts of purchase and issue of gold ornaments. The AO has observed that when compared with regular stock register maintained by them i.e. MSP-113, wide variations were noted for the dates 26.07.2007 to 07.08.2007. The AO has also pointed-out that at the showroom of M/s. Sunny Jacob Jewellers 916 Kerala Showroom, Pazhavangadi, Trivandrum all the sales of the day are recorded in the computer within 2 to 5 minutes. The period referred to by the AO is between 07.05.2007 to 11.05.2007. He has observed that it is very anomalous and gives more credence to the view that sale bill generated in the computer are made up for accounting purposes only and they do not reflect the actual sales. In Para 13 (a), (b) and (c) some other discrepancies pointed-out for the Kollam shop, Kottayam shop and Kottarakkara Shop. Based on these discrepancies the AO has finally rejected the books of accounts invoking provisions of sec. 145(3) r.w.s. 144. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 19
6. As regards assessees ground relating to the invocation of sec. 144 r.w.s. 145(3) is concerned I do not agree with the appellant because the AO has first pointed-out various discrepancies and anomalies in the books of accounts maintained by the appellant and then only invoked provisions of sec. 145(3) r.w.s. 144. The appellant has submitted that the provisions of sec. 145(3) are not fully complied with, because no opportunity of being heard was allowed to the appellant before invoking these provisions. The appellant in submitting this Objection has not carefully gone through the Section, because as per second proviso to sec. 144(1) there is no necessity to give such opportunity in a case where a notice under sub- section (1) or sec. 142 has been issued prior to the making of an assessment. The assessment order has been made in which it is clearly mentioned in Para 5 that notice u/s 142(1) was also issued before passing this order. The appellant has not disputed this. Hence the contention put forth by the appellant that invocation of sec. 145(3) was bad in law is not maintainable. Accordingly this ground of the appellant is dismissed.
7. As regards the estimation of suppressed turnover and working out of GP thereon for arriving at the concealed income of the appellant. In my view for assessment year 2008-09 there- was sufficient material on record and in the possession of the Department which prove that the appellant assessee was engaged in sale/transactions outside the regular books of accounts. Howsoever unscientific the method of computation of concealed income has been adopted by the AO it cannot be denied that there is evidence of concealment of income came to light during the course of search. In various case laws cited in my orders for the same assessee for the assessment-year 2002-03 to 2007-08, one principle, which is common for framing the assessment for the search and seizure case is that there should be evidence which came to light during search and is supported by corroborative evidence regarding the concealment of income. In the present case and for the present year though the assessment is again based on estimate basis but the availability of incriminating documents is not ruled-out for which there is no satisfactory explanation given by the appellant. In the earlier years no additions were maintainable because there was no material relating to those years found or seized during the course of search, but for the A.Y. 2008-09 materials are available with specific dates and period which has been rightly relied upon by the AO in holding that there was concealment of income in the form of suppressed turnover and profits earned thereon. In the case of Rajnik & Co, vs. ACIT (251 ITR 561) (AP), it has been held that where a regular pattern of suppression is established the presumption is that there is suppression for whole of the search year. Similar view has been taken in the case of Rajendrakumar Lahoti vs. DCIT (266 ITR 621), In the earlier years the additions could not stand the test of appeal because there was no material I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 20 available with the Department to show that there was suppression of income for those years and, therefore, there could not have been any additions. But for the year under consideration a pattern of suppression has emerged though restricted to only a small period, but it proves that there was suppression for this period and once there was suppression for a period of the year the estimate is possible for whole of the year as pronounced by various judicial forums. Hence for the assessment year 2008-09 I do not have any hesitation in holding that the appellant has concealed income to the tune of Rs.47,34,209/- as per working given in the order for assessment year 2008-09. I therefore sustain the same.
7.3. In the revised assessment order, the Assessing Officer held as under:
The order giving effect to the order n/s.263 of the I.T. Act by the Commissioner of Income-tax (Central), Kochi was passed on 20.03.2013 by making an addition of Rs.26,80,305/- by recomputing the value of closing stock. The closing stock originally adopted was Rs.1,21,83,206/-. Applying the ratio of the decision of the Honble Supreme Court in the case of A.L.A. Firm, vs. CIT (189ITR 285), the market value of the closing stock was worked out at Rs.1,48,63,511/-[i.e. 1,21,83,206*122/100} while giving effect to the order u/s.263. As a result, an addition of Rs.26,80,305/- to the business income determined in the original assessment. While giving effect to the order u/s.263 of the CIT (Central), an addition of Rs.26,80,305/- was made by recomputing the value of the closing stock by applying the gross profit ratio of 22% adopted in the original assessment. In view of the fact that the profit percentage now adopted is only 19%, the value of closing stock is recomputed to Rs.1,44,98,01 5/- [i.e. 2,21,83,206*119/100]. Accordingly, the addition of Rs.26,80,305/- made vide order dated 20.03.2013 giving effect to the order u/s.263 of the CIT(Central) is restricted to Rs.23,14,809/- while completing the assessment.
7.4 In our opinion, there is no error in the estimation of income of the assessee on the basis of the seized records. The estimation of income by the Assessing Officer is based on the documents found during the search and statement recorded during the course of search. Being so, the Assessing Officer I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 21 is completely justified in adopting those figures for the whole year and for the next year. For this proposition, reliance is placed on the judgment of the Jurisdictional High Court in the case of Travancore Diagnostics P. Ltd. vs. ACIT (390 ITR 167) wherein it was held that when suppression had been found from the documents and the statement on record, the Assessing Officer was completely justified in adopting those figures for the whole year and for the next year which was based on sound rationale, since from the statement on behalf of the assessee, the suppression was found to be continued. In view of the uncontroverted and admitted statement given on behalf of the assessee u/s. 133A and the documents impounded during the survey, which were also virtually admitted by the assessee, there was no error in the order of the Tribunal in accepting the materials on record in order to arrive at an assessment. Reliance is also placed on the judgment of the Jurisdictional High Court in the case of CIT vs. Hotel Meriya (332 ITR 537) wherein it was held as under:
(ii) That the partner of the assessee had in unambiguous terms stated that 20 per cent of the sales outturn was suppressed and only 80 per cent was recorded in the account books and it was the practice from the very beginning. So, it was just and appropriate to presume that there was uniform concealment of income in all the assessment years during the block period. Hence the assessee was liable to be assessed during the block period at a uniform rate.In view of the above judgments of the Jurisdictional High Court, we are inclined to dismiss this ground of the assessee. The appeal of the assessee is dismissed. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 22
8. The next ground is with regard to sustenance of addition of Rs. 23,14,809/- towards valuation of closing stock.
9. The facts of the case are that the issue considered U/s. 263 by the CIT cannot and was also not subject matter of appeals before CIT(A) and ITAT. The issue set aside and restored to the file of Assessing Officer by theAT was regarding the issue of suppressed sales turnover and profit whereas the issue set aside by the CIT in her order dated 16/03/2012 was the valuation of correct closing stock. Giving effect to the orders of the CIT and ITAT were not interdependent also. Moreover, order giving effect to the directions of the CIT u/s 263 was required to be passed by 31/03/2013, as time limit would set in regarding the same by that date. The assessee also filed a letter dated 15/02/2013 stating his objections to the directions issued by the Commissioner of Income tax (Central) vide order u/s 263. The Commissioner of Income tax(Central) while passing the order u/s. 263 had dealt with the objections in detail and came to the conclusion that the issue relating to the valuation of closing stock for the A.Y.2008-09 has to be remanded back to the assessing officer. Accordingly, the Assessing Officer proceeded to give effect to the order of the CIT u/s 263.
9.1 According to the assessee the firm had only discontinued certain line of business which does not imply that the firm is dissolved. According to the assessee, the firm is still in operation. It was submitted that before discontinuing I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 23 the business, the assets and liabilities of the business were sold as "business as a whole to another concern at mutually agreed rates which were at book values, as evidenced by the "deed of sale of business as whole as a going concern". Along with the return of Income filed by the assesse Audit Report u/s. 44B in Form No.CB was also furnished by the assessee . In Schedule-S, viz. "Significant Accounting Policies it has been noted that "The firm was discontinued, and all assets and liabilities as on 05/12/2007 have been taken over by one of the partner, at their book values to run the concern as his proprietary business. This being the fact and the Audit report signed by both the Chartered Accountant and the Managing Partner of the firm, it was submitted that no further evidence was required to prove the discontinuance of the firm. With the discontinuance of the firm its assets and liabilities were taken over by M/s. Dona Gold, the proprietary concern of the Managing Partner, Shri Sunny Jacob. Therefore it became established that the facts of the case are identical to those narrated in the case of M/s A.L.A. Firm vs. Commissioner of Income tax (189 ITR 285) . In the judgment, the Apex Court held that in case of dissolution of firm the firm and the partner, being commercial men, would value the assets only on real basis and not at cost or at their other value appearing in the books. Once this principle is applied and the stock-in-trade is valued at market price, the surplus if any, has to get reflected as profits of the firm and has to be charged to tax. The assessee relied on various judicial decisions in the same line. For example, G.R. Ramachari & Co. vs. CIT 1961) 41 ITR 142 (Mad) : Popular Workshops vs. CIT (1986) 54 I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 24 CTR 323 (Ker): (1987) 166 ITR 348(Ker). Popular Automobiles vs. CFT (1990)89 CTR 248(Ker) : (1989) 179 ITR 632 (Ker) etc.
9.2 The Assessing Officer noted that the firms business was totally discontinued and the assets were in fact distributed. The only difference was that the entire assets were assigned to one of the partners in satisfaction of his accepting the entire liabilities. After taking over the entire assets and liabilities of the firm the partner continued the business of the firm as part of his proprietary concern, Dona Gold. This would mean that the firm stood dissolved.
9.3 In view of the above, the contentions raised by the assessee that the firm is not "dissolved" but only its assets and liabilities were sold to another concern "as business as a whole" and that there being no closing stock, the Assessing Officer held that the question of valuation of closing stock does not arise.
9.4. According to the Assessing Officer, the revised assessment order passed u/s.143{3) r.w.s. 153B r.w.s. 254 dtd. 27.03.2014 has also incorporated the finding of the order dtd. 20.03.2013 wherein it has been held that: "The order giving effect to the order u/s.263 of the I.T. Act by the Commissioner of Income Tax (Central), Kochi was passed on 20.03.2013 by making an addition of Rs.26,80,305/- by recomputing the value of closing stock. The closing stock originally adopted was Rs.1,21,83,206/-. Applying the ratio of the decision of the Honble Supreme Court in the case of A.L.A. Firm vs. CIT (189 ITR 285) , the market value of the closing I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 25 stock was worked out at Rs. 1,48,63,511/- [i.e. 1,21,83,206*122/100] while giving effect to the order u/s.263. As a result, an addition of Rs,26,80,305/- to the business income determined in the original assessment. While giving effect to the order u/s. 263 of the CIT (Central), an addition of Rs.26,80,305/- was made by recomputing the value of the closing stock by applying the gross profit ration of 22% adopted in the original assessment. In view of the fact that the profit percentage now adopted is only 19%, the value of closing stock is recomputed to Rs.1,44,98,015/- [i.e. 1,21,83,206*119/100]. Accordingly the addition of Rs.26,80,305/- made vide order dated 20.03.2013 giving effect to the order u/s.263 of the ClT(Central) is restricted to Rs.23,14,809/- while completing the assessment."
10. On appeal, the CIT(A) relied on the ratio of the judgment of the Supreme Court in the A.L.A. Firms vs. CIT (189 ITR 285) and held that the firms business was totally discontinued on account of closure of the business by the firm and the transfer of the entire assets and liabilities of the firm in favour of the proprietory concern namely Dona Gold of Shri Sunny Jacob. Thus, according to the CIT(A), the firm transferred the assests and hence, for all practical purposes the firm stands dissolved. The CIT(A) observed that the assessee, other than reiterating that the AO failed in appreciating the facts of the case while applying the above ratio, had not substantiated his arguments with facts. In view of this, the CIT(A) held that the AO has rightly worked out the under valuation of the closing stock and resorted to make an addition of Rs.23,14,809/-.
11. Against this, the assessee is in appeal before us. The ld. AR submitted that the addition of Rs.23,14,809/- being difference in valuation of closing stock was I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 26 wrong. The lower authorities failed to distinguish the facts of the assessees case with the facts in the case of A.L.A. Firms vs. CIT (189 ITR 285) .
12. On the other hand, the Ld. DR relied on the orders of the lower authorities.
13. We have heard the rival submissions and perused the record. In this case, te closing stock was estimated by applying GP rate at 22% in the assessment year under consideration. Since we have confirmed the estimation of income by applying GP rate at 22%, the closing stock determined by the Assessing Officer is to be confirmed. Accordingly, we find no infirmity in the order of the lower authorities and the same is confirmed. Thus, this ground of appeal of the assessee is dismissed. The appeal of the assessee is dismissed. ITA Nos. 314 to 319/Coch/2016: Revenue: AY 2002-03 to 2008-09
14. These appeals filed by the Revenue are directed against the common order of the CIT(A)-IV, Kochi dated 31/03/2016 for the assessment years 2002-03 to 2008-09.
15. The only ground raised by the Revenue in ITA Nos. 314 to 319/Coch/2016 is with regard to deletion of addition of Rs. 31,06,361/-made by the Assessing Officer towards undisclosed income on estimate sales. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 27
16. The facts of the case are as narrated in ITA No. 314/C0och/2016 are similar to the facts considered by us in ITA No. 372/Coch/2016.
17. On appeal, the CIT(A) found that no new facts had been brought by the AO. There was no findings on facts but for the logical argument extended for re- working the GP by applying the rate of 19% instead of G.P. @ 22% applied in the original order on the same suppressed turnover and estimated the same as the total income of the assessee. According to the CIT(A), the AO had resorted to estimation of suppressed profit as well as the estimation of applicable G.P. rate, based on the findings of the period relevant to the AY 2008-09 and the finding of the AY 2008-09 has been stretched back to cover the entire period between the AY 2002-03 to 2007-08. Therefore, it was held that the addition based on deriving the income out of applying estimated GP rate at the estimated suppressed turnover has got no basis. Accordingly, the CIT(A) deleted the additions.
17.1 Against this, the Revenue is in appeal before us. The Ld. DR relied on the jurisdictional High Court in the case of CIT vs. Hotel Meriya in which court had held that when it is revealed in a search u/s. 132 that the assessee was following a particular method to conceal income, it is just and reasonable to presume that the same practice was followed by the assessee throughout the assessment years in the block period. The Ld. DR submitted that the income generated from I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 28 the unaccounted sales had been invested in immovable properties worth more than Rs.6 crores which itself is a concrete evidence for the concealment of income for all the years. It was submitted that the Commercial Taxes Department had also detected the suppression of sales during an inspection of 5 business concerns of the group which showed that the assessee was making sales on estimate slips instead of sale bills. While remitting the issue back to the AO, the Tribunal in its Order No. 690 to 696/Coch/2010 and 23 to 43/Coch/2011 had observed that the CIT(A) in his first appellate order was not justified in deleting the addition for AY 2006-07 to 2007-08 on the ground that there was no material evidence for these years. For these reasons, it was prayed that the order of the CIT(A) may be set aside and that of the AO restored.
17.2 On the other hand, the Ld. AR relied on the order of the CIT(A).
17.3 We have heard the rival submissions and perused the record. Since we have confirmed the estimation of income for the assessment year 2008-09 in ITA No. 372/Coch/2016 by placing reliance on the judgment of the Travancore Logistics cited supra and Meriya Hotel cited supra, estimation of income for these assessment years on the basis of the seized records found during the search in the year relevant to the AY 2008-09 is justified as the assessee has followed uniform system of suppression of sales. This ground of appeal of the Revenue is allowed for all the assessment years I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 29
17.4 In the result, the appeals of the Revenue in ITA Nos. 314 to 319/Coch/2016 are allowed. ITA No. 371/Coch/2016 : Assessee: AY 2007-08
18. This appeal filed by the assessee is directed against the common order of the CIT(A)-IV, Kochi dated 31-03-2016 for the assessment year 2007-08.
18.1. There is a delay of 93 days in filing the appeal before the Tribunal. The reason advanced by the assessee for filing the appeal belatedly is same as in ITA No. 372/Coch/2016 and for the same reason, the delay is condoned and the appeal is admitted for adjudication.
18.2 The assessee has raised the ground that the CIT(A) erred in confirming the addition made by the Assessing Officer on valuation of closing stock at Rs. 23,75,735/-.
18.3 The facts of this case are the Assessing Officer made an addition of Rs.23,75,735 being difference in valuation of closing stock, following the principle as laid down by the Supreme Court in the case of A.L.A. Firm vs. CIT (189 ITR 285) . From 06/12/2007, this line of business of the assessee was closed and the assets and liabilities of the firm were taken over by proprietary concern of the Managing Partner, M/s. Dona Gold. The above referred income I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 30 was computed by adopting 22% (G.P. ratio) on the value of closing stock of Rs.84,23,061/- taken over by the partner. By this, the tax and interest payable over and above the tax determined, as per the original order passed u/s. 143(3) was fixed at Rs.9,76,357/-.
18.4 We have heard the rival submissions and perused the record. This ground is similar to the ground no. 2 in ITA No.372/Coch/2016. Accordingly, by applying the same ratio, this ground of appeal is dismissed. This appeal filed by the assessee is dismissed. ITA Nos. 341 to 344/Coch/2016 : Revenue: AY 2004-05 to 2007-08
19. These appeals filed by the Revenue are directed against the order of the CIT(A)-IV, Kochi dated 31/03/2016 for the assessment years 2004-05 to 2007-08
19.1 There was a delay of 22 days in filing the appeals for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08 before the Tribunal. The Revenue has filed a condonation petition accompanied with affidavit dated 24/10/2016 stating that the order of the CIT(A), Trivandrum in ITA No. 313- 317/CIT(A)/Kochi/2014-15 passed on 31/03/2016 against which the present appeals are preferred was a combined order for the assessment years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. It was submitted that the CIT(A) order was received in the office of the CIT, Central Circle on 05/05/2016 and I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 31 received on transfer in the office of the Pr . Commissioner of Income-tax, Trivandrum on 18/05/2016. Form No. 36 was filed before theAT on 18 th July 2015 which resulted in a delay of 22 days in filing the appeal for the above assessment years. It was submitted that the delay was due to the late receipt of the appellate order in the office of Pr. Commissioner of Income-tax, Trivandrum on transfer of jurisdiction from the office of Commissioner of Income-tax, Central Circle, Trivandrum. As the delay was due to sufficient causes beyond the control of the Revenue, it was prayed that the delay of 22 days may be condoned and admit the appeals for adjudication. In our opinion, there is good and sufficient reason for condoning the short delay of 93 days. Accordingly, we condone the delay and the appeals in ITA Nos. 341 to 344/Coch/2016 are taken up for adjudication.
19.2 The only ground in ITA Nos. 341-344/Coch/2016 is with regard to estimation of G.P. towards unaccounted sales on the basis of material found during the search for the assessment year 2008-09.
19.3 The facts of the case are similar to that considered by us in Ground No. 1 in ITA No.372/Coch/2016. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 32
19.4 The addition made by the Assessing Officer was deleted by the CIT(A) for the reason that no material was found during the course of search for the assessment year 2008-09 .
19.5 Against this, the Revenue is in appeal before us. The Ld. DR submitted that the AO had established that assessee had affected sales by issue of estimate slips instead of sale bills. The estimate slips were also not accounted for and that resulted in suppression of sales. The estimate slips were destroyed then and there as revealed from the statements. Since the search was conducted in financial year 2007-08, the immediate evidence gathered relate to assessment year 2008-09, and the CIT(A) had accepted the assessment made for the assessment year 2008-09, based on the evidence seized during the search. It was also established by the AO that this is the pattern of sales suppression followed by the assessee in the jewellery business for previous financial years also. It was submitted that the AO had estimated the gross turnover as well as the gross profit of the suppressed turnover based on certain estimate slips which were recovered or procured from the assessee at its premises and also at the other premises where the assessee was having sister concerns and thus the estimates were based on material evidence collected during the search. For these reasons it was prayed that the order of the CIT(A) may be set aside and that of the AO restored. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 33
19.6 On the other hand, the Ld. AR relied on the order of the CIT(A).
19.7 We have heard the rival submissions and perused the record. Since we have confirmed the estimation of income for the assessment year 2008-09 in ITA No. 372/Coch/2016 by placing reliance on the judgment of the Travancore Logistics cited supra and Meriya Hotel cited supra, estimation of income for these assessment years on the basis of the seized records found during the search in the year relevant to the AY 2008-09 is justified as the assessee has followed uniform system of suppression of sales. This ground of appeal of the Revenue is allowed for all the assessment years.
19.8 In the result the appeals filed by the Revenue in ITA Nos. 341 to 344/Coch/2016 are allowed. ITA No. 324/Coch/2016: [Revenue: AY 2004-05 to 2007-08]
20. This appeal filed by the Revenue is directed against the order of the CIT(A)- IV, Kochi dated 31/03/2016 collectively for the assessment years 2004-05 to 2007-08 which is duplication of the appeal and the department filed independent and separate appeals for these assessment year. Accordingly, this appeal of the Revenue is dismissed. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 34 ITA Nos. 320 & 321/Coch/2016: Revenue:2006-07 & 2007-08
21. These appeals filed by the Revenue are directed against the common order of the CIT(A)-IV, Kochi dated 31/03/2016 for the assessment years 2006- 07 and 2007-08.
21.2 The issue raised in these appeals is whether the CIT(A) was justified in deleting the additions of Rs.1,31,55,837/- and Rs.1,68,39,970/- for the assessment year 2006-07 and 2007-08, being unexplained investment made by the assessee in the purchase of property.
21.3. The facts of the case are the assessee is a partner in several firms. He is also a Director in two private limited companies. There was a search u/s. 132 of the I.T. Act in the business and residential premises of the assessee on 21/08/2007. A notice u/s. 153A of the was issued to the assessee on 30/06/2009. In response to the notice, the assessee filed his returns of income for the assessment years 2006-07 and 2007-08, declaring total income of Rs.1,09,062/- and Rs.95.799/- respectively. The original assessment was completed u/s. 153A r.w.s. 143(3) of the I.T. Act, determining a total income of Rs.1,36,74,900/-and Rs.1,74,05,770/- for the assessment years 2006-07 and 2007-08 respectively. The assessee filed appeals against the original assessments before the first appellate authority. The CIT(A) vide order dated 22/09/2010 deleted the additions made by the Assessing Officer. The Revenue I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 35 filed appeals to theAT, Cochin Bench. The ITAT, Cochin Bench vide its consolidated order dated 16/11/2012 remitted the issue to the files of the Assessing Officer with a direction to make fresh assessments after affording reasonable opportunity of hearing to the assessee. The relevant observation of theAT for restoring the cases to the files of the Assessing Officer reads as follows:
We have carefully gone through the judgment of the Andhra Pradesh High Court in the case of Rajnik & Co (supra). In the case before the Andhra Pradesh High Court there was a search in the business premises of the taxpayer and it was found from the loose sheets suppression of sales for the financial years 1995-96 to 1996-97. Apart from the materials recovered at the time of search sworn statement was also recorded by the department wherein one of the partners admitted in his statement before the officers that the taxpayers firm was practising suppression of sales from day to day basis through out the assessment year not only during the assessment years 1996-97 and 1997-98 but also during the earlier assessment years 1986-87 to 1995-96. Based on the material found during the course of search operation and the admission of the partner in the sworn statement, the assessing officer made addition towards suppression of sales. This was confirmed by the Tribunal. When the matter travelled to the High Court the High Court found that with reference to the addition made for assessment years 1986-87 to 1995-96 no doubt there is no material but it is admitted by the partner of the firm that the taxpayer has practiced suppression of sales turnover. Accordingly, the High Court found that the authorities are justified in making the addition. In the case before us also though the estimate slip found by the revenue authorities relate to assessment year 2008-09 the cashier, Shri Joshi Abraham said in his statement that he is issuing bills only for part of the sales and the balance sales were effected on estimate basis. This statement of the cashier was ignored by the Commissioner of Income-tax(A). Moreover, during the inspection by Commercial Tax Department on 24-02-2006 they found a similar practice adopted by the taxpayer in sale of jewellery by issuing estimate slip. Though proceedings under the Commercial Tax Department are different from income-tax proceedings while computing the total income the modus operandi adopted by the taxpayer can be taken into account in the income-tax proceedings also. The income-tax authority has to reappreciate the materials found by the Commercial Tax I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 36 Authorities. Moreover, one Mr. Pintu Jacob claimed that he was issuing only estimate slip. Moreover several investment in the landed properties were found from assessment year 2002-03 to assessment year 2008-
09. The agreement for sale -was found and the assessing officer claims that the profit on suppressed sales was invested in landed properties. Therefore, it may not be correct to say that there was no material for the assessment years 2002-03 to 2007-08. In those circumstances, this Tribunal is of the considered opinion that Commissioner of Income- tax(A) is not justified in deleting the addition for the assessment years 2002-03 to 2007-08. However, the statement recorded from the cashier and other persons and the material collected by the Commercial Tax Department needs to be examined after giving an opportunity to the taxpayer. The taxpayer had no occasion to respond to the material collected by the sales-tax department during their inspection on 24-02-
2006. It is also pertinent to note, that the impugned assessment proceeding was initiated u/s 153A of the. In proceedings u/s. 153A, the assessing officer can take into account all the evidences/materials including materials found during the course of search operation. Therefore, in all fairness, this Tribunal is of the considered opinion that one more opportunity shall be given to the taxpayer to present his case before the assessing officer. Accordingly, the orders of the lower authorities for the assessment years 2002-03 to 2007-08 are set aside and the entire issue with regard to addition of suppressed sales is remitted back to the file of the assessing officer. The assessing officer shall reconsider the issue afresh after reconsidering all the statements recorded and the material found during the course of inspection by the Commercial Tax Department, all the materials including the materials collected during the course, of search operation and thereafter decide the same in accordance with law after giving a reasonable opportunity to the taxpayer.
21.5 Against the above order of theAT, the appeals were preferred by the assessee u/s. 260A of the I.T. Act before the Honble High Court of Kerala. The Honble High Court confirmed theAT order. On further appeal, the Honble Apex Court noticed that the assessments were completed pursuant to the matter being remanded by theAT and directed the assessee to approach the I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 37 appellate authority to raise all his grievances before the said authority. The relevant observation of the Honble Apex Court reads as follows: "Upon hearing the learned counsel for the parties, we find that in pursuance of the impugned judgment delivered by the High Court, assessment orders have already been made and the petitioners have also filed appeals against the orders of assessment. In the circumstances, in our view nothing survives in these petitions. However, we clarify that it would be open to the parties to raise all possible legal contentions before the Appellate Authority where the appeals are pending against the orders of assessment. Any observation made by the High Court shall not be treated as conclusive and it would be open to the Appellate Authority to look into all other relevant facts and legal contentions which might be raised before it for coming to its final conclusion in the appeals. "
21.6 Pursuant to theAT order dated 16/11/2012, the fresh assessment was completed by making the additions of Rs.1,31,55,837/- and Rs. 1,68,39,970/- for the assessment years 2006-07 and 2007-08 respectively, being the on-money payments made by the assessee for purchase of lands. In other words, the assessment orders passed in consequent to the order of theAT had reiterated the additions made in the original assessment order.
21.7 Aggrieved by the additions made by the Assessing Officer in the second assessment order, the assessee had preferred appeals to the first appellate authority. The CIT(A) following his predecessors order, held that the additions are purely on estimate basis without any documentary proof and therefore they cannot be sustained. The CIT(A) after reproducing his predecessors order held as follows: I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 38 11. As a matter of fact, my ld. Predecessor has already discussed the issue on facts as well as on the judicial pronouncement on identical facts and has held that
additions made on this count are not justified and accordingly cannot be sustained, I do not find anything new brought out by the AO during the re-assessment proceedings which deserves to be analyzed over and above, what have been discussed and analyzed by my ld. Predecessor. Accordingly, the additions made by the AO are held to be not sustainable and hence are deleted for the AYs 2006-07 and 2007- 08.
21.8 Aggrieved by the order of the CIT(A), the Revenue has filed the present appeals before the Tribunal. For the assessment years 2006-07 and 2007-08, identical grounds have been raised except for difference in figures. Hence, grounds of appeal relating to the assessment year 2006-07 is reproduced below:
1. The order of the learned Commissioner of Income tax (Appeals)- lV, Kochi in so far as the points stated below are concerned, is opposed to law on the facts and in the circumstances of the case.
2. The Ld. Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs.1,31,55,837/- on account of unexplained investment made by the assessee in the purchase of properties.
3. The Ld. CIT (A) has erred in ignoring the evidences unearthed during the search u/s 132 in respect of extra amount paid for purchase of the properties. Agreements relating to purchase of two properties in Kollam were seized during the search from which it was found that the assessee had made payments over and above the price shown in the document.
4. The Ld. CIT (A) ought to have noted that the agreed price for
3.312 cents of land was Rs. 18 lakh in place of Rs. 1,70,000/- shown in the document. Likewise, the agreed price for 11.61 cents of land was Rs. 44,48,000/- in place of Rs. 6 lakhs shown in the document.
5. The Ld. CIT (A) has completely overlooked the fact that while recording the statements before the DDIT (Inv.), the assessee in I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 39 answer to Qn.No.11 on 24-8-2007 had agreed that amounts as per the agreements were paid for purchase of the properties.
6. As regards the properties purchased at Kottayam, the Assessing Officer found that the properties were in the prime locations of Kottayam Municipality and considering the importance and location, the value declared by the assessee in the document was much less when compared with the market value.
7. The Assessing Officer had also taken into account the fact that the properties lying at even interior areas without road frontage had fetched Rs. 5,00,000/- per cent, as evidenced by an agreement found during the course of Survey u/s 133A in the premises of M/s. Hotel Anjali Park, Kottayam on 13-2-2007. For these and other grounds that may be advanced at the time of hearing, the order of the learned Commissioner of Income tax (Appeals) on the above points may be set aside and that of the Assessing Officer restored.
21.9 The Ld. DR relied on the grounds raised and also has filed written submission. The relevant portion of the written submission reads as follows:
1(a) The Respondent Shri Sunny Jacob is a Partner in the firm mentioned below: - M/s.. Sunny Jacob Jewellers, Kottayam. M/s. Sunny Jacob Gold Hyper Market, Kollarn. M/s. Sunny Jacob Jewellers & Wedding Centre, Kottarakkara. M/s. Sunny Jacob 916 Jewellers Show Room, Fort Manor, Trivandrum. Shri Sunny Jacob is also a director of M/s. Sunny Jacob Builders and Developers P. Ltd, Kottayam and M/s. Kalathil Builders & Developers. 1 (b) A Search u/s 132 was conducted on 21-08-2007 in the Residential premises and business premises at Kottayam, Kollam, Kottarakkara & Trivandrum. Sworn statement was recorded from Sri Sunny Jacob during search proceedings on 24/08/2007. Incriminating documents were seized. Incriminating documents revealed for the immovable properties (land) purchased, the respondent has paid huge money/unaccounted money over and above the Registered value. One such instance is as under: (Refer para - 4 a&b of Assessment order for A.Y. 2006-07 & 2007-08). I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 40 A.Y. 2008-09. Document No: Area Sy.No & Village Document value Payment actually made 2492/07 3.312 cents Re.Sy No: 68 Rs. 1,70,000/- Rs. 18 lakhs. Dt: 14-8-07. Kollam East. 2500/07, 11.610 cents Sy.No: 29 & 30 Rs. 6 lakhs Rs. 44.00 lakhs. Dt:14-8-07. 14.92 cents Kollam East. 62.40 lakhs. On the basis of admission of on money payment, the Assessing Officer has taken the average rate per cent and arrived at the difference for A.Y.2006-07 (Rs. 81.55 lakhs), 2007-08 ( Rs. 67.57 lakhs) 2008-09 (Rs
54.87 lakhs), (refer para-4 of A.O). For the properties purchased at Kottayam, considering the facts such as: a) Property lying in prime location of Kottayam Municipality. b) Located in prime commercial areas. c) M/s. Hotel Anjali Park, Kottayam has purchased a land @ Rs. 5 lakh per cent, which is behind the property of Sri Sunny Jacob. In fact the property purchased by the respondent does have main road frontage & has advantage & reply of respondent to show cause notice and considering the admission of on money payment admitted by the assessee, the unaccounted investment of Rs. 1,68,39,970/- ( Rs. 67,37.270/- + Rs. 1,00,82,700/-) has been added to the returned income for A.Y. 2007-08.
22. The Ld. AR has also filed argument note and the same reads as follows:
The above appeals are filed by the Revenue against the order of the CIT(A)-IV, Kochi, in I.T.A. Nos.347 & 348/CIT(A)-IV/Kochi/2015-16 dated. The aggregate addition made for 2006-07 assessment is Rs.1,31,55,837/-.
31.03.2016. For the Assessment Year 2006-07, the Assessing Officer made addition of Rs.1,31,55,837/- as income under other sources vide paragraphs-4 & 7 of the Assessment Order dated 27.03.2014. In paragraph-4(c) of the Assessment Order, the Assessing Officer observed as under:- I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 41 "Shri. Sunny Jacob, had purchased 3.312 Cents of land at Rs.18 lakhs. The rate per cent is Rs.5,40,345/-. The assessee had purchased 11.61 Cents of land for Rs.44,48,000/- as per which the rate per Cent is Rs.3,83,118/-. Taking the average, he had purchased 1 Cent of land for Rs.4,18,710/-. Applying this average rate, the extra amount, Shri. Sunny Jacob had paid for the land is worked as follows". On that basis, a sum of Rs.81,55,8377- was proposed to be treated as unaccounted investment for the Assessment Year 2006-07 and finally added that amount to the declared income.
2. Vide paragraph-7 of the Assessment Order, the Assessing Officer also made an addition of Rs.50 lakhs on assumptions and presumptions as is evident in the following findings:- "Valuation at 200% of the declared cost was proposed after taking into account the above factors and the fact that these properties were in the hands of the tenant at the time of transfer. Hence, considering the circumstances of the case, the properties are valued as proposed and the extra amount paid is treated as unexplained investment u/s 69 of the Income Tax Act. The additional payment for investment in property so made, works out to Rs.50 lakhs for the Assessment Year 2006-07. Rs. 1,00,82,700/-for 2007-08 and Rs. 1,60,000/- for 2008-09
3. The CIT(A) after having considered the lack of evidence and the objections raised by the appellant before him, deleted the additions of Rs.1,31,55,837/-for the Assessment Year 2006-07 and Rs.1,68,39,970/- for the Assessment Year 2007-08. Before the CIT(A), the Counsel for the appellant submitted elaborate argument note, the relevant case law on the subject, which are discussed in detail and the issues were decided by holding that additions were arbitrary and purely on estimates and unsupported by any reliable material or evidence. The facts of the case for 2006-07 and 2007-08 are identical and also common for both the years.
4. Vide-paragraph-26 at Page No.13 of the order of the CIT(A), the case of Shri.Moidu @ Kunhippa Vs. ACIT is referred to, which is the order of the Honble ITAT, Cochin Bench, where it was held that the additions made on pure estimate basis, are not justified. It was also held that in a number of similar cases, the same decision was taken by holding that the additions made merely on guess work, cannot be sustained. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 42 In the above background, the order of the CIT(A) deleting the additions cannot be faulted and on that basis, it is prayed that the Departmental appeals may be dismissed and the order of the CIT may be affirmed.
22.1 We have heard the rival submissions and perused the record. The details of the additions made by the Assessing Officer for the assessment years 2006-07 and 2007-08 with regard to the purchase of property at Kollam and Kottayam are detailed below: AY 2006-07 AY 2007-08 I Estimation of on money payment of payment for land purchase near Velankanni Matha Church, Kollam Rs.81,55,837/- Rs. 67,57,270/- II Estimation of on money payment of payment for land purchase at Kottayam @ 200% of declared cost Rs.50,00,000/- Rs.1,00,82,700/- Rs.1,31,55,837/- Rs.1,68,39,970/-
22.2 For the assessment year 2006-2007, the above addition was elaborately discussed by the A.O. from para 4 to 7 of the impugned assessment order. The A.O. mentioned in the assessment order for assessment year 2006-2007 that assessee had purchased two properties at Kollam vide document No.28/6 dated
04.01.2006 for Rs.5,00,000 for an area of 1.433 cents and another 38.93 cents for an amount of Rs.82,50,000 vide document No.25/06. The A.O. held for purchases of these two properties the assessee had paid on-money i.e. price more than the documented value. The A.O. observed that during the course of search in the assessees premises, two documents relating to purchases made by the assessee for the assessment year 2008-2009 were seized and marked as I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 43 MSP/1 (53) were seized. As per these documents, the A.O. held that the agreed price for 3.31 cent of land was Rs.18 lakh in place of Rs.1,70,000 as per the sale deed. Further for the other document that was seized, it was Rs.44,48,000 in place of Rs.6 lakh as per the document. The Assessing Officer stated that the assessee had admitted that amounts have been paid as per the sale agreements seized and had offered to tax for AY 2008-09 the difference as per the sale agreement seized and the sale documents, in the statement recorded during the course of search. The A.O. noted that the properties purchased by the assessee for the assessment year 2006-2007 and 2007-2008 are in the same locality and in the same village of the properties purchased by the assessee for the assessment year 2008-2009. Therefore it was concluded by the A.O. that on- money has been paid for the properties purchased during assessment year 2006-2007 and A.Y. 2007-2008 as well based on the seized documents and statement recorded from the assessee concerning AY 2008-09. The A.O. took the average value per cent for the purchase made by assessee in the A.Y. 2008- 2009 and adopted the same value for the purchase made in the assessment year 2006-2007 and 2007-2008 and worked out the on-money payment as regards the purchase of property at Kollam.
22.3 With regard to the purchase of property at Kottayam, it was noticed by the A.O., that the documented consideration was Rs.50 lakh for 10.03 cents. The location of the property is at Central Junction, Kottayam and according to the I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 44 Assessing Officer, this property purchased by the assessee is more advantage than the one property purchased by Hotel Anjali Park, Kottayam at Rs.5 lakh per cent as per the agreement found during the course of survey u/s 133A of the I.T. Act. The A.O. compared the property purchased by the assessee at Kottayam with that of the property purchased by Hotel Anjali Park and after considering the advantages of the property purchased by the assessee held the value of the Kottayam property purchased by the assessee should be enhanced by 200% of the declared cost in the documented price.
22.4 The A.O. had estimated the value of all properties purchased by the assessee at Kollam and Kottayam without any documentary evidence except for two agreements seized by the Department during the search with regard to purchase of property by assessee in Kollam relating to assessment year 2008-
2009. The assessee had also admitted for the addition of difference between the agreed price and the documented price for the assessment year 2008-2009. So the admitted fact is, as regards the purchase of property at Kollam, the Assessing Officer had estimated the on-money based on incriminating documents for an altogether different assessment year. The Assessing Officer had not referred the issue to the Departmental Valuation Officer, which he ought to have done. The A.O. had adopted the average price per cent for two properties purchased by the assessee in the assessment year 2008-2009 and had worked out the on-money payment for the assessment years 2006-2007 and 2007-2008. The A.O. claims that the properties are adjacent and the average price per cent I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 45 of two properties purchased by the assessee in the assessment year 2008-2009 is Rs.4,18,710. So the purchases made in the assessment year 2008-2009 itself vary and is Rs.5,45,345 per cent as regards purchase made as per the document No.2492/07 dated 14.08.2007 and Rs.3,83,118 as per document No.2500/07 dated 14.08.2007 (concerning assessment year 2008-2009). In assessment year 2008-2009 itself there is a wide variance for cost of land purchased by the assessee and similar difference would be there for assessment years 2006-2007 and 2007-2008 as well. As regards the Kollam property, the CIT(A) has categorically found that the assessee has a valid point that price which is smaller and strategically located plot would fetch more compared with bigger plot at the interior and the observation that all plots in the area would fetch similar price is illogical and unconvincing and same is evident from two purchases made by the assessee for the assessment year 2008-2009 itself. Apart from the documents seized for assessment year 2008-2009, no incriminating documents have been seized against the assessee with regard to the purchase made in assessment years 2006-2007 and 2007-2008. As mentioned earlier, the A.O. ought to have been referred the matter to the Valuation Officer to determine the actual market value of the property as provided u/s 142A of the Income-tax Act. The A.O. has also not mentioned the circle rate notified by the Revenue Authorities for the purpose of determining the market value of the said property. It is a generally acceptable principle that when a property is registered with the registering authority, the valuation cannot be challenged unless something incriminating is I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 46 found by the Department. In the instant case, there is no incriminating documents found by the Department relating to assessment years 2006-2007 and 2007-2008 as regards the property purchased by the assessee at Kollam. In the case of Moidu Alias Kunhippa v. ACIT, (256 ITR (AT) 76 Cochin), the Tribunal had held addition made on pure estimate is not justified. Hence, in the instant case, the addition made on account of on-money for assessment years 2006-2007 and 2007-2008 is without any materials seized by the department and the same cannot be sustained.
22.5 As regards the value of property at Kottayam, the A.O. estimated 200% of the documented value by comparing the property purchased by Hotel Anjali Park. Hotel Anjali Park had purchased a freehold property, whereas the assessee had purchased tenanted property and eviction of the tenants was the responsibility of the assessee. Some of the tenants had not evicted even at the time of search. These facts have been noted by the Assessing Officer in para 6(d) of the assessment order concerning assessment year 2006-2007. Moreover, there is no evidence for payment of extra money and this fact has also been accepted by the Assessing Officer.
22.6 Moreover, the CIT(A) in the original round of litigation had and elaborately considered the issue of on-money payment and had categorically found that additions for assessment years 2006-2007 and 2007-2008 are not warranted. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 47 (CIT(A)s order dated 22.09.2010). The relevant finding of the CIT(A) as regards the deletion of on-money payment for purchase of property for assessment years 2006-2007 and 2007-2008 reads as follow:-
18. The next ground relates to addition made on account of payment of extra money on purchase of various properties during the previous year relevant to assessment year 2006-07. The AO discusses this addition from Para 4 to 7 of the impugned order. It has been mentioned that the appellant purchased two properties at Kollam vide document No.28/6 dated
04.01.2006 for Rs.5,00,000/- agreement value for an area of 1.433 cents and also area of 38.93 cents for an amount of Rs.82,50,000/- vide document No. 25/06. The AD has held that more money was being paid on purchase of these properties than the documented value. His observation is based on the value mentioned in two documents which were found and seized during the course of search at the residence of Shri Sunny Jacob. These documents are marked as MSP-1 (53). As per these documents the agreed price for 3.312 cents of land was Rs.18,00,000/- in place of Rs.1,70,000/- and Rs. 44,48,000/- in place of Rs.6,00,000 as per documents. In his statement the appellant had admitted that the amounts have been paid as per documents seized. The AO has inferred that since "these properties in the same locality and in the same Village and as they are of similar nature and contiguous all the properties would have fetched almost the same value during the transaction". Hence the AO inferred that the difference has been paid for the properties from the sources undisclosed to the Department and worked-out that since an amount of Rs.18,00,000/- has been paid for a plot measuring 3.312 cents, the rate per cent is Rs.540345 and for the plot measuring 11.61 cents the rate comes to Rs.383118. Hence taking an average of Rs.418710, the AO worked-out the difference at Rs.100011 and Rs.8055826 as difference for the bigger plot, hence for the plots purchased at Kollam the total extra money paid was worked-out at Rs.8155837 which has been added to the returned income of the appellant .
18.1. Similarly, the AO also estimated the payment of on money in respect of properties purchased at Kottayam from one Shri T K Joseph on 24.10.2005. This property was purchased at a documented consideration of Rs.5000000 measuring 10.03 cents. The location of the property is stated to be at central junction, Kottayam, Vide 5(b) the A.O. has compared this piece of land with one property purchased by one Hotel Anjali Park, Kottayam @ 500000 per cent as per agreement found from them during the course of a survey u1s 133A. The AO has compared this property with that of the appellant and after considering the replies submitted by the appellant has adopted the valuation this property @ 200% of the declared cost and has finally mad the addition ofRs.5000000 on account of purchase of this property as I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 48 payment of on money for the A.Y, 2006-07, Rs.100827001- for A.Y 2007-08 and Rs.160000/- for A.Y 2008-09.
18.2 The appellant has agitated both the additions. Before me it has been submitted that there cannot be a similar rate for a bigger plot, which is at the interior than a plot which is facing the front and is very strategically located and also is very crucial being approach plot to the bigger plot. Regarding Kollam property the appellant has also submitted the site plans which show that unless some road access is provided to the bigger plot no viable commercial project could be feasible on that property. The amount which has been paid for the smaller plots facing front road for entry and also exit would definitely fetch a more handsome price than what an interior bigger plot would fetch. Hence the appellant has objected to the adoption of the similar rate for a plot less locationally advantageous and bigger one with that of very strategically located small plot. The appellant submits that a higher price was paid for the smaller property as it was the only entrance to the bigger property and this was the only portion of the plot facing the NH-47 Highway. Hence the price paid for a smaller plot to get right of way to the larger plot should not be adopted as the model price. Similarly the higher rate was paid for the other property was due to the similar reasons.
19. As regards the Kottayam property the appellant has submitted that the rates are not comparable since the property purchased by Hotel Anjali Park was a freehold property whereas in the property purchased by the appellant there were lot many tenants who were the occupants and also were paying a very low rent. For actual possession of the property the appellant submits he has to pay lot of compensation but for the serious financial hardship he could not pay and therefore possessing was not taken by him for a very long time. He submits that Adverse possession and tenancy rights were the criteria which determined the price when the property at TB Road, Kottayam was purchased. "
20. On a careful consideration of the facts it has been observed that even the AO who has estimated the value of Kottayam property @200% of the agreement value comparing it with that of property purchased by Hotel Anjali Park has also mentioned in Para 6(d) in agreeing with the appellant that a part of the property is still in the hands of the tenants and the assessee have to pay money for evicting some of the occupants. He adds that "also no direct evidence for payment of extra money has been seized by the Department." However, still he has not accepted the contention of the appellant and comparing it and comparing it with the property purchased by Hotel Anjali Park has taken the valuation @200% of the declared cost. While doing so he has not commented upon as to the point raised by the appellant that the property purchased by Hotel Anjali Park was a freehold property and not occupied by the tenants.
21. In Para 6(c) of the assessment order the AO has not accepted the assessees explanation regarding Kollam property and has observed that all the properties are of similar nature and since the Department is in possession of the two real agreements, similar rate is applicable to all the properties in the vicinity and I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 49 hence the difference in rate is applied and added back as undisclosed income.
22. One major factor which emerges in the entire discussion made by the AO and as per submissions of the appellant is that the AO has merely made estimation of the valuation of all the properties purchased by the appellant at Kollam and Kottayam except for properties purchased through those two agreements which have been seized by the Department and the actual valuation has been admitted and disclosed by the appellant. Except for these two agreements nothing incriminating has been either found or seized for the other properties during the course of search at the residence as well as all the business concerns of the appellant where he is either a partner or director. In the case of Kottayam property the appellants contention have been admitted by the AO but still a high pitched rate has been adopted comparing it with the property which was free from all encumbrances viz. a free-hold property. Hence the case compared by the AO while determining the rate at 200% of the declared value doesnt seem justified. The rate adopted by the AO is arbitrary and not convincing.
23. As regards the Kollam property, assessee has a very valid point that the price which a smaller and strategically located plot would fetch is not comparable with that of a bigger plot at the interior. The AOs .observation that all plots in the area would fetch similar price seems quite illogical and unconvincing. A.O. has adopted an average method which cannot hold good for determining the valuation of immovable property. It is a very subjective and arbitrary method especially when no incriminating material has been found which could support the valuation so made by the AO.
24. As per guidelines for valuation of immovable property Circulated by the Department for a general compliance it has been clearly directed that the valuations should be "realistic, depending on the nature of property, its use, potential and all other characteristics." In Para 5.2.1.3 of this guidelines under the chapter Method of Valuation it has been circulated that "Two properties cannot be identical. They may not posses similar advantage and disadvantage. All such factors of adjustment I influence affecting land rates are to be considered" and the main factors are (a) Location and situation (b) Size, (c) Side open, (d) Encumbrance, etc. Under the head Size it has been written that "in general large plots fetch less unit price due to less number of buyers.. Sometimes it is not possible to have sale instances of larger size of plots and the sale instances available are of smaller size developed plots. In such a situation the price of small developed plot cannot be directly applied. " Similarly for Side open it has been directed that the plots having more sides open fetch more rate. Similarly due and adequate importance should also be given for shape, encumbrance, etc. Unfortunately the AO has not applied any of the factors while determining the extra money payments for which additions have been made.
25. The valuation has been made by the AO himself instead of referring the case to the Valuation Officer who is authorized as per the Income Tax Act to I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 50 determine the actual market value for such a property as provided u/s 142A of the Income Tax Act. Hence the guidelines in this regard are not followed by the AO while determining the actual investment made by the appellant in purchase of immovable property. The AO has not even mentioned as to what was the circle rate notified by the Revenue Authorities for the purposes of determining the market value of the said properties. It is a generally acceptable principle that when a property is registered with the registering authority the valuation cannot be challenged and this is acceptable throughout the country unless something incriminating is found by the Department during the course of any action.
26. In the case of Moidu Alias Kunhippa vs. ACFT the Honble ITAT Cochin Bench has decided the issue in ITR No. 256 (AT) 75 favouring the appellant and held that additions made on pure estimates are not justified. Nothing contrary-to this has so far been held by the Honble jurisdictional High Court. Coupled with this it is held in various case laws by the Honble courts that in a search and seizure case unless the material is found but contradicts the returns filed by the appellant, the additions cannot be made on mere estimations. This view has been taken by the Honble judicial forums in a number of case and some of the citations are as under: (i) Samrat Beer Bar vs. ACIT [75 ITD 19 (Pune)] (ii) RML Mahrotra vs. CIT (ITAT All Benches) (iii) Anjaneya BrickWorks vs. ACIT (74 TTJ Bang. 921) (iv) Poornima Beri vs. DCIT (264 ITR AT 54) (Asr.)
27. Hence respectfully following the above I have to hold that in the absence of any concrete material found during the course of search regarding excess money paid by the appellant for the properties mentioned in the order the additions made on this account are not justified and accordingly cannot be sustained.
22.7 The above factual finding of the CIT(A) has not been dispelled by the Revenue by placing any contra material / evidence before the Tribunal. Hence, we are of the view that the CIT(A) is justified in deleting the additions of Rs.1,31,55,837 for assessment year 2006-2007 and Rs.1,68,89,970 for assessment year 2007-2008. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 51
22.8 In view of the above, we decide the issue against the Revenue and in favour of the assessee. This ground of appeal of the Revenue is dismissed for both the assessment years. ITA No. 322/Coch/2016
23. This appeal filed by the Revenue is directed against the common order of the CIT(A)-IV, Kochi dated 31/03/2016 for the assessment years 2006-07.
23.1 The main ground of the Revenue is with regard to deletion of addition of Rs.1,42,86,087/- on account of unaccounted sales.
23.2 The facts of the case are similar to that considered by us in ITA No. 372/Coch/2016.
23.3 On appeal, the CIT(A) observed that his predecessor had already discussed the issue on facts as well as on the judicial pronouncements on identical facts and had held that additions made on this count are not justified and accordingly cannot be sustained. The CIT(A) did not find anything new brought out by the AO during the assessment proceedings which deserved to be analysed over and above what had been discussed and analysed by his predecessor. Accordingly, the addition made by the AO was held to be not sustainable and hence were deleted for 2006-07. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 52
23.4 Against this, the Revenue is in appeal before us. The Ld. DR submitted that the evidences unearthed during the search u/s. 132 hold good only for the year in which the search took place (i.e. AY 2008-09) and that the assessment u/s. 153a for the preceding years in the light of these evidences were based on presumptions and hence not maintainable. The Ld. DR relied on the jurisdictional High Court in the case of CIT vs. Hotel Meriya, cited supra in which court had held that when it is revealed in a search u/s. 132 that the assessee was following a particular method to conceal income, it is just and reasonable to presume that the same practice was followed by the assessee throughout the assessment years in the block period. The Ld. DR submitted that the income generated from the unaccounted sales had been invested in immovable properties worth more than Rs.6 crores which itself is a concrete evidence for the concealment of income for all the years. It was submitted that the Commercial Taxes Department had also detected the suppression of sales during an inspection of 5 business concerns of the group which showed that the assessee was making sales on estimate slips instead of sale bills. While remitting the issue back to the AO, the Tribunal in its Order No. 690 to 696/Coch/2010 and 23 to 43/Coch/2011 had observed that the CIT(A) in his first appellate order was not justified in deleting the addition for AY 2006-07 to 2007-08 on the ground that there was no material evidence for these years. For these reasons, it was prayed that the order of the CIT(A) may be set aside and that of the AO restored. I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 53
23.5 On the other hand, the Ld. AR relied on the order of the CIT(A).
23.6 We have heard the rival submissions and perused the record. We have heard the rival submissions and perused the record. Since we have confirmed the estimation of income for the assessment year 2008-09 in ITA No. 372/Coch/2016 by placing reliance on the judgment of the Travancore Logistics cited supra and Meriya Hotel cited supra, estimation of income for this assessment year on the basis of the seized records found during the search in the year relevant to the AY 2008-09 is justified as the assessee has followed uniform system of suppression of sales. This ground of appeal of the Revenue is allowed. Thus, the appeal of the Revenue in ITA No. 322/Coch/2016 is allowed.
24. In the result, the appeals filed by the assessee in ITA Nos. 371 & 372/Coch/2016 are dismissed and the appeals filed by the Revenue in ITA Nos. 341 to 344/Coch/2016 and 314 to 319 & 322/Coch/2016 are allowed. The appeals filed by the Revenue in ITA Nos. 320 & 321 & 324/Coch/2016 are dismissed. Order pronounced in the open Court on this 10 th October, 2018. sd/- sd/- GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 10 th October, 2018 I.T.A. Nos. 320 etc./C/2016 (Sunny Jacob Jewellers) 54 GJ Copy to:
1. Shri Sunny Jacob, Kalathil House, Mount Wardha, Kanjikuzhy, Kottayam.
2. Smt. Maggy Sunny, Kalathil House, Mount Wardha, Kanjikuzhy, Kottayam.
3. M/s. Sunny Jacob Jewellers and Wedding Centre, Chanthamukku, Kottarakara, Kollam.
4. M/s. Sunny Jacob 916 Jewellery, Fort Manor, Power House Road, Trivandrum.
5. M/s. Sunny Jacob Jewellers, CSI Commercial Complex, Sasthri Road, Kottayam.
6. The Income-tax Officer, Ward-4, Kottayam.
7. The Income-tax Officer, Ward-3, Kollam.
8. The Income-tax Officer, Ward-1(3), Trivandrum.
9. The Commissioner of Income-tax(Appeals)-IV, Kochi
10. The Pr. Commissioner of Income-tax, Kottayam.
11. The Commissioner of Income-tax, Central, Kochi.
12. D.R., I.T.A.T., Cochin Bench, Cochin.
13. Guard File. By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin
