ACIT, Trivandrum v. Smt A. R Lilly Kutty, Trivandrum

ITA 171/COCH/2006 | 2002-2003
Pronouncement Date: 16-12-2011

Appeal Details

RSA Number 17121914 RSA 2006
Assessee PAN ACGPA5142H
Bench Cochin
Appeal Number ITA 171/COCH/2006
Duration Of Justice 5 year(s) 9 month(s) 14 day(s)
Appellant ACIT, Trivandrum
Respondent Smt A. R Lilly Kutty, Trivandrum
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2011
Appeal Filed By Department
Bench Allotted DB
Tribunal Order Date 16-12-2011
Date Of Final Hearing 12-10-2011
Next Hearing Date 12-10-2011
Assessment Year 2002-2003
Appeal Filed On 03-03-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE S/SHRI N.R.S.GANESAN JM AND SANJAY AROR A AM I.T.A NOS. 624/COCH/2005 AND 171/COCH/2006 ASSESSMENT YEARS: 2001-02 & 2002-03 THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE TRIVANDRUM. VS. SMT. A.R.LILLY KUTTY MALACKAL HOUSE PEYAD TRIVANDRUM. [PAN:ACGPA 5142H] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY: MS. S. VIJAYAPRABHA DR ASSESSEE BY: SHRI R.KRISHNA IYER CA-AR DATE OF HEARING 12/10/2011 DATE OF PRONOUNCEMENT 16/12/2011 O R D E R PER SANJAY ARORA AM: THESE ARE A SET OF TWO APPEALS BY THE REVENUE FOR TWO CONSECUTIVE ASSESSMENT YEARS (A.YS.) BEING 2001-02 AND 2002-03 ARISING O UT OF SEPARATE ORDERS I.E. DATED 23.02.2005 AND 13.10.2005 RESPECTIVELY BY THE COMM ISSIONER OF INCOME-TAX (APPEALS)- I KOCHI (CIT(A) FOR SHORT) PARTLY DELETING THE ADDITION MADE BY THE ASSESSING OFFICER (A.O.) PER ASSESSMENTS U/S. 143(3) OF THE INCOME-TA X ACT 1961 ('THE ACT' HEREINAFTER) FOR THE TWO CONSECUTIVE YEARS DATED 31/3/2004 & 04/3/20 05 RESPECTIVELY. AS THE APPEALS RAISE COMMON ISSUES THEY WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY A COMMON CONSOLIDATED ORDER. A.Y. 2001-02 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THERE WA S A SEARCH U/S. 132 OF THE ACT AT THE BUSINESS AS WELL AS THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 11.10.2000. THE BLOCK ASSESSMENT FOR THE PERIOD 01-04-1990 TO 18-10-2000 WAS COMPLETED ON 31-10-2002 I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 2 DETERMINING THE TOTAL INCOME AT ` 135.75 LAKHS IN RESPECT OF WHICH THE ASSESSEE PREF ERRED TO MOVE THE HONBLE SETTLEMENT COMMISSION CHENNAI. THE ASSESSMENT COVERS THE PERIOD 19-10-2000 ONWARDS AS WELL AS THE INCOME FOR THE P RIOR PERIOD (01-04-2000 TO 18-10- 2000) I.E. TO THE EXTENT NOT COVERED BY THE BLOCK ASSESSMENT. AMONG THE SEVERAL ADDITIONS MADE THEREIN WAS ONE IN RESPECT OF PROFIT ON SUPPRESSED TURNOVER. THE SAME CONSTITUTES THE SOLE ISSUE ARISING FOR ADJUDICATION IN THE INSTANT APPEAL; THE REVENUE INFERRING CONTINUATION OF SUPPRESSION AND TOWARD W HICH AN ADDITION FOR ` 16 51 031/- STANDS MADE BY THE ASSESSING OFFICER (AO). THE SAM E HAVING BEEN REDUCED BY THE LD. CIT(A) TO AS STATED BY THE ASSESSEE ` 80 659/- THE REVENUE IS IN APPEAL. THE SEARCH YIELDED SPECIFIC EVIDENCES WITH REGARD TO UNACCOUNT ED PURCHASES AND SALES IN RESPECT OF HER TIMBER BUSINESS BY THE ASSESSEE A PROPRIETOR O F THREE FIRMS I.E. MALACKAL FINANCIERS; MALACKAL SAW MILLS; AND MANJU L.JOHN TIMBERS - IN T HE BUSINESS OF FINANCE SAW MILLS AND TIMBER RESPECTIVELY AND WHICH WERE BEING MANAG ED BY HER HUSBAND SHRI JOHN FRANKLIN. IT WAS ADMITTED BY HIM AS WELL AS BY THE ASSESSEE PER SEC. 132(4) STATEMENTS THAT ONLY 50% OF THE ACTUAL SALES WERE BEING ACCOUN TED FOR IN THE BOOKS OF ACCOUNT. ACCORDINGLY THE BLOCK ASSESSMENT WAS COMPLETED BY DETERMINING THE UNACCOUNTED SALES AT 100% OF THE ACCOUNTED/DISCLOSED SALES AND THE G ROSS PROFIT WORKED OUT AT THE RATE OF 25% OF SUCH UNACCOUNTED SALES. THE AOS INFERENCE O F CONTINUED SUPPRESSION IN SALES I.E. FOR THE LATTER PART (AFTER 18.10.2000) OBJEC TED TO BY THE ASSESSEE ON THE GROUND OF ABSENCE OF ANY EVIDENCE AS TO SUPPRESSION (FOR THE SAID PERIOD) BEING FOUND IN SEARCH SO THAT THERE WAS NO BASIS FOR THE SAME WAS REJECTED BY HIM WITH REFERENCE TO SOME MATERIALS. THE LD. CIT(A) IN APPEAL FOUND MERIT I N THE INFERENCE AS TO SUPPRESSION ON THE BASIS OF MATERIALS FOR THE PERIOD OF ASSESSMENT TO WARD WHICH INFERENCE THE AO HAD ALSO RELIED ON THE DECISIONS BY THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF V.A. AUGUSTINE & COMPANY VS. STATE OF KERALA (IN TRC NO. 31 OF 1973) AND P.P. VARGHESE VS . STATE OF KERALA 27 STC 459 (KER.) ALSO QUOTING FROM THE SAME AT PAGE 4 OF HIS ORDER AS ALSO FROM THE DECISION BY THE APEX COURT IN THE CASE OF STATE OF KERALA VS. C. VELLUKUTTY (1966) 60 ITR 239 (SC). HOWEVER WITH REGARD TO THE ESTIMA TION OF THE SUPPRESSED TURN- OVER HE DIRECTED THE SAME FOR BEING ESTIMATED AT 6 (SIX) TIMES THE SUPPRESSED TURNOVER DETECTED DURING THE YEAR AS EVIDENCED BY SALE SLIPS AND THE ACCOMPANYING UN-ENCASHED I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 3 CHEQUES WHICH WERE NOT ACCOUNTED FOR I.E. OTHER THAN THAT ACCOUNTED FOR IN BLOCK ASSESSMENT. FURTHER WITH REGARD TO THE GROSS PROFI T RATE HE RESTRICTED THE SAME TO 16% OF SALES I.E. AS DECIDED BY HIM IN RESPECT OF THE BL OCK ASSESSMENT. AGGRIEVED THE REVENUE IS IN APPEAL. 4.1 BEFORE US IT WAS SUBMITTED BY THE LD. DR THAT THE ASSESSEES APPLICATION TO THE HONBLE SETTLEMENT COMMISSION STOOD NOT ADMITTED BY IT. THE ASSESSEE HAD ADMITTED TO THE CONCEALED TURNOVER INCLUDING ITS RATIO (WITH R EFERENCE TO THE BOOK SALES) DURING SEARCH VIDE STATEMENTS U/S. 132(4) OF THE ACT WHIC H THEREFORE BINDS HER EVEN AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F V. KUNHAMBU & SONS VS. CIT 219 ITR 235 (KER.). EVEN OTHERWISE IT IS TRITE LAW THA T ADMISSION IS THE BEST FORM OF EVIDENCE SO THAT WHERE NOT SHOWN TO BE INFIRM OR MISTAKEN T HE SAME WOULD HOLD CITING THE DECISION BY THE APEX COURT IN THE CASE OF NARAYAN BHAGWANT RAO GOSAVIBALAJIWALE V. GOPAL VINAYAK GOSAVI & OTHRS . REPORTED AT AIR 1960 SC 100. 4.2 THE LD. AR THE ASSESSEES COUNSEL REITERATED THE ASSESSEES CASE I.E. THAT NO EVIDENCE IN RESPECT OF SUPPRESSION OF SALES STOOD F OUND FOR THE POST SEARCH PERIOD. THERE WAS ADMITTEDLY NO ADMISSION IN RESPECT OF THE POST SEARCH PERIOD. ON A QUERY BY THE BENCH AS TO THE FATE OF THE CORRESPONDING ADDITION IN THE ASSESSEES BLOCK ASSESSMENT IT WAS CLARIFIED BY HIM THAT THE SAME STOOD CONFIRMED BY THE TRIBUNAL VIDE ITS ORDER DATED 22-7-2009 (IN IT(S&S) NO. 101(COCH)2005 / COPY PLAC ED ON RECORD ALONG WITH THE WRITTEN NOTES). 5. WE HAVE HEARD THE PARTIES AND PERUSED TH E MATERIALS ON RECORD. 5.1 THE LD. CIT(A) HAVING CONFIRMED THE SUPPRESSION OF SALES IN PRINCIPLE THE ONLY ISSUE THAT THEREFORE SURVIVES; THE ASSESSEE BEING NOT IN APPEAL IS THE QUANTIFICATION OF THE SAID SUPPRESSION AS WELL AS THE ESTIMATION OF THE GROSS PROFIT EARNED THEREBY. WHILE THE REVENUE HAS PRESUMED THE SUPPRESSION AT THE SAME RA TE I.E. AS OBTAINING UP TO 18.10.2000 THE ASSESSEE RELIES ON THE ABSENCE OF A NY MATERIAL IN RELATION TO THE PERIOD SUBSEQUENT TO 18.10.2000. IN OUR VIEW THE ACTUAL S ALES AND THE CONCOMITANT SUPPRESSION I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 4 HAVING BEEN CONFIRMED FOR A CONTINUOUS PERIOD OF AL MOST A DECADE (THE MATERIALS FOUND EXTENDING UP TO NOVEMBER 1992) BY THE TRIBUNAL TH E FINAL FACT-FINDING AUTHORITY THE QUANTUM OF SUPPRESSION IF ANY FOR THE SUBSEQUENT PERIOD (POST SEARCH) HAS NECESSARILY TO BE BASED ON THE ACTUAL SALES AS CONFIRMED FOR THE E ARLIER PERIOD. THIS IS AS THERE IS NO REASON TO BELIEVE THAT THE ACTUAL SALES WOULD NOT C ONTINUE AT LEAST AT THE SAME RATE. WHAT IS RELEVANT WE MAY CLARIFY IS NOT THE SUPPRESSION PER SE BUT THE ACTUAL SALES AS CONFIRMED FOR THE BLOCK PERIOD INCLUDING ITS YEAR-WISE BREAK UP ALSO REVEALING A TREND THEREIN WITH THE SUPPRESSION BEING A DERIVED FIGURE I.E. IN EX CESS OF THAT ACCOUNTED FOR SO THAT IT IS TO BE ARRIVED AT BY DEDUCTING THE BOOK SALES THEREFROM . THAT IS THE EXCESS OF SUCH (ACTUAL) SALES WORKED PROPORTIONATELY FOR THE RELEVANT PERI OD (19/10/2000 TO 31/3/2001) OVER THE BOOK SALES FOR THE SAME WOULD YIELD THE EXTENT OF SUPPRESSION. IN OTHER WORDS THERE CAN BE NO PRESUMPTION AS TO THE EXTENT OF THE SAID SUPP RESSION DETERMINED BY THE AO AT 100% OF THE BOOK SALES BUT COULD ONLY BE WITH REFE RENCE TO THE SALES AS CONFIRMED BY THE TRIBUNAL WHATEVER ITS RATIO (W.R.T. TO BOOK SALES) MAY WORK OUT TO BE. IN FACT HE (THE AO) DOES NOT EVEN BASE HIS ESTIMATION OF SUPPRESSION ON THE BOOK SALES FOR THE RELEVANT PERIOD (19/10/2000 TO 31/3/2001) BUT ON THAT FOR THE ENTI RE YEAR DEDUCTING FROM THE TOTAL TURNOVER SO ARRIVED THAT AS ASSESSED IN BLOCK ASSE SSMENT FOR THE CURRENT YEAR AND WHICH IS AGAIN NOT THE CORRECT METHOD PARTICULARLY WHEN BOOK SALES ARE AVAILABLE. FURTHER OUR FOREGOING FINDING/S AS TO THE EXTENT OF SUPPRESSION IS STATED ONLY AS AN INFERENTIAL FACT IN THE ABSENCE OF ANY OTHER MATER IAL OR INFORMATION AVAILABLE WITH THE ASSESSING AUTHORITY CONTRADICTING OR MODIFYING THE SAME; THERE BEING NO BASIS TO PRESUME THAT THE MODUS OPERANDI OF BOOKING 50% OF THE ACTUAL SALES AS FOLLOWED IN THE PAST CONTINUED AS SUCH AFTER THE SEARCH AS WELL. HOWEVER AS AFORE-STATED AGAIN IN THE ABSENCE OF ANYTHING TO THE CONTRARY THE PRESUMPTION OF CON TINUING TO OPERATE AT THE SAME LEVEL OF ECONOMIC ACTIVITY WOULD BE NATURAL AND STRONG. OF C OURSE IT IS OPEN TO THE ASSESSEE TO EXHIBIT THE CIRCUMSTANCE/S FOR A DECLINE IN SALES BEGINNING IMMEDIATELY AFTER THE SEARCH PERIOD (OR EVEN AFTER A LAPSE OF TIME) DUE TO SOME SUPERVENING CIRCUMSTANCE/S AS FOR EXAMPLE DECLINE IN PRODUCTION (ALONG WITH REASONS THEREFOR) SEVERING OF BUSINESS RELATIONSHIP WITH CUSTOMERS TO WHOM THE UNACCOUNTED SALES WERE BEING MADE (AS WHERE THE CUSTOMERS FELL IN TWO DISTINCT CATEGORIES) BOO KING OF SALES AT FULL PRICE/S ET. AL. I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 5 HOWEVER DE HORS ANY SUCH MATERIALS OR EXPLANATIONS DULY SUBSTANTI ATED IT IS DIFFICULT TO FAULT THE PRESUMPTION OF (ACTUAL) SALES AT THE RATE AT WHICH THESE WERE CONFIRMED FOR IMMEDIATELY PRECEDING PERIOD. ALSO VALID WOULD BE C ONTENTION OF (HENCEFORTH) ACCOUNTING FOR A HIGHER PROPORTION (EXTENDING UP TO 100%) OF I TS SALES IN TERMS OF VOLUME AND PRICES WHICH (BOOK SALES) WOULD IN ANY CASE HAVE TO BE DED UCTED IN COMPUTING THE SUPPRESSION. THIS IS AS HIGHER SALES WOULD INDICATE THE EXTENT T O WHICH THE ASSESSEE MAY HAVE ACCOUNTED FOR THE ERSTWHILE UNACCOUNTED COMPONENT. THE ASSESSEE COULD THUS EASILY DEMONSTRATE SUCH (OR SUCH-LIKE) CIRCUMSTANCES LEAD ING TO THE INFERENCE OF A LOWER OR EVEN NIL SUPPRESSION FOR THE POST SEARCH PERIOD. EQUALLY IT IS PERMISSIBLE FOR THE AO TO INFER HIGHER ACTUAL (TOTAL) SALES AS WHERE THE SAME EXHI BITS A PROGRESSIVE TREND AT LEAST OVER THE PAST 2 TO 3 YEARS EITHER ON ACCOUNT OF INCREASE IN VOLUME OR PRICES OR BOTH JUSTIFYING THE INFERENCE OF CONTINUATION OF THE SAID TREND. CONTINUING FURTHER IT NEEDS TO BE APPREC IATED THAT THE MATERIALS FOUND DURING SEARCH WOULD RELATE ONLY TO OR PRIMARILY TO THE P RE-SEARCH PERIOD WHILE WHAT IS RELEVANT HERE IS ESSENTIALLY THE SUPPRESSION AS OBTAINING FO R THE POST-SEARCH PERIOD SO THAT IT WOULD NOT BE CORRECT TO BASE IT ON THE BASIS OF THE MATER IALS FOUND DURING SEARCH AS HELD BY THE LD. CIT(A). THE EXISTENCE OF SOME SLIPS AND CHEQUES FOR THE SAID PERIOD IF SO IS RELEVANT ONLY TO THE EXTENT THAT THEY VALIDATE THE INFERENCE OF CONTINUATION OF SUPPRESSION AND MAY BY ITSELF NOT BE DETERMINATIVE OF ITS EXTENT. THE B ASIS AS ADOPTED BY THE LD. CIT(A) IS FOR THE REASONS AFORE-STATED UNACCEPTABLE. THE POWERS OF THE ASSESSING AUTHORITY IN T HE MATTER OF ASSESSMENT ARE PLENARY AND ARE ONLY CIRCUMSCRIBED BY THE CONDITION OF BEING BA SED ON RELEVANT MATERIALS AND THE COGENCY OF THE REASONS UNDERLYING THE INFERENCES DR AWN. NO SUCH MATERIALS HOWEVER WE FIND HAVE BEEN EITHER RELIED UPON BY THE AO OR FUR NISHED BY THE ASSESSEE TOWARD ITS CASE. THE MATTER AND THE ISSUE INVOLVED IS PURELY FACTUAL AND THERE IS NO SCOPE FOR A MECHANICAL APPLICATION OF ANY PRE-DETERMINED FORMUL A OR NOTION AS WE FIND TO BE THE CASE BOTH BY THE AO AS WELL AS THE FIRST APPELLATE AUTHORITY WHO HAS APPLIED THE SUPPRESSION RATIO AS FOUND IN THE CASE OF RAJNIK & CO. VS. ACIT 251 ITR 561 (A.P.) MISCONSTRUING ITS RATIO. I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 6 5.2 WITH REGARD TO THE SECOND ASPECT I.E. ESTIMAT ION OF GROSS PROFIT RATE AT 16% THE SAME STANDS UPHELD BY THE TRIBUNAL FOR THE BLOCK PE RIOD INCLUDING A PART (FIRST HALF) OF THE CURRENT YEAR. THE ACCOUNTED AND UNACCOUNTED TURNOVE R FORMING PART OF THE SAME (TIMBER) BUSINESS THERE IS NO REASON FOR ADOPTION OF ANY OT HER RATE OF GROSS PROFIT PARTICULARLY IN THE ABSENCE OF ANY MATERIAL TO THE CONTRARY. IN FAC T THE AO HIMSELF ADOPTS THE SAME AS THE BASIS THOUGH AT THE RATE AS ASSESSED BY HIM AND W HICH STANDS SUBSEQUENTLY CONFIRMED AT A LOWER RATE OF 16%. NO OTHER BASIS FOR A HIGHER GR OSS PROFIT RATE OR INFIRMITY IN THE ADOPTION OF THE RATE AS CONFIRMED STANDS ADVANCED BY THE REVENUE. 5.3 WE THEREFORE WHILE SUSTAINING THE GROSS PR OFIT RATE AS CONFIRMED BY THE LD. CIT(A) (I.E. AT 16%) RESTORE THE MATTER ON THE QUANTUM O F SUPPRESSION (OF SALES) BACK TO THE FILE OF THE AO WITH A DIRECTION TO BASE HIS ESTIMATION BY QUANTIFYING THE SAME ON SOME DEFINITE OBJECTIVE CRITERIA CO-RELATING IT WITH T HE TOTAL ACTUAL SALES AS CONFIRMED FOR THE BLOCK PERIOD INCLUDING THE TREND/S THEREIN; THE SA LES FOR THE RECENT PERIODS BEING MORE RELEVANT ON ACCOUNT OF PROXIMITY IN TIME. THE ASSES SEE SHALL BE ALLOWED PROPER OPPORTUNITY OF BEING HEARD AND PRESENTING ITS CASE WITH THE AO CLARIFYING HIS STAND IN THE MATTER PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. A.Y. 2002-03 6. COMING TO THIS YEAR (A.Y. 2002-03) THE AO HA S RESTRICTED HIS ESTIMATION OF SUPPRESSION TO 50% OF THE BOOK SALES. THE LD. CIT( A) IN APPEAL FOUND THAT THERE WAS NO MATERIAL TO EVIDENCE SUPPRESSION SO THAT IN ITS AB SENCE THE AOS INFERENCE AS TO IT WAS MISPLACED. THE AOS ADVERTENCE TO A TRANSACTION/REC EIPT OF ` 75 000/- FROM ONE M/S. HEERA CONSTRUCTION TO INFER SUPPRESSION FOR THIS YE AR WAS FOUND BY HIM AS NOT TENABLE ON FACTS. IN ANY CASE AN ISOLATED TRANSACTION WOULD NOT ESTABLISH A PATTERN AND WHICH ONLY WOULD AUTHORIZE THE ASSESSING AUTHORITY TO PROJECT OR ESTIMATE THE SALES FOR THE OTHER PERIODS AS WELL. ALSO THE BOOK SALES FOR THE CURRE NT YEAR (AT ` 149.37 LACS) WERE HIGHER THAN THAT FOR THE IMMEDIATELY PRECEDING YEAR (AT ` 116.10 LACS) BY 28.66%. ACCORDINGLY HE DELETED THE ADDITION. I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 7 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. 7.1 OUR OBSERVATIONS AND FINDINGS FOR A.Y. 2001 -02 ARE EQUALLY VALID AND APPLICABLE IN RELATION TO THE ASSESSMENT FOR A.Y. 2002-03 AS WELL . AS AFORE-NOTED WHILE DISCUSSING THE REVENUES APPEAL FOR A.Y. 2001-02 THE ACTUAL SALES AS FOUND AND CONFIRMED FOR THE IMMEDIATELY PRECEDING YEARS IS BY ITSELF A PROOF OF SUPPRESSION AS WELL AS INDICATIVE OF ITS EXTENT WHICH (EXTENT) CAN ONLY BE DETERMINED AFTER REDUCING THE BOOK SALES THERE-FROM. BOTH THE ACTUAL AND THE BOOK SALES BEING NOT CONSTA NT BUT VARIABLE FROM YEAR TO YEAR NO FIXED PROPORTION COULD BE ADOPTED WHICH IF SO WA S OPERATIVE ONLY FOR THE BLOCK PERIOD. THIS IS AS THE ACTUAL SALES FOR A LONG PERIOD OF TI ME WOULD ITSELF FACTUALLY ESTABLISH THE TREND OR PATTERN WHICH THE LD. CIT(A) SPEAKS OF W ITH THE SUPPRESSION BEING ONLY CONSEQUENTIAL I.E. TO THE EXTENT NOT BOOKED IN AC COUNTS. THAT IS EVEN AS THE ASSESSEE MAY NOT BE STRICTLY FOLLOWING THE MODUS OPERANDI OF ACCOUNTING FOR ONLY 50% OF ITS ACTUAL SALES AS IN THE PAST WHICH WE OBSERVE TO BE NOT T HE REVENUES CASE AS WELL THE TOTAL (ACTUAL) SALES AS DETERMINED WOULD REFLECT BOTH A T REND AS WELL AS THE LEVEL OF OPERATIONAL ACTIVITY (FOR WHICH AN AVERAGE ACTUAL SALE FOR A PE RIOD OF 2 TO 3 YEARS COULD BE CONSIDERED REASONABLE). THE ACTUAL TURNOVER OF THE BUSINESS EX HIBITS A LEVEL OF ECONOMIC ACTIVITY PARTICULARLY WHERE IT IS ESTABLISHED ON A REGULAR B ASIS. THE SAME IT MAY BE APPRECIATED INVOLVES UNACCOUNTED WORKING CAPITAL (IF NOT FIXED CAPITAL AS WELL) IN THE FORM OF CASH STOCK-IN-TRADE RECEIVABLES FROM CUSTOMERS IF NOT CREDITORS AS WELL. UNACCOUNTED BUSINESS EQUALLY ENTAILS FACTORS OF PRODUCTION AS WELL AS I NCURRING COSTS IN THEIR RESPECT I.E. IS IMBUED WITH THE WHOLE (AND THE SAME) PARAPHERNALIA AND OPERATIONAL SET UP. IT IS MOTIVATED BY STRONG ECONOMIC FORCES YIELDING SEVER AL `BENEFITS AS BY WAY OF OR IN THE FORM OF A LOWER INCIDENCE OF BOTH DIRECT AND INDIRE CT TAX. TO CONTEND THEREFORE THAT THERE IS NO SUPPRESSION WHERE IT IS OTHERWISE INFERABLE ON THE BASIS OF THE ACTUAL SALES OR ITS LEVEL WOULD IMPLY THAT THE ENTIRE SET UP HAS SUDDE NLY DRIED UP OR EVAPORATED IN THIN AIR. THAT IS NOT TO SAY THAT THERE COULD BE NO DECLINE I N THE SAME BUT ONLY THAT IT WOULD BE SO ONLY ON ACCOUNT OF SOME ECONOMIC FACTORS/REASONS AN D FURTHER CORROBORATED BY BOOK FIGURES/RESULTS. I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 8 7.2 THE AO CONSIDERING THE APPRECIABLE INCREAS E OF 28.66% IN THE RECORDED SALES LOWERED THE ESTIMATION OF SUPPRESSION FROM 100% TO 50% OF THE BOOK SALES DRAWING SUPPORT FROM AN UNRECORDED TRANSACTION OF ` 75 000/-. AS EXPLAINED BY THE APEX COURT IN THE CASE OF STATE OF KERALA VS. C.VELLUKUTTY (SUPRA) JUDGMENT IS A FACULTY TO DECIDE MATTERS WITH WISDOM TRULY AND LEGALLY. IT DOES NOT DEPEND UPON THE ARBITRARY CAPRICE OF THE JUDGE BUT ON THE SETTLED AND INVARIABLE PRINCI PLES OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESS WORK IN A BEST JUDGMENT ASSESSMENT IT SHOULD NOT BE A WILD ONE BUT SHOULD HAVE A REASONABLE NEXUS WITH THE AVAILABLE M ATERIAL AND CIRCUMSTANCES OF EACH CASE. THOUGH RENDERED IN THE CONTEXT OF A BEST JUDG MENT ASSESSMENT THE SAME (THE SAID JUDGMENT) IS EQUALLY VALID FOR A SECTION 143(3) ASS ESSMENT AS WELL. THE AMBIT OF AN APPELLATE AUTHORITY UNDER REVIEW PROCEEDINGS IS TH EREFORE TO EXAMINE BOTH THE BASIS AS WELL AS THE REASONABILITY OF SUCH AN ESTIMATE. IN OUR VIEW THERE IS ON TAKING NOTE AND CONSIDERATION OF THE ENTIRETY OF THE FACTS AND CIRC UMSTANCES OF THE CASE SUFFICIENT BASIS TO SUPPORT THE INFERENCE OF SUPPRESSION THOUGH ITS EX TENT WOULD REQUIRE AN EVALUATION WITH REFERENCE TO THE ACTUAL SALES I.E. AS CONFIRMED PARTICULARLY FOR THE IMMEDIATE PAST AND ALSO A TREND IF ANY EXHIBITED THEREBY. ACCORDINGL Y WE ONLY CONSIDER IT FIT AND PROPER AND IN THE INTEREST OF JUSTICE TO REMIT THE MATTER BACK TO THE FILE OF THE AO FOR A CONSIDERING AFRESH ON MERITS THE EXTENT OF SUPPRESSION PER A SP EAKING ORDER AND AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING TO STA TE ITS CASE INCLUDING PLACING ANY MATERIAL SOUGHT TO BE RELIED UPON IN SUPPORT ON REC ORD. WE DECIDE ACCORDINGLY. 8. IN THE RESULT THE REVENUES APPEAL FOR AY 2 001-02 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT FOR AY 2002-03 IS ALLOWED FOR ST ATISTICAL PURPOSES. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 16TH DECEMBER 2011 GJ COPY TO: 1. SMT. A.R.LILLY KUTTY MALACKAL HOUSE PEYAD TRI VANDRUM. I.T.A. NOS.624/COCH/2005 & 171/COCH/2006 ASSTT. CIT V. A.R. LILLY KUTTY TRIVANDRUM 9 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRA L CIRCLE TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I KOCH I 4. THE COMMISSIONER OF INCOME-TAX CENTRAL KOCHI T RIVANDRUM. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE .