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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
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.
Since the issues involved in these appeals are common, they were heard
together are being disposed of by this common and consolidated order.
Regarding assessee’s appeals in ITA Nos.580-583/Coch/2017, there was a
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.
We have gone through the contentions made by the assessee in the
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.
In the present case, we find that the assessee justified the delay only with
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.
In the result, all the other appeals of the assessee are dismissed as
unadmitted.
Now coming to the Revenue appeal in ITA No.60/Coch/2017. The Revenue
has raised the following grounds:
The CIT(A) erred in suggesting that extrapolation of the findings of the seized document be limited to 180 days and not the whole year (300 days as adopted by AO being working days).
If the seized material is correct with respect to a limited period, it is only logical to extend it to the whole year rather to just half a year.
The CIT(A) erred in relying on a submission of assessee based on case reported in 251 ITR 561 (AP) without ascertaining whether the facts & circumstances, nature of the seized materials of the assessee's case are identical/relevant to that of the case relied upon.
The CIT(A) erred in adopting figure of 72 days in penultimate para of his order when the actual figure is 67 days, being the number of days for which there is seized material.
The CITA) erred in overlooking the contents of page 4 of assessment order which reproduced assessee's own submission that number of days is 67.
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)].
The CIT(A) erred in passing order resulting in assessment of income below returned income overlooking the fact that the returned income as per return u/s 153C is Rs 61,03,520 and on implementation of CIT(A)'s order, income is Rs.55,95,160.
The decision of the CIT(A) is devoid of logic and is arbitrary.
The facts of the case is that the assessee is a partnership firm having three
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/-.
Against this, the assessee carried the matter in appeal before the CIT(A).
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.
Against this the revenue is in appeal before us.
We have heard the rival submissions and perused the record. This case
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.
In the Revenue’s appeal in ITA No.61/Coch/2017, the following grounds
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.
The observation of the CIT(A) in para 6.3 of the Appellate Order that the assessee filed its Return of Income in response to notice u/s 153C declaring a total Income of Rs. 12,96,930/-is not factually correct. The assessee did'nt file its return of Income either u/s 139(1) or 139(4). The original return of income declaring total income of Rs 1,78,46,830 filed by the assessee on 11.11.2013 is not even a belated return u/s 139(4). Even the Return of Income filed by the assessee in response to notice u/s 153C on 18.12.2013 disclosed income of Rs 1,78,46,830. The firm again revised its Return of Income on 06.02.2014 lowering the Total Income to Rs. 26,60,350. Since the Return of Income u/s 153C cannot be revised, the revised Return of Income filed is not valid. As there is no return of income disclosing an income of Rs 12,96,930 as stated by CIT(A), the decision of CIT(Appeals) is not based on correct facts and figures.
The observation of the CIT(A) that there are two sets of tally accounts is not correct. Three of the seized documents A-28 (pages 16 & 17/Profit & toss account), A-28 (pages 13 & 14/ Profit & Loss account) & A-ll (pages 25 & 26) reflected Rs. 76,68,96,714 as the figure of sales; also A-ll(page 29/ sales register for 01/04/2010 to 01/04/2011) showed the closing balance figure as Rs. 79,17,84,486/-. Further as per seized document A-12 (pages 8 to 37 - sales register from 0.04.2010 to 31.03.2011), grand total sales reflected amounted to Rs. 78,35,86,819/-. Thus when majority of the seized material showed the figure of sales ranging from Rs. 76.68 crores to Rs. 79.18 crores, the CIT(A) erred in averaging the sales to Rs 43.68 crores based on figures supplied by the assessee. There is .no documentary evidence in form of seized material showing sales of 8,41,81,607 and hence the same was wrongfully adopted.
The decision of the CIT(A) is devoid of logic and is arbitrary.
The facts of the case are that the assessee filed its return of income in
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.
Against this, the assessee carried the matter in appeal before the CIT(A).
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.
Against this the Revenue is in appeal before us.
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