ACIT, Trichur v. A.H.Aboobacker, Trichur

IN THE INCOME TAX APPELLATE T RIBUNAL COCHIN BENCH COC HIN BEFORE S/SHRI N.VIJAYAKUMARAN JM AND SANJAY ARORA AM I.T.(SS)A. NO. 23/COCH./2005 BLOCK PERIOD : 1.4.1996 TO 11.7.2002 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1) RANGE- 2 TRICHUR. VS. SHRI A.H.ABOOBACKER M/S. MALABAR ENTERPRISES WADAKKANCHERY TRICHUR. [PAN: ACYPA 5922H] (APPELLANT-REVENUE) (ASSESSEE- RESPONDENT) C.O. NO. 58/COCH/2005 I.T.(SS)A. NO. 23/COCH./2005 BLOCK PERIOD : 1.4.1996 TO 11.7.2002 SHRI A.H. ABOOBACKER M/S. MALABAR ENTERPRISES WADAKKANCHERY TRICHUR. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1) RANGE-2 TRICHUR. (APPELLANT) (RESPONDENT) ASSESSEE BY SMT. PREETHA S.NAIR ADV. REVENUE BY SHRI A.K.THATAI CIT-DR O R D E R PER SANJAY ARORA AM : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE IS ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-V KOCHI (CIT(A) FOR SHORT) DATED 25.11.2004 AND THE BLOCK PERIOD UNDER REFERENCE IS 1.4.1996 TO 11.7.2002. 2. WHILE THE REVENUE CHALLENGES THE PART-RELIEF ALL OWED BY THE FIRST APPELLATE AUTHORITY THE ASSESSEE VIDE ITS CROSS OBJECTION ( CO) APART FROM SUPPORTING THE ORDER OF THE LD. CIT(A) IN RESPECT OF THE RELIEF GRANTED PER THE SAME IS AGITATED INSOFAR AS THEREBY HE UPHOLDS THE ASSESSMENT U/S. 158BC OF THE INCOME- TAX ACT 1961 (THE ACT HEREINAFTER) AS VALID IN LAW. WE SHALL TAKE UP THE ASSESSEES CROSS OBJECTION FIRST AS IF IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 2 THE ASSESSEE SUCCEEDS ON THE LEGAL GROUND THERE W OULD BE LITTLE JUSTIFICATION IN DECIDING THE REVENUES APPEAL ON MERITS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE SEARCH OPERATION U/S. 132 OF THE ACCT WAS CARRIED OUT ON 11.7.2002 IN THE CASE OF ONE SHRI M .P. KUNJUMOHAMMED PROPRIETOR M/S. MANGADAM TRADERS AND DOORS VYLATHUR TIRUR. ONE OF THE PLACES SEARCHED I.E. A GODOWN AT IRINGALLOR IN VENGORA BELONGED TO M/S. MA LABAR ENTERPRISES A PROPRIETORY CONCERN OF THE ASSESSEE. PHYSICAL VERIFICATION OF T HE STOCK AT THE GODOWN WAS CARRIED OUT AND REVEALED STOCK WORTH RS. 23.20 LAKHS BELONGING TO THE ASSESSEE. HOWEVER NO RECORDS IN ITS RESPECT VIZ. CHALLANS BILLS STOCK REGISTER ETC. WERE FOUND THEREAT TO SHOW THAT THE SAME STOOD DULY ACCOUNTED FOR WHICH WERE EXPLAINED TO BE MAINTAINED AT THE HEAD OFFICE (HO) AT KUMARANELLUR TRICHUR. AS SUCH THE SAID BUSINESS PREMISES OF THE ASSESSEE WAS ALSO SUBJECT TO SURVEY U/S. 133A OF TH E ACT ON THE SAME DATE (11.7.2002) EVEN AS SOME DOCUMENTS LOOSE SHEETS ETC. WERE SE IZED FROM THE GODOWN (BRANCH OFFICE) AND THE STATEMENT OF THE BRANCH MANAGER S H. ABDUL SALAM RECORDED U/S. 132(4); THE ASSESSEE BEING NOT AVAILABLE. NO PHYSICAL STOCK OF THE GOODS AT THE HEAD OFFICE WAS HOWEVER TAKEN DURING THE SURVEY. SUBSEQUENTLY NOT ICE U/S. 158BC OF THE ACT WAS ISSUED TO THE ASSESSEE ON 26.3.2004 IN RESPONSE TO WHICH HE FILED A RETURN OF UNDISCLOSED INCOME IN THE PRESCRIBED FORM ON 11.6.2004 DECLARIN G AN UNDISCLOSED INCOME OF RS. 10 58 882/- I.E. FOR THE RELEVANT BLOCK PERIOD. ENQUIRIES IN RESPECT OF THE STOCK FOUND AT THE GODOWN AS WELL AS DOCUMENTS FOUND AND SEIZED FR OM THE TWO BUSINESS PREMISES WERE MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS W HEREIN THE ASSESSEE ALSO APPEARED ON SOME OCCASIONS. ON THE BASIS OF THE MATERIAL ADD UCED BY THE ASSESSEE INCLUDING BOOKS OF ACCOUNTS AS WELL THE STATEMENT OF THE ASS ESSEES MANAGER ABDUL SALAM DURING SEARCH AS WELL AS BY THE ASSESSEES DEPOSITION DATE D 3.10.2002 THE STOCK AT THE GODOWN (BRANCH OFFICE) WAS CONSIDERED AS FULLY EXPLAINED AND ACCOUNTED FOR BY THE ASSESSEE. ACCORDINGLY NO ADDITION IN ITS RESPECT WAS MADE BY THE AO. AFTER CONSIDERING ALL THE MATERIALS THE ASSESSEES UNDISCLOSED INCOME STOOD F OR THE BLOCK PERIOD STOOD ASSESSED AT RS. 31 57 350/- VIDE ORDER DATED 29/7/2004 WHICH INCLUDED COMMISS ION INCOME (RECEIVED BY THE ASSESSEE WHO AFTER COMING FROM AB ROAD DURING THE END OF THE FINANCIAL IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 3 YEAR 1998-99 ENGAGED IN ASSISTING HIS BROTHER IN T HE LATTERS TRADING BUSINESS); INFLATION IN REPORTING OF AGRICULTURE INCOME AS DISCLOSED; SH ORTAGE IN CASH (DETERMINED ON THE BASIS OF THE CASH FLOW STATEMENT FILED BY THE ASSESSEE); AND FINALLY THE UNDER-REPORTING OF INCOME ON BOOK SALES AS WELL AS ON SUPPRESSED OF TU RNOVER (FOUND ON THE BASIS OF THE ASSESSEES SALES TAX ASSESSMENT) I.E. QUA THE ASSESSEES TRADING GOODS BEING CFL AND OTHER IMPORTED ITEMS. 4.1 THE FIRST QUESTION THAT ARISES BEFORE US IS IN RELATION TO THE VALIDITY OF THE ASSESSMENT. THE ASSESSEES CHALLENGE THERETO IS ON THE BASIS OF THE DEFINITION OF THE TERM `UNDISCLOSED INCOME U/S. 158B (B) OF THE ACT. THER E IS NOTHING TO SUGGEST ON THE BASIS OF THE MATERIAL FOUND IN SEARCH THAT THE SAME REPR ESENTED (WHOLLY OR PARTLY) THE ASSESSEES INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT. THE REVENUE ON THE OTHER HAND CONTENDS THAT THE MATERIALS GATHERED IN SEARCH OR IN CONSEQUENCE THERETO DEFINI TELY LED TO THE CONCLUSIVE FINDING THAT THE ASSESSEE HAD UNDISCLOSED INCOME. THE LD. CIT(A) WE FIND HAS REJECTED THE ASSESSEES PLEA ON THE BASIS THAT IT HAD ITSELF RET URNED UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE LD. DR IN ADDITION ARGUES THAT THE LE GALITY OF THE SEARCH ALSO CHALLENGED BY THE ASSESSEE BEFORE US WITH REFERENCE TO THE DECISI ON IN THE CASE OF NTPC LTD. V. CIT 229 ITR 383 (SC) FIRSTLY CANNOT BE CHALLENGED BEFORE THE APPELLATE TRIBUNAL WHOSE POWERS BEING CIRCUMSCRIBED BY THE STATUTE ARE AS FALLING WITHIN THE AMBIT OF S. 254 OF THE ACT. FURTHER EVEN SO THERE IS NOTHING THAT WO ULD PREVENT THE ASSESSING AUTHORITY FROM TAKING COGNIZANCE IN FRAMING AN ASSESSMENT O F ANY MATERIALS OR INFORMATION THAT COME IN ITS POSSESSION I.E. EVEN IF SEARCH WERE T O BE ILLEGAL SO THAT THE ARGUMENT QUA THE ILLEGALITY OF SEARCH IS OF NO CONSEQUENCE PLACING RELIANCE ON THE DECISION IN THE CASE OF POORAN MAL VS. DIRECTOR OF INSPECTION (INV.) 93 ITR 505(SC). 4.2 WITH REGARD TO THE LEGAL OBJECTIONS RAISED WE FIRSTLY FIND THAT THE GROUNDS RAISED PER THE CO DO NOT ANYWHERE ASSAIL THE VALIDITY OF T HE SEARCH SO THAT THE ARGUMENT RAISED DURING HEARING IN ITS RESPECT IS NOT IN SUPPORT OF THE APPEAL AS PREFERRED. IN ANY CASE IT IS WELL SETTLED THAT THE SAME CANNOT BE CHALLENGED BE FORE THE TRIBUNAL BUT ONLY UNDER WRIT IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 4 JURISDICTION OF THE HIGHER COURTS OF LAW (REFER: GAYA PRASAD PATHAK V. CIT (ASSTT.) 290 ITR 307 (MP); PROMAIN LTD. V. CIT (DY.) 95 ITD 489 (DEL.) (SB)) SO THAT THE SAME IS EVEN OTHERWISE OF NO MOMENT. AS REGARDS THE PLEA WI TH REGARD TO THE DEFINITION OF THE UNDISCLOSED INCOME WE FIND THAT THE ADDITIONS IMPU GNED BY THE REVENUE THEIR MERITS APART HAVE THEIR GENESIS IN THE SEIZED BILL BOOKS AND THE OTHER MATERIALS FOUND SEIZED OR IMPOUNDED FROM THE TWO BUSINESS PREMISES AS WELL A S THE STATEMENT OF THE ASSESSEES MANAGER U/S. 132(4) DATED 11/7/2002. NO BOOKS OF AC COUNT FOR THE F.Y.S 2000-01 AND 2001-02 WERE FOUND EVEN FROM THE HO AND WHICH FACT WAS LATER EXPLAINED BY THE ASSESSEE AS ON ACCOUNT OF THEIR BEING WITH HIS ACCO UNTANT FOR COMPLETION. IN FACT WE FIND THAT THE ASSESSMENT ON QUANTUM STANDS CONFIRME D BY THE LD. CIT(A) TO A SIGNIFICANT EXTENT (OVER RS. 15 LACS) AND WHICH IS NOT BEING C ONTESTED BY THE ASSESSEE IMPLYING ACCEPTANCE OF THE UNDISCLOSED INCOME TO THAT EXTENT OR IN THE VERY LEAST MATERIAL TO INFER THE SAME. AS SUCH THERE CAN BE NO QUESTION AS REGA RDS THE VALIDITY OF BLOCK ASSESSMENT PROCEEDINGS REGARD BEING MADE ALSO TO THE PROVISIO N OF S. 292C OF THE ACT. FURTHER ON WE ARE AWARE THAT THE ASSESSMENT STANDS FRAMED U/S. 158BC WHILE THE SAME OUGHT TO HAVE BEEN MORE APPROPRIATELY U/S. 158BD R.W.S. 158BC OF THE ACT (REFER: CIT (ASSTT.) V. VINOD GOEL 111 ITD 70 (ASR.)). THIS HOWEVER WOULD NOT BE M ATERIAL IN THE PRESENT CASE AS THE AO HAVING JURISDICTION OVER THE PERSON IN RESPECT O F WHOM PROCEEDINGS U/S. 132(1) STOOD MADE I.E. SHRI KUNJU MOHAMMED AND THE ASSESSEE IS ONE AND THE SAME WITH THERE BEING AS APPARENT MATERIAL FOUND AS A RESULT OF S EARCH INDICATING UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. ONCE AN AUTHORIT Y HAS THE POWER AND THE INGREDIENTS FOR THE EXERCISE THEREOF STAND SATISFIED REFERENCE TO A WRONG SECTION (SOURCE THEREOF) WOULD NOT BE MATERIAL. THIS IS PARTICULARLY SO AS I N EITHER CASE ITS PURPORT IS THE SAME I.E. THE ASSESSMENT OF THE UNDISCLOSED INCOME FOR THE BL OCK PERIOD WITH REFERENCE TO THE SEARCH AFORESAID. REFERENCE IN THIS CONTEXT BE MADE AMONG OTHERS TO THE DECISION IN THE CASE OF HAZARI MAL KUTHIALA V. ITO 41 ITR 12 (SC) WHEREIN IT STANDS HELD THAT THE EXERCISE OF POWER WOULD BE REFERABLE TO A JURISDICT ION THAT CONFERS VALIDITY RATHER THAN THAT WHICH RENDERS THE SAME NUGATORY AS ALSO TO S. 292B OF THE ACT. SUPPORT IS ALSO DRAWN FROM THE DECISION IN THE CASE OF SUBHAN JAVEED V. ASST. CIT 122 ITD 307 (BANG.). THE ASSESSEES LEGAL CHALLENGE THUS FAILS. IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 5 5. COMING TO THE MERITS OF THE ADDITIONS WHICH FOR M THE SUBSTANCE OF THE REVENUES APPEAL WE SHALL TAKE UP EACH OF THE FOUR ADDITIONS SEPARATELY. THE FIRST ONE FOR RS. 87 582/- IS IN RESPECT OF SUPPRESSION OF TURNOVER F OR RS.4 37 910/-; THE AO ASSESSING THE PROFIT ELEMENT AT THE RATE OF 20%. THE ASSESSEE WAS ADMITTEDLY APART FROM SALE OF IMPORTED ITEMS WHICH WERE DEALT WITH ON WHOLE-SALE BASIS ALSO UNDERTAKING RETAIL SALES THEREOF THOUGH AS STATED NOT ON A REGULAR BASIS. THIS STANDS DISCLOSED BOTH BY THE MANAGER AS ALSO ADMITTED BY THE ASSESSEE WHO ALSO CONCEDED OF OMISSIONS IN THE RECORDING OF SALES AND WHICH FACT IS ALSO BORNE BY THE NOTINGS IN THE SEIZED BILL BOOKS. SALES OF RS. 4 37 910/- WERE STATED TO HAVE BEEN UN DER-INVOICED AT RS. 19 250/- BY THE MANAGER. THE ASSESSEE THOUGH REFUTED THE MANAGERS STATEMENT COULD NOT ADDUCE EVIDENCE TO PROVE THE CONTRARY SO THAT THE SAME WA S CONSIDERED AS OF NO EFFECT. THE ASSESSEE FOUND FAVOUR WITH THE LD. CIT(A) ON THE BA SIS THAT THE MANAGERS STATEMENT WAS NOT CONFRONTED TO THE ASSESSEE AND SECONDLY THE MANAGER APART FROM BEING EMPLOYED WITH THE ASSESSEE WAS ALSO WORKING FOR SOME OTHER PEOPLE AS SHRI SHAMSUDHEEN SHRI KUNJU MOHAMED ETC. ALSO DEALING IN THE SAME LINE O F BUSINESS. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. THERE IS FIRSTLY NO DOUBT THAT THE GODOWN SUBJECT TO SEARCH WAS BEING U SED BY THE ASSESSEE AS HIS BRANCH OFFICE AS ALSO CONFIRMED BY THE ENDORSEMENT ON THE SALES TAX REGISTRATION AND THE OWNING BY THE ASSESSEE OF STOCK WORTH RS. 23.20 LACS FOUND THEREAT. AND WHICH RATHER PROVES THE MANAGERS STATEMENT TO THAT EXTENT EVEN AS THE ASS ESSEE WAS SUCCESSFUL IN EXPLAINING THE SAME (STOCK) WITH REFERENCE TO HIS BOOKS OF ACCOUNT . THE SAID FACTS ALSO EXHIBITS AND JUSTIFIES HIS ENGAGEMENT BY THE ASSESSSEE. THE FACT THAT THE MANAGER WAS BESIDES THAT OF THE ASSESSEE ALSO MANAGING THE AFFAIRS OF OTHERS WOULD NOT DETRACT FROM THE FACT THAT HE WAS WORKING FOR THE ASSESSEE AND HIS STATEMENT WAS SPECIFIC IN RELATION TO THE AFFAIRS OF MALABAR ENTERPRISES. THE ASSESSEE HIMSELF ADMITS OF ALSO UNDERTAKING RETAIL TRADE THOUGH NOT ON A REGULAR BASIS AS WELL AS TO THE OMISSIONS IN THE RECORDED SALES. ADMISSION IS THE BEST FORM OF EVIDENCE AND THERE IS NO DENIAL RATH ER CORROBORATION OF THE ADMITTED FACTS . AS SUCH IT IS ESSENTIALLY A MATTER OF ASSESSMENT OF THE UNDISCLOSED PROFIT ON THE IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 6 SUPPRESSED TURNOVER WHICH STANDS ALSO DETECTED BY THE SALES-TAX AUTHORITIES FOR THE SAME YEAR (F.Y. 2001-02) EVEN AS THE SAME IS THE SUBJEC T MATTER OF A SEPARATE ADDITION ( REFER PARA # 11 ). UNDER THE CIRCUMSTANCES THE NON-CROSS EXAMINATI ON WOULD NOT BE OF MUCH RELEVANCE THE ADDITION EFFECTED BEING ON SPECIFIC MATERIAL BEING THE RELEVANT INVOICES (PER WHICH GOODS WORTH RS. 19 250/- STAND SOLD) AND THE STATEMENT OF THE MANAGER WHICH HAS NOT BEEN EFFECTIVELY REBUTTED BY THE ASSE SSEE ONLY ISSUING A DENIAL AND WHICH ITSELF CONFIRMS THE KNOWLEDGE OF THE CONTENTS BEING RELIED UPON. THE ASSESSEE COULD HAVE EASILY ESTABLISHED ABSENCE OF ANY UNDER-BILLING IF SO WITH REFERENCE TO THE PURCHASE INVOICES OF THE GOODS STATED TO BE UNDER-INVOICED. AND THUS EFFECTIVELY REBUTTED THE MATERIAL BEING RELIED UPON JUST AS HE PROVED THE S TOCK AT THE GODOWN AS BEING ACCOUNTED WITH SPECIFIC MATERIALS. BESIDES THE ASSESSEE OTH ER THAN IN THE CASE OF THIRD ADDITION (RS. 1 79 200/-) HAS NOT SPECIFICALLY REQUIRED CROSS-EX AMINATION OF THE MANAGER WHOSE STATEMENT IT MUST BE APPRECIATED IS ONE U/S. 132( 4) OF THE ACT AND FURTHER BY A NON- INTERESTED PARTY. IT NEEDS BE BORNE IN MIND THAT TH E ASSESSEE HAS HIMSELF RETURNED UNDISCLOSED INCOME FOR THE BLOCK PERIOD INCLUDING BUSINESS INCOME FOR THE RELEVANT YEAR SO THAT THERE IS NO DENYING THE FACT THAT HE STOOD ENGAGED IN UNACCOUNTED BUSINESS DURING THE RELEVANT YEAR CORROBORATING THE EVIDENC ES/MATERIAL FOUND AS A RESULT OF SEARCH. THE MATTER AS STATED EARLIER IS THUS ONE OF EST IMATION OF UNDISCLOSED PROFIT ON THE RETAIL TRADE UNDERTAKEN BY THE ASSESSEE DURING THE RELEVAN T PERIOD BEING F.Y. 2001-02. THE ASSESSEE THOUGH ENTITLED TO REBUT THE SAID STATEME NT HOWEVER COULD DO SO ONLY ON SOME DEFINITE BASIS WHICH IT HAS FAILED TO BASING HIS CASE ONLY ON THE ISSUE OF DENIAL AND WHICH IS OF NO MOMENT IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. IT HAS NEITHER IMPUGNED THE PROFIT RATE. THE LD. CIT(A) TO OUR MI ND HAS FAILED TO APPRECIATE THAT THE STATEMENT BY THE MANAGER IS U/S. 132(4) OF THE ACT NOT RETRACTED BY THE DEPONENT AND BASED ON DEFINITE SEIZED MATERIAL NEITHER THE EXIS TENCE NOR THE TRUTH OF WHICH IS DENIED OR EFFECTIVELY REBUTTED BY THE ASSESSEE WHO CONCEDES BOTH OF THE EXISTENCE OF THE RETAIL TRANSACTIONS AS WELL AS THE OMISSIONS IN THE RECORD ED SALES. WE THEREFORE CONFIRM THE ADDITION AS MADE DERIVING SUPPORT FROM THE DECISIO N IN THE CASE OF V. KUNHAMBU & SONS V. CIT 219 ITR 235 (KER.) EVEN AS WE FIND THE AOS WORK ING IS ERRONEOUS INASMUCH AS IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 7 HE SHOULD HAVE EXCLUDED THE DISCLOSED TURNOVER (RS. 19 250/-) BY THE ASSESSEE FROM THE PROFIT ESTIMATION. THE ASSESSEE GETS A RELIEF OF RS . 5850/- BEING 20% THEREOF. 7. THE SECOND ADDITION IS FOR RS. 1 79 200/-. THE S AME PERTAINS TO THE UNACCOUNTED SALE OF 89 600 NOS. OF CFL DURING THE F.Y. 2001-02. THESE AS PER THE MANAGERS STATEMENT STOOD SOLD AT RS. 34 APIECE THOUGH NO P ROFIT ELEMENT STOOD STATED BY HIM. THE ASSESSEE ON THE OTHER HAND STATES OF HAVING EARNE D A MARGIN OF RS. 0.50 PS. PER PIECE ONLY BEING A WHOLESALE DEALER FURTHER STATING THA T ANY DECISION FOR ADOPTION OF A DIFFERENT PRICE MAY BE TAKEN ONLY AFTER BEING GRANT ED AN OPPORTUNITY OF BEING HEARD INCLUDING FOR CROSS-EXAMINATION. THE AO AS IT APPE ARS ON ACCOUNT OF TIME CONSTRAINT COULD NOT GRANT THIS OPPORTUNITY AND ESTIMATED THE MARGIN OF PROFIT AT RS. 2 APIECE. THE LD. CIT(A) DELETED THE ADDITION FOR THE SAME REASON S AS STATED BY HIM IN RESPECT OF FIRST ADDITION FOR RS. 87 582/- DISCUSSED HEREINBEFORE. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. WE FIRSTLY OBSERVE THE SURROUNDING FACTS & CIRCUMSTANCES FOR T HIS ADDITION TO BE THE SAME AS IN RELATION TO THE ADDITION FOR RS. 87582/- DISCUSSED AT PARA # 6 ABOVE. AS WOULD BE APPARENT THE MANAGERS STATEMENT IS DEFINITE IN IT S CONTENT AND CORROBORATED BY THE FACT THAT THE ASSESSEE DEALS IN THE SAID ITEM. THE ISSUE WE FURTHER OBSERVE IS NOT WITH REGARD TO THE SALE OF THE SAID ITEM PER SE ; THE ASSESSEE NOT DENYING THE SAME AND NEITHER TH E AO MAKING ANY ADDITION TOWARD THE INVESTMENT ON ITS AC QUISITION BUT OF THE PROFIT ON ITS SALES IN THE FACTS AND CIRCUMSTANCES OF THE CASE W HICH STAND CONCEDED BY THE ASSESSEE AT RS. 0.50 PER PC. THIS IS FURTHER SO AS THE ASSESSEE COULD HAVE EASILY; THE ITEM BEING IMPORTED PROVED ITS COST OR EVEN THE SALE PRICE WITH REFERENCE TO SOME DOCUMENTS AND THUS THE TRADING MARGIN. IN OUR VIEW IT WOULD HAVE BEEN BETTER IF THE MATTER HAD BEEN INVESTIGATED FURTHER BY THE AO PARTICULARLY WITH R EGARD TO THE PROFIT ELEMENT WHICH ALONE HE HAS BROUGHT TO TAX BASING HIS ESTIMATION THEREOF ON A MORE DEFINITE BASIS. SIMILARLY THE ASSESSEE OUGHT TO HAVE SUBSTANTIATED ITS CLAIM OF HAVING EARNED ONLY RS. 0.50 APIECE WHICH WORKS TO ABOUT 1.5% ONLY. THE LD . CIT(A) BEING VESTED WITH THE VERIFICATION POWER I.E. APART FROM BEING AN APPEL LATE AUTHORITY COULD HAVE CAUSED THE IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 8 SAME BUT FAILED TO. UNDER THE CIRCUMSTANCES WE ON LY CONSIDER THAT AN ESTIMATE OF RE. 1 PER PIECE WHICH WORKS TO CLOSE TO 3% WOULD MEET T HE ENDS OF JUSTICE DRAWING SUPPORT FROM THE DECISION IN THE CASE OF CIT V. RAJENDRA PRASAD GUPTA 248 ITR 350 (RAJ.) UPHOLDING THE PRINCIPLE THAT UNDER APPROPRIATE CIRC UMSTANCES ASSESSMENT OF UNDISCLOSED INCOME ON ESTIMATE BASIS COULD BE MADE BY THE AO. W E DECIDE ACCORDINGLY AND THE ASSESSEE GETS A RELIEF FOR RS. 89 600/-. 9. THE THIRD ADDITION I.E. FOR RS. 2 39 782/- IS BASED ON THE NOTINGS IN THE SEIZED BILL BOOKS AND A NOTE-BOOK SUPPLEMENTED BY THE MANAGER S STATEMENT ON THE BASIS OF WHICH THE AO FOUND THE SALES SUPPRESSION OF RS. 11 98 910 /- AND ESTIMATED THE PROFIT THEREON AT 20%. THE ASSESSEE ON ITS PART DENIED THE SAME ON THE GROUND THAT THE MANAGER WAS ALSO WORKING FOR OTHERS IN THE SAME TRADE. THE LD. CIT(A) ON AN EXAMINATION OF THE SEIZED NOTE-BOOK FOUND THAT THERE WAS NOTHING THER EIN WHICH WOULD CONNECT THE ENTRIES APPEARING THEREIN WITH THE ASSESSEE. FURTHER THE M ANAGER HAD HIMSELF NOWHERE STATED THAT THE NOTE-BOOK PERTAINED TO THE ASSESSEES BUSI NESS. HE THEREFORE WAS OF THE VIEW THAT THE AO HAD NOT BEEN ABLE TO ESTABLISH BEYOND D OUBT THAT THE ENTRIES THEREIN PERTAINED TO THE ASSESSEES BUSINESS AND ACCORDINGLY ALLOWE D RELIEF TO THE ASSESSEE. 10. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE DEPONENT HAD NOWHERE STATED OF THE NOTE-BOOK BELONGING TO THE AS SESSEES BUSINESS AND THE LD. CIT(A) ON EXAMINATION FOUND NOTHING THEREIN TO LINK IT WIT H THE ASSESSEE. THIS IS ALL THE MORE RELEVANT CONSIDERING THAT TWO OTHERS WERE ALSO OPER ATING FROM THE SAME PREMISES DEALING IN THE SAME GOODS AND WHOSE AFFAIRS WERE ALSO BEIN G HANDLED BY THE MANAGER. THE REVENUE BEFORE US HAS NOT BEEN ABLE TO IN ANY MAN NER CONTROVERT THE FINDINGS OF FACT BY THE LD. CIT(A). IN FACT THE AO WE FIND HAS PROCE EDED TO MAKE THE ADDITION IN THE ABSENCE OF ANY OTHER ALTERNATIVE; THE ASSESSEE ISSU ING A DENIAL. THE ASSESSMENT THUS IS DE HORS THE MATERIAL ON RECORD AND WHICH BEING A BLOCK A SSESSMENT AND NOT UNDER THE REGULAR PROVISIONS OF THE ACT CANNOT BE. WE THERE FORE ARE IN AGREEMENT WITH THE LD. CIT(A) THAT THE SAME CANNOT BE SUSTAINED. WE DECID E ACCORDINGLY. IT(SS)A. NO. 23/COCH./2005 & C.O. NO. 58/COCH/2005 9 11. THIS LEAVES US WITH THE FOURTH AND FINAL ADDI TION FOR RS. 15135/- BEING 20% OF THE SALES SUPPRESSION AS ASSESSED BY THE SALES TAX AUTH ORITIES IN THE ASSESSEES CASE FOR THE RELEVANT PERIOD. THE LD. CIT(A) DELETED THE SAME ON THE GROUND THAT THE SAME CANNOT FORM PART OF THE BLOCK ASSESSMENT. WE ARE IN AGREEM ENT AND CONFIRM THE DELETION ALONG WITH THE REASON CITED THEREFOR. WE DECIDE ACCORDING LY AND THE REVENUES GROUND FAILS. 12. IN THE RESULT THE REVENUES APPEAL IS PARTLY A LLOWED AND THE ASSESSEES CROSS OBJECTION IS DISMISSED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 28TH APRIL 2010 GJ COPY TO: 1. SHRI A.H.ABOOBACKER M/S. MALABAR ENTERPRISES W ADAKANCHERY TRICHUR. 2. THE THE ASSISTANT COMMISSIONER OF INCOME TAX CI RCLE-2(1) RANGE-2 TRICHUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V KOCH I. 4. THE COMMISSIONER OF INCOME-TAX TRICHUR. 5. D.R./I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR)