K.K.SAKKARIYA (LATE) REP BY LEGAL HEIRS - K.S.SIMIL (SON) K.S.SIMI (DAUGHTER) & P.A.SAJEENA (WIFE),ERNAKULAM vs. CIT (A) NFAC , CHENNAI

आदेश / O R D E R

PER MANJUNATHA.G, ACCOUNTANT MEMBER:

This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-18, Chennai, dated 16.06.2022,

and pertains to assessment year 2012-13.

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1) The order of the Learned CIT(A) in sustaining the additions made by the Assessing Officer is bad and erroneous in law and against the principles of natural justice.

2) The Learned C1T(A) erred in not considering the written submissions and grounds of appeal in proper perspective.

3) The action of the CIT(A) is erroneous, for sustaining the addition of Rs.1,83,94,184/-, which is purely based on conjecture and surmises and without any proper basis.

4) The Learned C1T(A) failed to consider the fact that when the confessions made by the appellant was not based on any credible evidence and later retracted while filing returns of income, such confession do not serve any useful purpose.

5) Findings of the Learned CIT(A) in Paras-6 & 8, Page-5 of the order u/s.250 dt. 16/06/2022 is totally erroneous and unsustainable, for what was admitted, as per the instructions of the appellant and his heirs, was conditional to the extent that of giving the benefit of giving telescoping effect to the additions of cash seizure and 1.5% of income from the timber business. [letter dt. 07/07/2022 for certified copy of the order sheet entry has been sent by RPAD, which was served on 08/07/2022 and the certified copy obtained from C1T(A)-18 dt.15/07/2022 are attached]

And for the other reasons that may be adduced at the time of hearing, the appellant prays that this appeal be admitted, considered and justice rendered.

u/s.132A of the Income Tax Act, 1961 (in short “the Act") was conducted

on 23.12.2011 in the case of Mr.K.K.Sakkariya. Simultaneously, a survey

u/s.133A of the Act, was conducted in the business premises of the

assessee, on 02.01.2013. The circumstances lead to search and survey

was that the police officials of B-14 Police Station, Kuniyamuthur,

Coimbatore, seized an amount of Rs.98,52,100/- on 23.12.2011, from a

lorry, bearing Registration No.TN 38 BB 5389 and found that

Mr.Rajasekaran, who was in the said lorry, had possession of cash. During

the enquiry, it was noticed that Mr.Rajasekaran, an employee of

Mr.K.K.Sakkariya. The Police has passed on information to the Investigation

Wing of Income Tax Department and handed over cash seized. The Income

Tax Department conducted enquiry u/s.131A of the Act, with

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Mr.S.Tamilakaran who is also an employee of the assessee travelling with

Mr.Rajasekaran and during the course of investigation, they admitted that

cash was belongs to Mr.K.K.Sakkariya. Summons were issued u/s.131(1A)

of the Act, and statements were recorded on oath from the assessee on

28.12.2011. In response, he agreed to furnish details of cash seized within

two days. Thereafter, one more statement was recorded from the assessee

on 16.05.2012, where he had admitted entire amount is unexplained

income.

assessment proceedings, it was noticed that the information gathered

during the course of search, reveal that the assessee is into the business

of trading in timber. Further, survey conducted u/s.133A of the Act, also

reveals that there was cash transaction of Rs.61,31,39,468/- between

01.04.2011 & 31.03.2012. The AO after considering relevant details and

also taken note of submissions made by the assessee, treated transactions

recorded in impounded material, as business turnover of the assessee and

estimated 3% profit on total turnover and determined business profit at

Rs.1,83,94,184/-. The AO had also made additions towards cash seized

during the course of search amounting to Rs.98,52,100/- as unexplained

income assessable u/s.69A of the Act.

appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee challenged

the additions made by the AO towards estimated profit on turnover on the

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basis of impounded materials. The assessee had also made an alternative

submissions and requested for estimation of 1.5% commission on ply wood

trading as his income and further, requested for telescoping of cash seized

during the course of search and addition made u/s.69A of the Act, to income

estimated from his business. The Ld.CIT(A) after considering relevant

submissions of the assessee and also taken note of certain judicial

precedents, sustained additions made towards cash seized during the

course of search u/s.132A of the Act, as unexplained money of the assessee

assessable u/s.69A of the Act, on the ground that the assessee has agreed

for addition of cash seized during the course of search. In so far as income

assessed under the head ‘income from business’, the Ld.CIT(A) after

considering relevant facts, and also taken note of industry average profit in

line of this business, sustained addition made towards estimated profit on

total business turnover. Aggrieved by the order of the Ld.CIT(A), the

assessee is in appeal before us.

submitted that the assessee has argued for estimation of 1.5% commission

on total turnover from ply wood trading business and also telescoping of

additions made towards cash seized during the course of search to income

estimated from his business. The Ld.CIT(A) disregarding evidences filed

by the assessee, sustained estimation of profit from ply wood business and

also sustained addition made towards cash seizure. Therefore, he

submitted that a reasonable amount of income may be estimated from the

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unaccounted turnover from ply wood business and also telescoping may be

given to cash seized during the course of search, and addition made

u/s.69A of the Act.

of the Ld.CIT(A), submitted that the assessee has agreed for additions

towards cash seizure. Before the Ld.CIT(A), the assessee had also failed to

submit any evidences how 3% profit estimated by the AO is incorrect by

bringing on record some comparable cases of similar in nature. Therefore,

the Ld.CIT(A) has rightly upheld the additions made by the AO and their

orders should be upheld.

record and gone through orders of the authorities below. In so far as

addition made towards cash seizure, during the course of search u/s.132A

of the Act, we find that the assessee had agreed for addition towards cash

seizure as unexplained money assessable u/s.69A of the Act, before the AO

as well as the Ld.CIT(A). Further, the assessee could not explain nature

and source for cash seized during the course of search. Therefore, we are

of the considered view that there is no error in the reasons given by the

Ld.CIT(A) to sustain additions made by the AO towards cash seizure

u/s.69A of the Act, and thus, we reject the arguments of the assessee.

fact that during the course of survey proceedings u/s.133A of the Act,

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certain books of accounts were seized, as per which, the assessee is having

unaccounted turnover from his timber business, and same was not

disclosed for taxation. In fact, the assessee is not disputing quantum of

turnover computed by the AO. The only dispute is with regard to

percentage of profit adopted by the AO for estimation of income from

business. The AO has adopted 3% net profit on total turnover on the

ground that the average profit margin in line of this business is between

7% - 12%. The assessee claims that 3% net profit margin adopted by the

AO is on higher side. We find that although, the AO has adopted 3% net

profit margin for estimation of income, but no evidence has been brought

on record, including some comparable cases of similar in nature to justify

3% profit rate. Further, the assessee also could not file any evidences,

including some comparable cases of similar nature to prove that profit

estimated by the AO @3% on total turnover is at higher side. Since both

the parties failed to justify their case, to resolve dispute between the

parties, we are of the considered view that 2% net profit on total

unaccounted turnover would suffice to meet end of justice. Therefore,

considering the facts & circumstances of the case and also considering

reasons given by the AO and arguments advanced by the Ld.Counsel for

the assessee, we direct the AO to estimate 2% net profit on total turnover

determine on the basis of seized books of accounts and determined income

of the assessee. In so far as the arguments of the assessee for telescoping

of additions made u/s.69A of the Act, to income estimated on the basis of

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turn over, we find that the assessee could not establish link between cash

seized during the course of search and income generated from his business

activity. Unless, the assessee establishes with necessary evidences, cash

seized during the course of search, is earned out of his business activity,

the benefit of telescoping cannot be given. Therefore, we reject the

arguments of the assessee for telescoping benefit.

Order pronounced on the 19th day of May, 2023, in Chennai. Sd/- Sd/- (महावीर िसंह) (मंजूनाथा.जी) (MANJUNATHA.G) (MAHAVIR SINGH) उपा�� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER

चे�ई/Chennai, �दनांक/Dated: 19th May, 2023. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ� / Appellant 3. आयकर आयु� / CIT 5. गाड� फाईल / GF 2. ��यथ� / Respondent 4. िवभागीय �ितिनिध / DR