THE ACIT, TRICHUR vs. THE DCIT, TRICHUR

Per CHANDRA POOJARI, AM:

These appeals by the assessee as well as by the Revenue are directed against

the different orders of the CIT(A)-IV, Kochi and pertain to the assessment years

2009-10 to 2012-13.

together are being disposed of by this common and consolidated order.

delay of 217 days in filing these appeals. The assessee has filed condonation

petition accompanied by an affidavit for condonation of the delay. In the

condonation petition, it was stated that the assessee’s managing partner, Shri U.

Abdulla was in police custody for few months because of several cases filed

against him for non payment of amounts borrowed by him. After release from

police custody, he could sign the requisite documents and hence, there was

delay of 217 days in filing these appeals before this Tribunal.

condonation petition accompanied by the affidavit. It is noticed that the

assessee is a partnership firm, having more than two partners. The assessee

has not furnished the details of other partners who were running the business

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 along with Shri U. Abdulla. Further, there is nothing on record to indicate

whether the functions were assigned to other partners when he was not

available. The assessee has not specified when the managing partner was in

police custody and when he was released from police custody. There are no

specific details of his absence from his business. Unless it was specified that he

was in police custody for the entire period of 217 days which resulted in belated

filing of appeals, we are not in a position to condone this delay. The Supreme

Court in the case of Collector Land Acquisition vs. Mst. Katigi (167 ITR 471) held

that when substantial justice and technical consideration are pitted against each

other, the cause of substantial justice deserves to be preferred, for the other

side cannot claim to have a vested in injustice being done because of a non-

deliberate delay. In the case of Vedabai alias Vaijayanatabai Baburao Patil vs.

Shantaram Baburao Patil (253 ITR 798) 253 ITR 798, the Supreme Court held

that in exercising discretion u/s. 5 of the Limitation Act the courts should adopt a

pragmatic approach. A distinction must be made between a case where the delay

is inordinate and a case where the delay is of a few days. Whereas in the former

case, the consideration of prejudice to the other side will be a relevant factor so

the case calls for a more cautious approach but in the latter case no such

consideration may arise and as such a case deserves a liberal approach. No hard

and fast rule can be laid down in this regard. The court has to exercise the

discretion on the facts of each case keeping in mind that in construing the

expression ‘sufficient cause’, the principle of advancing substantial justice is of

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 prime importance. In the above cases, the Apex Court clearly laid down that a

distinction between a case where the delay is inordinate and a case where the

delay is of a few days. The law assists those who are vigilant, not those who

sleep over their rights. In the present case, though there was delay of 217 days,

the assessee was not able to specify the exact number of days the managing

partner was not in active business and in police custody. In the absence of

these details, the delay cannot be condoned simply because assessee’s case is

hard and calls for sympathy or merely out of benevolence to the party seeking

relief. In granting the indulgence and condoning the delay it must be proved

beyond the shadow of doubt that the assessee was diligent and was not guilty of

negligence whosoever. The sufficient cause within the contemplation of the

limitation provision must be a cause which is beyond the control of the party

invoking the aid of the provisions. The Supreme Court in the case of Ramlal vs.

Rewa Coalfields Ltd. AIR 1962 SC 361 held that the cause for the delay in filing

the appeal which by due care and attention could have been avoided cannot be

sufficient cause within the meaning of the limitation provision. Where no

negligence, nor inaction, or want of bona fide can be imputed to the assessee, a

liberal construction of the provisions has to be made in order to advance

substantial justice and seekers of justice must come with clean hands.

reference to the affidavit of managing partner, namely U Abdulla, represented by

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 Power of Attorney Holder Famid Urathodiyil. In the said affidavit it was stated

that he was in police custody without specifying the number of days in police

custody. Being so, there was no proper explanation given by the assessee for

the delay in filing the appeals. In our opinion, there is no good ad sufficient

reason to condone the delay. Accordingly we decline to condone the delay of

217 days in filing the appeals for all the assessment years.

unadmitted.

has raised the following grounds:

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 6. The CIT(A) ought to have considered the decision of the Hon'ble Kerala High Court in the case of C1T vs Hotel Mariya [332 ITR 537 (2011)].

partners, namely U Abdulla, U Abdul Nazar and U Faizal Babu and is engaged in

gold jeweler business at Round North, Thrissur. There was search action u/s.

132/133 of the I.T. Act on 09/06/2013 in the Avathar group cases which included

the business premises of the assessee at Thrissur and the residence of the

partners of Avathar Jewellers, Trichur. During the course of search u/s. 132 of

the Act, an amount of Rs.10,77,590/- in cash, gold Gross 52043.490 gms net

46248.310 was found. Out of this only an amount of Rs.10,00,000/- was seized

and no other unaccounted assets were seized. A notice u/s. 153C was issued to

the assessee on 2/12/2013 against which the assessee filed return on 9/11/2013

declaring income of Rs.61,03,520/-. Later on 05.02.2014, one more return was

filed declaring income of Rs.19,86,480/-. During the course of search, there was

seized material marked as Annexure CP/A-12 showing the number of days of

sales as 72 days at Rs.14,95,82,351/-. The Assessing Officer computed the

average sales per day on the basis of the seized material at Rs,20,77,533/- and

working out the sales for 300 days at Rs.62,35,59,796/-. This issue was put to

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 the assessee to which the assessee stated that the income be estimated only at

1.25% to 1.5% on the suppressed sales as requested by the assessee in the

case of Edappal Jewellery to consider the profit on the suppressed sales. At the

time of assessment, it was clarified by the assessee that sales found during the

search and seizure action was only for 67 days and the details were furnished as

follows:

Table II

Asst Yr. Sale details Average sale Estimated for Accounted Suppressed sales sales Available for For available days 300 days 2011-12 07 days Rs.19,08,797 Rs.57,26,39,100 Rs.2,00,38,990 Rs.55,26,00,110

8.1 However, the Assessing Officer overlooked it and estimated the income on

sales of Rs.57,26,39,100/- at 1.75% (Rs.19,08,797/-) (average sales per day x

300) which worked out at Rs.1,00,21,184/-.

Before the CIT(A), the Ld. AR submitted that the assessee filed a return of

income declaring a total income of Rs.1,21,06,220/- for AY 2009-10 whereas on

similar basis, the Assessing Officer estimated the income at Rs.85,08,386/-.

Similarly in AY 2010-11, the assessee declared an income of Rs.1,18,55,190/-

and the Assessing Officer estimated the income at Rs.92,19,688/-, thus in both

the years, the income declared by the assessee was higher than the income

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 estimated by the Assessing Officer. It was submitted that the Assessing Officer

had estimated income based on papers found during the course of search,

indicating out of book sales, only for a few days in a year, whereas the assessee

had disclosed all the income earned by the assessee during this period. It was

submitted that during the course of search, only a cash of Rs.10,77,590/- was

found out of which Rs.10,00,000/- was seized and no other unaccounted assets

were either found or seized. It was further contended that data for unaccounted

sales was found for 72 days, though it has been taken for 67 days by the

Assessing Officer. It was submitted that the Assessing Officer was not justified to

estimate the income for 300 days on this basis. Hence, it was submitted that the

since the papers found during the course of search proved suppression sales of

72 days only, the estimation of income may be done for a maximum of twice this

time and not more. The CIT(A), after considering the facts of the case and the

submissions of the assessee opined that income is to be estimated for half a

year, i.e., 180 days, on the basis of documents found for 72 days. Accordingly,

he directed the Assessing Officer to recompute the income for 180 days in place

of 300 days.

was covered by the provisions of section 153C of the Act consequent to search

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 u/s. 132/133 of the Act conducted on 09/06/2013 in the Avathar Jewellers Group

cases. Consequent to the search action, material seized marked as Annexure

CP/A-12 showed the sales for 67 days at Rs.12,78,89,402/-. The Assessing

Officer worked out the average sales per day at Rs.19,08,797/-. On this basis,

he estimated 300 days of sales for one year at Rs.57,26,39,100/- and applying

the net profit at 1.75%, the Assessing Officer estimated the income on it. Out of

this, the Assessing Officer estimated the profit at Rs.1,00,21,184/-. On appeal,

the CIT(A) was of the opinion that the income of the assessee could be

estimated for a maximum of twice of the suppression sales found during the

search action. Accordingly, he directed the Assessing Officer to estimate

suppression sales for only 180 days in place of 300 days and to recompute the

income of the assessee. This finding of the CIT(A) has no legal sanction. 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 is completely justified in

adopting those figures for the whole year, i.e. for 300 working days out of 365

days in a 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

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 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 allow this ground of the Revenue. The appeal of the Revenue is allowed.

have been raised:

1.The CIT(A) erred in passing order resulting in assessment of income below assessed income. We concede that there is error in lowering the Total Income to Rs. 1,54,51,351 by the Assessing Officer when the income returned by the assessee in its original return of income u/s 153C is Rs.

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 1,78,46,830. The CIT(A) should not have reduced Total Income below the Income determined by the Assessing Officer.

response to notice u/s. 153C declaring a total income of Rs.12,96,930/- which

was subsequently revised after two months declaring a total income of

Rs.26,60,351/-. The Assessing Officer assessed the income at Rs.1,54,51,351/-.

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 During the course of search conducted at the business premises of the assessee

firm on 09/06/2011, certain documents containing profit and loss accounts were

found and seized. Out of that documents, pages 25 and 26 of item A11 of

Annexure A, which contained a sales figure of Rs.77,25,67,453/- was utilized by

Assessing Officer for estimating the income of the assessee. Hence, the

Assessing Officer adopted 2% of the above sales as net profit of the assessee.

The CIT(A) observed that Assessing Officer should not adopt the highest sales

figure for estimating assessee’s income, when the veracity of data itself is not

authenticated. The CIT(A) adopted average of sales turnover from two P&L

accounts found during the search to meet the ends of justice. Accordingly, the

CIT(A) directed the Assessing Officer to take the average of sales turnover,

reflected in two P&L accounts and recompute/estimate the income of the

assessee.

16 We have heard the rival submissions and perused the record. In this case

the seized material marked as A-14 to Annexure A page 25–26 showed the total

turnover of Rs.78,61,13,658/-. At the time of assessment, it was noticed by the

Assessing Officer that the turnover was at Rs.79,17,84,486/- . The assessee was

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 asked to explain the difference between the turnover reflected in the seized

material and the audited accounts. The assessee has not given any reasonable

explanation to the query made by the Assessing Officer. The Assessing Officer

later considered the total turnover of the assessee at Rs.77,25,67,543/- after

deducting sales return of Rs.1,92,16,943/- from Rs.79,17,84,486/- and estimated

income at 2% of the gross turnover working out at Rs.1,54,51,351/-. The

CIT(A) considered the average of the turnover in audited books of account and

total turnover found in seized material and worked out the total turnover of the

assessee. In our opinion, audited turnover is part and parcel of total turnover

and there is no separate audited turnover so as to take the average of turnover

in audited books of account and total turnover found during the course of search

and seizure action. Accordingly, we vacate the findings of the CIT(A) and uphold

the order of the Assessing Officer wherein he had determined total income on

the basis of total turnover found during the course of search and seizure.

Hence, this ground of appeal of the Revenue is allowed. Thus, the appeal of the

Revenue is allowed.

I.T.A. Nos.580-583 /Coch/2017 & 60&61/Coch/2017 8. In the result, all the appeals filed by the assessee are dismissed and both

the appeals filed by the Revenue are allowed. Order pronounced in the open Court on this 27th September, 2018.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 27th September, 2018 GJ Copy to: 1. M/s. Avathar Jewellers, AIWA Towers, Edappal, Malappuram. 2. The Deputy Commissioner of Income-tax, Central Circle, Thrissur. 3. The Assistant Commissioner of Income-tax, Central Circle, Thrissur. 4. The Commissioner of Income-tax(Appeals), Thrissur. 5. The Commissioner of Income-tax, Central, Kochi. 6. D.R., I.T.A.T., Cochin Bench, Cochin. 7. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin