M/s Theyyampattil Jewellery, Kottakkal v. DCIT, Calicut

ITSSA 102/COCH/2005 | misc
Pronouncement Date: 11-08-2010

Appeal Details

RSA Number 10221916 RSA 2005
Assessee PAN AABFT9164C
Bench Cochin
Appeal Number ITSSA 102/COCH/2005
Duration Of Justice 5 year(s) 2 month(s) 22 day(s)
Appellant M/s Theyyampattil Jewellery, Kottakkal
Respondent DCIT, Calicut
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 11-08-2010
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 11-08-2010
Date Of Final Hearing 04-08-2010
Next Hearing Date 04-08-2010
Assessment Year misc
Appeal Filed On 20-05-2005
Judgment Text
IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH COCHIN BEFORE S/SHRI T.R.SOOD AM AND N.VIJAYAKUM ARAN JM I.T(SS)A NOS. 133 134 & 135 /COCH/2005 BLOCK ASSESSMENT YEAR : 1996-97 TO 2002-03 THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE CALICUT VS. 1. M/S. THEYYAMPATTIL JEWELLERY KOTTAKKAL. [PAN: AABFT 9164C] 2. M/S. THEYYAMPPATTIL JEWELLERY TIRUR. [PAN: AABFT 3609D] 3. M/S. THEYYAMPPATIL JEWELLERY PUTHANATHANI [PAN: AABTFT 5179G] (REVENUE -APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI S.C.SONKAR CIT-DR ASSESSEE BY SHRI C.B.M.WARRIER CA I.T(SS)A NOS. 102 103 & 104 /COCH/2005 BLOCK ASSESSMENT YEAR : 1996-97 TO 2002-03 1. M/S. THEYYAMPATTIL JEWELLERY MALAPPURAM (PUTHANATHANI) [PAN: AABTFT 5179G] 2.M/S. THEYYAMPPATTIL JEWELLERY TIRUR [PAN: AABFT 3609D] 3. M/S. THEYYAMPPATIL JEWELLERY KOTTAKKAL [PAN: AABFT 9164C] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE CALICUT (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI C.B.M.WARRIER CA REVENUE BY SHRI S.C.SONKAR CIT-DR O R D E R IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 2 PER T.R.SOOD AM: IN THIS GROUP OF CASES SOME OF THE ISSUES WERE COM MON THEREFORE THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2. FIRST WE WILL TAKE UP THE REVENUE APPEALS IN IT( SS)A NOS. 133 134 & 135/COCH. IN THESE APPEALS THE REVENUE HAS RAISED COMMON ISSUES. THE FIRST ISSUE RAISED IS REGARDING DELETION OF ADDITION ON ACCOUNT OF EXCESS GOLD FOUND DURING THE SEARCH. 3. THE BRIEF FACTS ARE THAT SOME GOLD WAS FOUND DUR ING THE SEARCH WHICH WAS IN EXCESS OF THE STOCK CONTAINED IN THE BOOKS OF ACCOUNTS. IN THE S TATEMENT RECORDED U/S. 132(4) THE MANAGER OF THE ASSESSEE ADMITTED GOLD WEIGHING 4798.609 GMS. (IN THE CASE OF THEYAMPATTIL JEWELLERY TIRUR) HOWEVER LATER ON DURING THE ASSESSMENT PROC EEDINGS IT WAS CLAIMED THAT THERE WAS PURCHASE OF JEWELLERY FROM M/S. SANCHETTY JEWELLERS (P) LTD. MUMBAI ON 17.1.2002 AND IF THE SAME WAS ACCOUNTED FOR THERE WOULD BE NO EXCESS ST OCK. THE REVENUE HAD CONDUCTED A SURVEY U/S. 133A AT THE BUSINESS PREMISES OF SANCHETTY JEW ELLERS (P) LTD. 21-23 MUMBADEVI MANSION MUMBAI ON 12.2.2002. IN THE STATEMENT RECORDED DU RING THE SEARCH THE DIRECTOR SHRI SATISH VIMAL JAIN ADMITTED THAT THE COMPANY HAD ISSUED BIL LS ONLY TO ACCOMMODATE THE ASSESSEE. I.E THEYYAMPATTIL JEWELLERY PUTHANATHANI. THIS STATEME NT WAS CONFRONTED TO THE ASSESSEE AND IN REPLY TO QUESTION NO. 9 HE STATED THAT HE HAS NOTH ING TO STATE ON THIS. THEREAFTER THE ASSESSEE PRODUCED AN AFFIDAVIT SWORN IN BY SHRI SATISH VIMAL JAIN IN WHICH THE PURCHASE CLAIMED BY THE ASSESSEE HAS BEEN ACCEPTED. THE AO ASKED THE ASSE SSEE TO PRODUCE SHRI SATISH VIMAL JAIN BUT HE WAS NOT PRODUCED. THE ASSESSEE FILED THE LETTE R DATED 21.1.2004 IN WHICH IT WAS STATED THAT HE HAD CONTACTED SHRI SATISH VIMAL JAIN WHO HAD EXPRE SSED HIS INABILITY TO COME. IN THE REPLY IT WAS ALSO STATED THAT WHETHER SUMMONS SHOULD BE ISSU ED TO M/S. SANCHETTY JEWELLERS IS A MATTER TO BE INITIATED BY THE DEPARTMENT. ALONGWITH THE REPL Y A COPY OF THE LETTER FROM SANCHETTI JEWELLERS IN REGARD TO THE SALE OF GOLD WAS ALSO F ILED. IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 3 4. THE ASSESSEE ALSO PRODUCED KUMARI. K. YESODHA WHO WROTE THE BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM. FROM HER STATEMENT THE AO NOTED THAT SHE WROTE THE ACCOUNTS ON THE BASIS OF SOME PAPERS GIVEN TO HER. SHE NEVER VISITED THE SH OP OF THE ASSESSEE FIRM TO WRITE THE ACCOUNTS. THE CASH BALANCE WAS NEVER TALLIED WITH THE CASH. SHE WAS ALSO NOT AWARE WHETHER GOODS HAVE BEEN ACTUALLY RECEIVED AS PER THE ENTRIES IN THE PU RCHASE VOUCHERS. THE AO ASKED THE ASSESSEE TO FURNISH THE RETURNS GIVEN TO THE COMMERCIAL TAX DEP ARTMENT TO VERIFY THE CLAIM OF THE ASSESSEE. SINCE NO RETURNS WERE FILED THE SAME WERE OBTAINED FROM THE COMMERCIAL TAXES DEPARTMENT FROM WHICH IT WAS NOTED THAT THE ASSESSEE HAS NOT DISCLOSED THE SAID PURCHASE AND TURNOVER. IT WAS CLAIMED BY THE ASSESSEE THAT IT WAS NOT NECESS ARY TO DISCLOSE THE PURCHASES TO THE SALES TAX DEPARTMENT. ON THE BASIS OF THIS DISCREPANCY AN AD DITION AMOUNTING TO RS. 17 23 448/- ON ACCOUNT OF UNACCOUNTED GOLD WAS MADE IN THE CASE OF THIS ASSESSEE I.E. THEYYAMPATTIL JEWELLERY TIRUR. SIMILARLY A SUM OF RS. 9 51 433 AND RS. 20 77 798/- WAS ADDED IN THE CASE OF THEYYAMPATTIL JEWELLERY KOTTAKKAL AND THEYYAMPATTI L JEWELLERY PUTHANATHANI RESPECTIVELY. 5. AGGRIEVED BY THESE ORDERS THE ASSESSEE FILED APPEALS BEFORE THE CIT(A). 6. DURING THE APPELLATE PROCEEDINGS IT WAS STATED THAT THE STATEMENT OF SHRI SATISH VIMAL JAIN DIRECTOR OF M/S.SANCHETTY JEWELLERS (P) LTD. IS NO T FORMING PART OF THE ASSESSMENT PROCEEDINGS AND THE STATEMENT WAS TAKEN BEHIND THE BACK OF THE ASSESSEE. IT WAS FURTHER ARGUED THAT THE STATEMENT OF SHRI SATISH VIMAL JAIN WAS BEING USED AGAINST THE ASSESSEE THEREFORE HE WAS A WITNESS OF THE DEPARTMENT AND WHEN THAT PERSON HAS FILED A CONTRADICTORY AFFIDAVIT ACCEPTING THE SALE OF JEWELLERY THE ASSESSING OFFICER SHOULD HAV E ISSUED SUMMONS U/S. 131 AND AN OPPORTUNITY SHOULD HAVE BEEN GIVEN TO THE ASSESSEE TO CROSS EX AMINE THAT PERSON. IT WAS FURTHER STATED THAT KUMARI. YESODHA WAS WRITING BOOKS AND AT THE TIME O F THE SURVEY THE BOOKS WERE NOT COMPLETE AND IN THE STATEMENT RECORDED U/S. 131 SHE HAD CAT EGORICALLY STATED .THAT SHE WAS CALLED TO THE SHOP BY THE OFFICERS CONDUCTING THE SEARCH WHERE SH E MADE A FEW ENTRIES IN THE BOOKS WITHOUT ANY INSTRUCTION FROM THE EMPLOYEES OR THE PARTNERS OF T HE FIRM. IT WAS STATED THAT 50 NOS. OF GOLD BISCUITS WEIGHING 5832 GMS. WERE PURCHASED FROM MMT C LTD WHICH WERE ALSO NOT RECORDED IN THE BOOKS THOUGH THE DEPARTMENT HAS ACCEPTED THE P URCHASE OF GOLD BISCUITS FROM MMTC LTD. IT IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 4 WAS FURTHER SUBMITTED THAT PAYMENTS TO M/S. SANCHET TY JEWELLERS (P) LTD. WERE MADE BY DEMAND DRAFTS AND ONCE THEY HAVE ACCEPTED THE SALE IN THE AFFIDAVIT THE SAME SHOULD HAVE BEEN ACCEPTED. CERTIFICATES FORM THE CATHOLIC SYRIAN BANK AND CANA RA BANK FOR THE ISSUE OF DEMAND DRAFTS IN FAVOUR OF M/S. SANCHETTY JEWELLERS (P) LTD. WERE AL SO FURNISHED. THE LD. CIT(A) AFTER EXAMINING THE ISSUE OBSERVED THAT THE INDEPENDENT ENQUIRY U/S . 131 CONFIRMED THE PURCHASE OF 3980.250 GMS. OF JEWELLERY FOR RS. 17 51 310/- BY THE ASSESSEE FI RM AND ACCORDINGLY HE DELETED THE ADDITION OF RS. 17 23 448/- ON ACCOUNT OF UNACCOUNTED JEWELLERY . 7. BEFORE US THE LD. DR SUBMITTED THAT EXCESS STOC K WAS FOUND DURING THE SEARCH WHICH WAS CONDUCTED ON 24.1.2002 AND SUCH STOCK WAS ADMITTED BY THE MANAGER OF THE FIRM AND NO MENTION WAS MADE IN RESPECT OF THE PURCHASES AT THE TIME OF SEARCH. NO PURCHASE DETAILS WERE FOUND DURING THE SEARCH. IN ALL THE THREE OFFICERS/SHOWRO OMS OF THE VARIOUS ASSESSES FIRMS. HE SUBMITTED THAT THE DIRECTOR SHRI SATISH VIMAL JAIN HAS CLEAR LY DENIED HAVING SOLD ANY GOODS TO THE ASSESSEE FIRMS DURING THE SURVEY CONDUCTED IN THEIR PREMISES AND IF ANY AFFIDAVIT WAS FILED LATER ON GIVING CONTRADICTORY STATEMENT THEN THE ASSESSEE WAS DUT Y BOUND TO PRODUCE THIS PARTY WHICH THE ASSESSEE FAILED TO DO. HE ALSO SUBMITTED THAT IT WAS VERY SURPRISING THAT ALL THE THREE BILLS WERE SERIALLY NUMBERED IN THE CASE OF DIFFERENT ASSESSEE CONCERNS. HE ALSO EMPHASISED THAT THE AO HAS OBTAINED SALES TAX RETURNS WHEREIN THE PURCHASES FR OM M/S. SANCHETTY JEWELLERS (P). LTD. HAVE NOT BEEN DISCLOSED BY THE ASSESSEE. HE SUBMITTED THAT AS FAR AS THE PURCHASES FROM MMTC LTD. ARE CONCERNED THE SAME WERE RECORDED LATER ON. IT WA S FURTHER ARGUED THAT IT WAS VERY SURPRISING THAT PAYMENTS FOR THE SAID PURCHASES HAD BEEN MADE IN THE MONTH OF FEBRUARY AND MARCH 2002 I.E. ALMOST AFTER 30 TO 60 DAYS WHICH CANNOT BE SA ID A NORMAL PERIOD. ALL THESE FACTS CLEARLY SHOW THAT THIS WAS ONLY AN AFTERTHOUGHT AND THE PURCHASE S WERE BOGUS. 8. ON THE OTHER HAND THE LD. CHARTERED ACCOUNTANT FOR THE ASSESSEE SHRI C.B.M.WARRIER SUBMITTED THAT STATEMENT OF SHRI T SHERAFUDHEEN MA NAGING PARTNER OF THESE FIRMS WAS RECORDED FOR THE FIRST TIME ON 4.4.2002 BY DCIT INVESTIGATI ON U/S. 131 WHEREIN IT WAS CLEARLY STATED THAT THE JEWELLERY WEWRE PURCHASED BY ALL THE THREE FIRM S FROM SANCHETTY JEWELLERY (P) LTD. MUMBAI AND THE EXCESS JEWELLERY WAS FOUND ONLY BECAUSE THE PURCHASE FROM M/S. SANCHETTY JEWELLERS LTD. IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 5 WAS NOT TAKEN INTO THE BOOKS OF ACCOUNTS. COPIES OF THE INVOICES AND AFFIDAVIT FROM M/S. SANCHETTY JEWELLERS REGARDING THE PURCHASE OF JEWEL LERY WERE ALSO FILED. HE ARGUED THAT THE ASSESSEE GOT THE FIRST OPPORTUNITY TO EXPLAIN THE P URCHASE OF JEWELLERY DURING THE STATEMENT RECORDED BY DCIT(INV.) AND SAME WAS EXPLAINED ON 4. 2.2002 BEFORE THE SURVEY WAS CONDUCTED ON M/S. SANCHETTY JEWELLERS ON 12.2.2002. HE FURTHER P OINTED OUT THAT THE SEARCH WAS CONDUCTED ON 24.1.2002 AND A NOTICE U/S. 158BC ASKING THE ASSES SEE TO FILE THE RETURNS WAS ISSUED ON 19.2.2002. THE RETURNS WERE FILED IN FORM 2B ON 6. 1.2003 AGAINST WHICH NOTICE U/S. 143(2) WAS SERVED ON 9.1.2003. HE ARGUED THAT ALL THESE DATES WERE AFTER THE DATE OF SURVEY CONDUCTED IN THE PREMISES OF M/S. THEYYAMPATTIL JEWELLERY AND THEREF ORE EVEN BEFORE FILING THE RETURN THE STATEMENT WAS GIVEN BY M/S. SANCHETTY JEWELLERS (P) LTD. MUMBAI ON 12.2.2002 AND THE SAME COULD NOT HAVE BEEN RELIED BY THE DEPARTMENT. HE F URTHER ARGUED THAT THE STATEMENT RECORDED DURING THE SURVEY HAVE NO EVIDENTIARY VALUE. HE CON TENDED THAT THE STATEMENT WAS RECORDED WITHOUT GIVING PROPER OPPORTUNITY TO THE OTHER PART Y TO CROSS EXAMINE THE WITNESS AND IS NOT AN EVIDENCE WHICH CAN BE USED FOR THE PURPOSE OF ASSES SMENT AND FOR THIS PROPOSITION HE RELIED ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT I N THE CASE OF PRAKASH CHANDA NAHATA VS.CIT 301 ITR 134 (M.P.). IN ANY CASE THE STATE MENT RECORDED DURING THE SURVEY HAS NO EVIDENTIARY VALUE AND FOR THIS HE RELIED ON THE DEC ISION OF HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEW AND SONS VS. CIT 263 ITR 101 (KER.) . SIMILAR VIEW HAS BEEN TAKEN BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KHADER KHA N & SONS 300 ITR 157. THEREFORE SUCH STATEMENTS COULD NOT HAVE BEEN USED BY THE DEPARTME NT FOR DENYING THE PURCHASES. 9. WHILE DEALING WITH THE ISSUE RAISED BY THE AO R EGARDING NON INCORPORATION OF PARTICULARS OF PURCHASE IN SALES TAX RETURNS HE ARGUED THAT AS PER SALES TAX ACT AND RULES INTER STATE PURCHASES ARE NOT REQUIRED TO BE INCLUDED AND SHOWN IN THE SALES TAX RETURNS. ONLY PURCHASES FROM UNREGISTERED DEALERS WHICH ARE TAXABLE AT THE POINT OF SALE IN THE STATE ARE ONLY TO BE INCLUDED. HE POINTED OUT THAT IN THIS REGARD THE DISCUSSION AS W ELL AS RELEVANT PROVISION AND OPINION OF ADVOCATE SHRI C.B.SIVASANKARAN WAS ALSO FILED BEFOR E THE ASSESSING OFFICER WHO EXPLAINED THE POSITION IN DETAIL. AS FAR AS THE STATEMENTS OF TH E ACCOUNTANTS ARE CONCERNED HE SUBMITTED THAT IT IS A FACT THAT BOOKS OF ACCOUNTS WERE INCOMPLETE ON THE DATE OF SURVEY AND SUCH ACCOUNTANTS WERE IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 6 CALLED BY THE DEPARTMENT TO COMPLETE THE BOOKS AND THEY WERE COMPLETED ON THE BASIS OF INCOMPLETE DETAILS AND ACCORDINGLY THE STATEMENT W AS GIVEN BY KUMARI K. YESODHA. FURTHER IT WOULD BE SEEN THAT NOT ONLY PURCHASES FROM M/S. SAN CHETTY JEWELLERS WERE OMITTED TO BE RECORDED BUT PURCHASES FROM MMTC LTD. WHICH IS A GOVERNMENT CONCERN WAS ALSO OMITTED TO BE RECORDED. SIMILARLY HE SUBMITTED THAT REMITTANCES TO THE CANA RA BANK ON 22.1.2002 AMOUNTING TO RS. 5 00 000/- WERE ALSO NOT ENTERED IN THE BOOKS OF AC COUNTS WHEN THE BOOKS WERE UPDATED ON THE INSTRUCTION OF THE ASSESSING OFFICER. THIS CLEARLY SHOWS THAT BOOKS WERE INCOMPLETE AT THE TIME OF SURVEY. 10. WHILE CONCLUDING HIS ARGUMENTS HE SUBMITTED TH AT EVEN CERTIFICATES FROM THE BANKERS OF THE ASSESSEE FOR SHOWING THE PAYMENTS THROUGH DEMAN D DRAFTS IN RESPECT OF THE PURCHASES FROM M/S. SANCHETTY JEWELLERS WERE FILED BEFORE THE LOWE R AUTHORITIES. EVEN A COPY OF BANK ACCOUNT OF ABN-AMRO SHOWING THAT SUCH PAYMENTS WERE CREDITE D TO M/S. SANCHETTY JEWELLERS WERE ALSO FILED BEFORE THE LOWER AUTHORITIES. IN ANY CASE TH E CIT(A) ISSUED SUMMONS U/S. 131 OF THE ACT TO RE-VERIFY THE DEMAND DRAFTS AND AFTER SUCH VERIFICA TION ONLY HE HAS ALLOWED THE PURCHASES AND ACCORDINGLY HE STRONGLY SUPPORTED THE APPELLATE ORD ER. HE ALSO SUBMITTED THAT IDENTICAL ISSUE CAME UP BEFORE THE TRIBUNAL REGARDING PURCHASES FRO M M/S. SANCHETTY JEWELLERS. IN THE REGULAR ASSESSMENT THE SAME HAS BEEN ACCEPTED BY THE TRIBU NAL IN I.T.A. NOS. 737 738 AND 739/COCH/2008. A COPY OF THE ORDER HAS BEEN FILED PGS. 1-10 OF THE PAPER BOOK. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND FORCE IN THE SUBMISSIONS OF THE LD. CHARTERED ACCOUNTANT FOR THE ASSESSEE SHR I C.B.M. WARRIER. IT IS NOT DENIED THAT NOTICE FOR FILING THE RETURN WAS ISSUED ONLY ON 19.2.200 2 AND RETURNS WERE FILED ON 6.1.2003. THEN WE WONDER HOW THE STATEMENT RECORDED AT THE TIME OF SU RVEY ON 12.2.2002 COULD BE UTILISED FOR DENYING THE PURCHASE OF JEWELLERY PARTICULARLY WIT HOUT GIVING ANY OPPORTUNITY TO CROSS EXAMINE THAT PARTY. THE ASSESSEE FIRMS FILED AN AFFIDAVIT FROM M/S. SANCHETTY JEWELLERS CONFIRMING THE PURCHASE OF JEWELLERY. THE ASSESSEE FIRMS HAVE FU RNISHED COPIES OF THE INVOICES AS WELL AS PROOF OF PAYMENTS IN THE FORM OF DEMAND DRAFTS ALONG WITH BANK STATEMENTS. SINCE THE AO HAD USED THE STATEMENT OF M/S. SANCHETTY JEWELLERS TO DENY THE PURCHASE THEREFORE WE FIND NO FORCE IN THE IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 7 SUBMISSIONS OF THE LD. CIT-DR THAT M/S. SANCHETTI J EWELLERS WAS WITNESS OF THE ASSESSEE. IT WAS THE DEPARTMENT WHICH WAS TRYING TO USE THE STATEMEN T AGAINST THE ASSESSEE AND IF THAT PARTY HAD LATER ON FILED AN AFFIDAVIT CONTRARY TO THE STATEME NT GIVEN DURING THE SURVEY THEN THE DEPARTMENT SHOULD HAVE SUMMONED THAT PARTY WHILE ISSUING SUMMO NS U/S. 131 AS ON THE REQUEST OF THE ASSESSEE FIRMS M/S. SANCHETTY JEWELLERS HAVE SHOWN THEIR INABILITY TO COME TO CALICUT. FURTHERMORE THE STATEMENT RECORDED DURING THE SURV EY HAS NO EVIDENTIARY VALUE. THE HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHEW AND S ONS VS. CIT 263 ITR 101 (KER.) WHILE DEALING WITH THE ORDER PASSED U/S. 263 ON THE BASIS OF SURVEY STATEMENT HAS HELD AS UNDER:- HELD THAT THE STATEMENT ELICITED DURING THE SURVE Y OPERATION HAD NO EVIDENTIARY VALUE AND THE INCOME-TAX OFFICER WAS WELL AWARE OF THIS. AT THE SAME TIME THE ASSESSEE HAVING FOUND THAT THERE WERE SOME OMISSIONS ON ITS PART OFFERED CERTAIN AMOUNTS AS ADDITIONAL INCOME FOR THE YEARS IN QUESTION AND GAVE A WRITTE N OFFER TO THE ADDITIONAL COMMISSIONER. IT WAS AFTER VERIFYING THE ACCOUNT BOOKS AND VARIO US MATERIALS GATHERED IN THE SURVEY AND AFTER CONSIDERING THE OFFER MADE BY THE ASSESSEE THAT THE INCOME-TAX OFFICER HAD EXERCISED A JUDICIAL DISCRETION IN THE MATTER WHILE COMPLETI NG THE ASSESSMENT. IN THE LIGHT OF THE VOLUNTARY DISCLOSURE IN THE LETTER GIVEN IN WRITIN G BY THE ASSESSEE THE FACTS GIVEN BY IT HAD BEEN VERIFIED WITH THE BOOKS OF ACCOUNT AND IT WAS ONLY AFTER CONSIDERATION OF THE VARIOUS ASPECTS OF THE MATTER AND RELATED FACTS THAT THE A SSESSING OFFICER ACCEPTED THE OFFER MADE BY THE ASSESSEE. IN SUCH CIRCUMSTANCES THE VIEW T AKEN BY THE INCOME-TAX OFFICER COULD NOT BE SAID TO BE PREJUDICIAL TO THE REVENUE NOR COULD IT BE SAID TO BE ERRONEOUS. THE ORDER OF REVISION WAS NOT VALID. 12. AS FAR AS THE ISSUE REGARDING NON INCLUSION OF THE PURCHASE IN THE SALE TAX RETURN IS CONCERNED THE LD. CHARTERED ACCOUNTANT FOR THE ASS ESSEE SHRI WARRIER CLEARLY POINTED OUT THAT INTER STATE PURCHASES WERE NOT REQUIRED TO BE INCOR PORATED IN THE RETURN. THE AO OR EVEN THE LD. CIT-DR BEFORE US COULD NOT POINT OUT IN THE SALES T AX ACT ANY CONTRARY PROVISION BECAUSE OF WHICH THE ASSESSEE FIRMS WERE REQUIRED TO DECLARE T HE PURCHASES IN THE RETURNS. AS FAR AS THE STATEMENT OF THE ACCOUNTANT KUMARI K. YESODHA IS C ONCERNED IT IS CLEAR FROM THE OMISSION IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 8 POINTED OUT BY THE LD. CIT(A) REGARDING NON RECORDI NG OF PURCHASES FORM MMTC LTD AND THE OMISSION REGARDING REMITTANCES OF RS. 5 LAKHS TO TH E CANARA BANK THAT THE BOOKS WERE REALLY INCOMPLETE. IT IS NOT CLEAR AS TO HOW THE DEPARTME NT HAS ACCEPTED THE PURCHASES FORM MMTC LTD. WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUN TS BUT HAS REFUSED TO ACCEPT THE PURCHASES FROM M/S. SANCHETTY JEWELLERS. IN ANY CASE UNDER T HE SIMILAR CIRCUMSTANCES THE ISSUE CAME UP BEFORE THE TRIBUNAL IN THE REVENUE APPEALS IN I.T.A . NOS. 737 738 &739/COCH/2008 WHICH WAS DECIDED VIDE PARA 7 WHICH IS AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. IN THE EARLIER ASSESSME NT YEAR 2003-04 ALL THE ASSESSES NOW UNDER APPEAL PURCHASED GOLD JEWELLERY FROM M/S. S ANCHETTY JEWELLER MUMBAI AND IN THE REGULAR ASSESSMENT FOR THIS ASSESSMENT YEAR THE DEPARTMENT HAD ACCEPTED THE PURCHASE OF JEWELLERY AND NO ADDITION WAS MADE. BUT FOR THIS YEAR THE ASSESSING OFFICER DOUBTED THE SOURCE FOR PURCHASE OF JEWELLERY AND NO ADDITION W AS MADE. THE ASSESSEE PROVED THE SOURCE BY WAY OF CONFIRMATION LETTER FROM CATHOLIC SYRIAN BANK WHICH IS AVAILABLE AT PAGE NO. 8 OF THE ASSESSEES PAPER BOOK. THE SOURCE AL ONE WAS DOUBTED. THE EXISTENCE OF THE PARTY IS NOT IN DISPUTE. THE PURCHASE OF JEWELLERY WAS ACCEPTED BY THE DEPARTMENT FOR EARLIER YEAR. THE ONLY DISPUTE FOR THIS ASSESSMEN T YEAR IS ABOUT THE SOURCE FOR THE PURCHASE OF JEWELLERY. THAT HAS BEEN SUFFICIENTLY EXPLAINED BY WAY OF CONFIRMATION BY CATHOLIC CYRIAN BANK WHO IS THE ULTIMATE PAYEE B ANK BRANCH THROUGH WHICH THE PAYMENTS WERE COLLECTED. IT IS CRYSTAL CLEAR FROM THESE FA CTS THAT THE ASSESSEE HAS DIS-CHARGED ITS ONUS PROVING THE SOURCE. PAGE NO. 4 OF THE ASSESS EES PAPER BOOK IS A COPY OF LETTER ADDRESSED TO M/S. SANCHETTY JEWELLERS MUMBAI WHE REIN THE ASSESSEE ASKED THE SAID JEWELLERS TO SEND A COPY OF THE ACCOUNT OF THE ASS ESSEE WITH M/S. SANCHETTY JEWELLERS MUMBAI FOR THE PERIOD FORM 01.04.2003 TO 31.3.2004 TO PRODUCE THE SAME BEFORE THE ASSESSING OFFICE. PAGES 5 & 6 ARE COPY OF STOCK RE GISTER IN WHICH THE PURCHASE OF GOLD ORNAMENTS ENTERED. PAGE NO. 7 OF THE PAPER BOOK I S A COPY OF CONFIRMATION LETTER ISSUED BY THE CATHOLIC CYRIAN BANK TO THE EFFECT THAT A DD N O. 271470 OF RS. 6 37 362/- DATED 14.7.2004 WAS DRAWN IN FAVOUR OF M/S. SANCHETTY JE WELLERS MUMBAI AND THIS AMOUNT IS IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 9 DEBITED AND PAID OUT OF THE CURRENT ACCOUNT OF THE ASSESSEE. WE COULD NOT DOUBT THIS CERTIFICATE UNLESS THERE IS SOME OTHER INCRIMINATI NG MATERIALS TO SUGGEST THAT IT IS A FALSE ONE. MERE DOUBT ON A SUSPICION IS NOT AT AL WARRA NTED WHICH THE LD. CIT(A) CORRECTLY APPRECIATED AND ULTIMATELY DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE. THEREFORE WE ARE OF THE FIRM BELIEF THAT THE ORDER OF THE CIT(A) REQUI RES NO INTERFERENCE. ACCORDINGLY THESE APPEALS DESERVES TO BE DISMISSED ON TOW COUNTS (I) THE GROUNDS ARE MISCONCEIVED AND (II) SOURCE FOR THE PURCHASE OF JEWELLERY HAS BEEN SUFF ICIENTLY PROVED. 13 . THEREFORE IN VIEW OF THE DETAILED DISCUSSION ABOVE WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS CORRECTLY DELETED THE ADDITION ON ACCOUNT OF PU RCHASES AND THEREFORE WE CONFIRM HIS ORDER. 14. ANOTHER COMMON ISSUE IN ALL THE THREE APPEALS I S LEVY OF SURCHARGE. 15. AFTER HEARING BOTH THE PARTIES WE FIND THAT TH AT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SURESH N. GUPTA 297 ITR 322 (SC) AND CIT VS. RAJIV BATRA 3 10 ITR 105 (SC). RESPECTFULLY FOLLOWING THESE DECISIONS WE DECIDE THIS ISSUE IN FAVOUR OF THE REVENUE. 16. THERE IS ANOTHER ISSUE IN THE CASE OF M/S. THEY YAMPATTIL JEWELLERY KOTTAKKAL IN I.T.A. NO. 133/COCH/2005 REGARDING DELETION OF ADDITION AMOUNT ING TO RS. 2 63 387/-. 17. AFTER HEARING BOTH THE PARTIES WE FIND THAT SO ME DOCUMENTS WERE FOUND DURING THE SEARCH SHOWING THAT CERTAIN EXPENDITURE ON ADVERTISEMENT C HARGES AND DONATION AMOUNTING TO RS. 2 63 387/- HAS BEEN INCURRED. IT WAS CLEAR THAT TH E EXPENDITURE WAS OF REVENUE NATURE AND THEREFORE THE SAME SHOULD BE ALLOWED. SINCE NO EX PLANATION REGARDING SOURCE WAS FILED BEFORE THE AO THIS AMOUNT WAS ADDED TO THE UNDISCLOSED IN COME OF THE ASSESSEE. 18. THE LD. CIT(A) DELETED THE ADDITION BY OBSERVIN G THAT THOUGH ENTRIES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS THEREFORE TO THAT EXTENT T HE AMOUNT WAS ASSESSABLE AS INCOME. BUT SINCE IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 10 THE NATURE OF THE EXPENDITURE WAS REVENUE THE SAM E HAS TO BE ALLOWED AND THEREFORE NO ADDITION COULD BE MADE ON THIS ACCOUNT. 19. BEFORE US THE LD. CIT-DR SUBMITTED THAT DETAIL S REGARDING EXPENDITURE HAS NOT BEEN GIVEN AND EXPENDITURE ALSO INCLUDE EXPENDITURE ON ACCOUNT OF DONATION THEREFORE IT IS NOT CLEAR WHETHER THE EXPENDITURE WAS USED FOR BUSINESS PURPOSES OR N OT. IN ANY CASE THE SOURCE OF EXPENDITURE WAS NOT EXPLAINED AND THEREFORE THE ADDITION WAS JUSTI FIED. 20. ON THE OTHER HAND THE LD. CHARTERED ACCOUNTANT FOR THE ASSESSEE SHRI WARRIER SIMPLY SUPPORTED THE ORDER OF THE LD. CIT(A). 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THAT THE LD. CIT(A) HAS CORRECTLY ADJUDICATED THE ISSUE THOUGH THE INCOME IS ASSESSABLE BECAUSE THESE EXPENDITURE WERE NOT ACCOUNTED FOR BUT AT THE SAME TIME DEDUCTION HAS TO BE ALLOWED BECAUSE EXPENDITURE WAS IN THE NATURE OF REVENUE. HOWEVER SINCE DETAILS OF E XPENDITURE ARE NOT AVAILABLE AND ITEM OF DONATION PARTICULARLY CANNOT BE STRICTLY SAID TO BE FOR THE PURPOSE OF BUSINESS AND THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND CONFIRM THE ADDIT ION OF RS. 50 000/- ON AN ESTIMATE BASIS OUT OF THESE EXPENSES. 22. IN THE CASE OF THE ASSESSE FIRM M/S.THEYYAMPAT TIL JEWELLERY PUTHANATHANI IN I.T.A. NO. 135/COCH/2005 THE REVENUE HAS RAISED ONE MORE ISSU E REGARDING DELETION OF ADDITION AMOUNTING TO RS. 9 98 883/-. 23. AFTER HEARING BOTH THE PARTIES WE FIND THAT DU RING THE SEARCH A LIST WAS FILED BY THE ASSESSEE IN WHICH SOME RECEIVABLES WAS SHOWN. IT WAS CLAIMED THAT THE AMOUNT OF RECEIVABLES INCLUDES THE MONEY RECEIVABLE BY SHRI C.P. ABDURAHI MAN FROM GOLDSMITHS IN THE FORM OF GOLD. ITS CLAIM WAS STATED TO HAVE BEEN DISCUSSED IN THE CASE OF SHRI C.P.ABDURAHIMAN AND AFTER DETAILED DISCUSSIONS THE CLAIM WAS REJECTED. ACCOR DINGLY THE ADDITION ON ACCOUNT OF RECEIVABLES WAS MADE OF RS. 24 12 273/-. IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 11 24. ON APPEAL THE LD. CIT(A) DELETED THE ADDITION VIDE FINDING AT PAGE 9 WHICH IS AS UNDER:- THE MANAGING PARTNER C.P. ABDURAHIMAN SUBMITTED IN THE LETTER DATED 10.12.2003 THAT GOLD ORNAMENTS ARE RECEIVED FROM GOLDSMITH FOR WHI CH GOLD IS PAYABLE. AS PER SEIZED RECORDS A 11 AND A 12 GOLD ORNAMENTS RECEIVED FROM GOLDSMITHS AND GOLD PAYABLE TO THEM AS ON 24.1.2002 ARE EVIDENCED. CONFIRMATION FROM 16 GOLDSMITHS WERE FILED AND AS DIRECTED BY THE ASSESSING OFFICER 15 GOLDSMITHS WE RE PRODUCED FOR EXAMINATION BEFORE THE ASSESSING OFFICER AND STATEMENTS WERE TAKEN FROM A FEW AND ALL THE GOLDSMITHS HAVE CONFIRMED THE TRANSACTIONS AND GAVE THE DETAILS OF ENTRIES IN THE SEIZED RECORDS AND THEY HAVE ALSO CONFIRMED THAT THEY HAVE GIVEN GOLD ORNA MENTS TO C.P.ABDURAHIMAN MANAGING PARTNER OF THEYYAMPATTIL JEWELLERY PUTHANATHANI. IT IS SUBMITTED BY THE APPELLANT THAT THE JEWELLERY RECEIVED FROM THE GOLDSMITH ARE IN THE F ORM OF RECEIVABLES FROM THE CUSTOMERS AND THE VALUE OF THIS JEWELLERY PAYABLE TO GOLDSMI TH HAVE TO BE REDUCED FROM THE AMOUNT RECEIVABLE ASSESSED AS UNDISCLOSED INCOME. LIST O F SUCH GOLD PAYABLE TO THE GOLDSMITH ALONG WITH THE COPY OF THE SEIZED RECORDS AS PER P ANCHANAMA A 11 AND A 12 ARE FILED BY THE APPELLANT. THE TOTAL OF THE GOLD PAYABLE AS O N 24.1.2002 THE DATE OF SEARCH IS 2306.890 GMS. THE VALUE OF WHICH WILL E RS. 433 PE R GRAM RS. 9 98 883/-. THUS THE FINDING GIVEN BY THE ASSESSING OFFICER IN CASE OF SHRI C.P . ADURRAHIMAN ON PAGE 3 OF THE ASSESSMENT ORDER THAT THE GOLDSMITHS HAVE STATED I N THEIR SWORN STATEMENTS BEFORE THE ASSESSING OFFICER AS NOT HAVING ANY EVIDENCE IS CO RRECT BUT SEIZED MATERIALS IN THE CASE OF SHRI C.P.ABDURRAHIMAN MANAGING PARTNER DEPICT THE FACTS. FURTHER THE GOLDSMITHS WHO WERE EXAMINED BY THE ASSESSING OFFICER HAVE PRODUC ED CERTIFICATES FROM GRAMAPANCHAYATH PRESIDENT ABOUT THEIR IDENTITY AS GOLDSMITHS. ALS O IN THEIR STATEMENTS THEY HAVE NOWHERE MENTIONED THAT THEY ARE DEPOSITING GOLD JEWELLERY ONLY WITH SHRI C.P. ABDURAHIMAN. FROM THE SEIZED RECORDS A 11 AND A 12 IT CAN BE SEEN T HAT DEPOSITING THE GOLD JEWELLERY BY THE GOLDSMITHS WITH THE APPELLANT AND RECEIVING PRIMAR Y GOLD AND COPPER IN RETURN IS THE REGULAR PRACTICE FOLLOWED. THEREFORE THIS AMOUNT PAYABLE BEING THE VALUE OF GOLD IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 12 JEWELLERY RECEIVED FROM GOLDSMITH IS DIRECTED TO B E SET OFF AGAINST THE RECEIVABLES ON ACCOUNT OF SALE OF JEWELLERY OUTSIDE THE BOOKS. 25. BEFORE US THE LD. CIT-DR SUBMITTED THAT NO EVID ENCE REGARDING SALE OF GOLD ORNAMENTS WAS FILED AND THEREFORE THE ADDITION WAS JUSTIFIED. 26. ON THE OTHER HAND THE LD. CHARTERED ACCOUNTANT FOR THE ASSESSEE SHRI WARRIER POINTED OUT THAT DURING THE SEARCH ITSELF THE SEIZED RECORDS M ARKED AS A 11 AND A 12 CLEARLY SHOWED THAT SOME GOLD ORNAMENTS WERE RECEIVED AND THE SAME WA S VERIFIED THROUGH THE REMAND REPORT AND 15 GOLDSMITHS WERE PRODUCED BEFORE THE AO WHO CONFIRME D HAVING GIVEN GOLD ORNAMENTS TO THE ASSESSEE FIRM. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. WE FIND FORCE IN THE SUBMISSIONS OF THE LD. CHARTERED ACCOUNTANT FOR THE ASSESSEE BECAUSE CONFI RMATIONS FROM 16 GOLDSMITHS WERE FILED BY THE ASSESSEE AND 15 GOLDSMITHS WERE PRODUCED BEFOR E THE AO AND STATEMENTS WERE TAKEN FROM FEW OF THEM IN WHICH THEY HAVE CONFIRMED HAVING GIV EN GOLD ORNAMENTS AND THIS FACT WAS NOT DENIED BEFORE US BY THE REVENUE AND THEREFORE WE F IND NOTHING WRONG WITH THE ORDERS OF THE LD. CIT(A) AND CONFIRM THE SAME. 28. IN THE RESULT THE REVENUE APPEALS ARE PARTLY A LLOWED. 29. IN THE ASSESSEE APPEALS IN I.T.A. NOS. 102 TO 105/COCH/2005 THE ONLY COMMON ISSUE RAISED IS REGARDING ADDITIONS MADE ON ACCOUNT OF RE CEIVABLES. 30. AFTER HEARING BOTH THE PARTIES WE FIND THAT CE RTAIN LIST IN WHICH SOME AMOUNTS WERE STATED TO BE RECEIVABLES WERE FOUND DURING THE SEARCH AND SINCE NO SATISFACTORY EXPLANATION WAS MADE THE AO NOTED THAT THESE ARE RECEIVABLES AGAINST CRE DIT SALES AND ACCORDINGLY ADDED SUMS IN RESPECT OF THE RECEIVABLES. IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 13 31. ON APPEAL THE LD. CIT(A) REDUCED THE ADDITIONS ON THE BASIS OF VERIFICATION OF GOLD HAVING ACTUALLY BEEN RECEIVED FROM THE GOLDSMITHS AND THER E WAS NO EVIDENCE OF CONFIRMATION TO THIS EFFECT. 32. BEFORE US THE LD. CHARTERED ACCOUNTANT SHRI W ARRIER SUBMITTED THAT CREDIT SALES WERE NOT POSSIBLE WITHOUT THE PURCHASER OF GOLD AND THEREFOR E AT BEST NET PROFIT MARGIN COULD HAVE BEEN ADDED TOWARDS UNDISCLOSED INCOME. FOR THIS PROPOSIT ION THE LD. CHARTERED ACCOUNTANT SHRI WARRIER RELIED ON THE DECISION OF THE AHAMEDABAD A THIRD MEMBER BENCH IN THE CASE OF B& BROTHERS ENGINEERING WORKS VS.DCIT 78 TTJ (AHD.) T M 876. 33. ON THE OTHER HAND THE LD. CIT-DR SUBMITTED THA T ALL THE PURCHASES HAVE BEEN ALREADY ACCOUNTED FOR AND THEREFORE IT CANNOT BE SAID THAT ONLY NET PROFIT SHOULD BE ADDED TO THE INCOME. 34. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND WE FIND FORCE IN THE SUBMISSIONS OF THE LD. CHARTERED ACCOUNTANT. IT IS NOT POSSIBLE TO SE LL AN ITEM UNLESS AND UNTIL THERE IS A CORRESPONDING PURCHASE. IF THE WHOLE OF THE SALE IS TAKEN AS NET PROFIT THEN G.P./N.P. MARGIN WOULD SHOOT UP UNPROPORTIONATELY. WE FURTHER FIND THAT THE THIRD MEMBER DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF B & BROTHERS ENGINEERING WORKS (SUPRA) HAS HELD THAT UNACCOUNTED SALE BY ITSELF DOES NOT INDIC ATE THE UNDISCLOSED INCOME OF THE ASSESSEE AND ACCORDINGLY ONLY ADDITION POSSIBLE WAS ON ACCOUNT O F PROFIT ELEMENT IN SUCH UNACCOUNTED SALES. FOLLOWING THIS DECISION WE ARE OF THE VIEW THAT ON LY NET PROFIT MARGIN IN SUCH SALES SHOULD HAVE BEEN INCLUDED IN THE UNDISCLOSED INCOME OF THE ASSE SSEE. CONSIDERING THE OVERALL FACTS WE ARE OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF 15% NET PROFIT MARGIN OF THESE RECEIVABLES IS ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE. THERE FORE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO MAKE ADDITION ONLY FOR 15% OF THE NET PROFIT OF SUCH UNACCOUNTED CREDIT SALES. THIS PROPOSAL WAS CONCEDED BEFORE US BY THE LD. CHARTERED ACCOUNTANT SHRI WARRIER. IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 14 35. IN THE RESULT THE ASSESSEE APPEALS ARE PARTLY ALLOWED. SD/- SD/- (N.VIJAYAKUMARAN) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED : 11TH AUGUST 2010 GJ COPY TO: 1. M/S.THEYYAMPATTIL JEWELLERY KOTTAKKAL. 2. M/S. THEYYAMPATTIL JEWELLERY TIRUR 3. M/S. THEYYAMPATTIL JEWELLERY PUTHANATHANI. 4. M/S. THEYYAMPATTIL JEWELLERY MALAPPURAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRA L CIRCLE CALICUT. 3. THE COMMISSIONER OF INCOME-TAX(A)-I KOCHI . 4. THE COMMISSIONER OF INCOME-TAX CENTRAL KOCHI. 5 D.R./I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) IT(S S)A.NOS. 102 103 & 104/COCH./2005 & 133 134 & 135/COCH/2005 15