TMI Blog2013 (6) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that they have been dispatched on that date itself leaving them beyond the control of the assessing officer to make any change or modification. Under these set of facts, the impugned assessment orders have become complete and effective on 31.12.2010 itself, in which case, they cannot be considered as barred by limitation. Accordingly, reject the grounds raised by the assessee on this issue. Rejection of book results - Held that:- The gold and silver ornaments are high valued items and hence all traders are vigilant over the stock kept by them. Hence, at any point of time, a gold merchant would be in a position to tell the aggregate quantity of stock held by him. If a prudent business man follows a systematic method of accounting only a portion of purchase and sales, then it would be difficult for anybody to find any defect in the books of accounts. In the instant case also, even if the AO did not point out any defect in the books of accounts, other factors as the assessee claims that the excess stock actually belong to the partner of the assessee firm, veracity of which requires examination, yet the fact remains that the assessee did not account for the same in its books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip firm consisting of two partners viz., Shri G.Venkatesan and his mother Smt. Muthulakshmi Ammal. It is engaged in the business of trading in gold and silver ornaments at Muvattupuzha. The revenue carried out search and seizure operations in the business premises of the assessee and also at the residential premises of its partners on 09-04-2008. During the course of search, it was noticed that the assessee did not keep any accounts for its business for the period from 01-04-2008 to 09-04-2008. It was also found that the purchase and sale entries were not made in the purchase register, sales register or stock register. The search party also stumbled upon excess stock of 2032 grams of gold and 7901 grams of silver ornaments. The search officials recorded a statement from the Managing partner of the firm Shri G.Venkatesan. According to the assessing officer, he admitted that the assessee firm did not maintain accounts for the period from 01-04-2008 to 09-04-2008 and had also accepted the fact that the assessee has carried on transactions of purchase and sales outside the books of account. It was further noticed that the assessee firm was effecting sales on the basis of "estimate slip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before him, held that the assessee is not entitled to raise the issue relating to the validity of search. For this proposition, the Ld CIT(A) placed reliance on the decision of the Delhi Special bench of ITAT in the case of Promain Ltd Vs. CIT( 281 ITR (AT) 107). However, the Ld CIT(A) also rejected the said ground on merits also, i.e., he held that the new claim of non-presence of panchas is not valid since the copies of panchanamas were duly signed by the Panchas and the copies thereof were given to the assessee during the search proceedings and the assessee did not raise any objection at that point of time or during the course of assessment proceedings. The Ld CIT(A) further observed that the assessee is raising this claim for the first time before him and it did not give any reason for not raising the same before the AO or the investigation wing. The Ld CIT(A) further held that the assessee is debarred from raising this issue in any further proceeding in view of the provisions of sec. 292B and 292 BB of the Act. With regard to the additions made by the AO in respect of suppressed sales, the ld CIT(A) directed the AO to estimate the income at 5 times of the declared turnover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving the affidavits. Further, they have not cited any reason for the considerable delay in retracting from the position taken earlier. Accordingly, the Ld D.R contended that the present claim is only an after thought aimed to protect the assessee. The Ld D.R further submitted that the assessee did not take this plea of non- presence of panchas either before the search officials or before the assessing officer. He also did not complain about any misbehaviour or improper actions of search party. Accordingly, the Ld D.R contended that the present plea of the assessee deserves to be rejected. The Ld D.R further pointed, the lapse, if any, in this regard is only a technical or procedure lapse and hence it would not vitiate the search proceedings, which was otherwise validly initiated. 9. We have heard the rival contentions on this issue and carefully perused the record. Admittedly, the assessee has urged this issue for the first time before the Ld CIT(A) after a gap of almost three years from the date of search. The Panchas, by filing affidavits, have, in effect, retracted from their stand taken earlier. It is well settled proposition that the retraction should be made at the earliest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from the department. The assessee is questioning the validity of search only on the plea of non-presence of panchas during the course of search proceedings. Hence, in our view, the decision rendered in the case of MD Overseas Ltd (supra) in a different context, will not come to the help of the assessee herein. 11. The assessee has also raised a ground relating to limitation, i.e., according to the assessee, the assessment order is barred by limitation. According to the assessee, as per the provisions of sec. 153B of the Act, the assessing officer shall make an order of assessment or reassessment u/s 153A of the Act within 21 months from the end of the financial year in which the last of authorization was executed. In the instant case, the search took place on 09.04.2008 and hence the limitation period expires on 31.12.2010. According to the assessee, the impugned assessment orders were served upon him only on 03-01-2011, even though they were dated 31-12-2010. According to the assessee, the assessment order takes effect only on communication and since the impugned orders were communicated to the assessee only on 03-01-2011, they were barred by limitation. The assessee placed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the impugned assessment orders were passed on 31.12.2010. It is not shown to us that the said orders remained in the hands of the assessing officered even after 31.12.2010. On the contrary, the Ld D.R has submitted that they have been dispatched on that date itself leaving them beyond the control of the assessing officer to make any change or modification. Under these set of facts, the impugned assessment orders have become complete and effective on 31.12.2010 itself, in which case, they cannot be considered as barred by limitation. Accordingly, we reject the grounds raised by the assessee on this issue. 13. The assessee has taken a ground that the rejection of book results was not valid, since the assessing officer did not point out any defect in the books of account maintained by the assessee. The assessee has pointed out that the defects pointed out relate to the period from 01.04.2008 to 09-04-2008 and they cannot be extrapolated to other years. In this regard, the Ld A.R placed reliance on the following case laws:- (a) CIT Vs. Paradise Holidays (2010)(325 ITR 13)(Delhi) (b) CIT Vs. Bindal Apparels (2011)(332 ITR 410)(Delhi) (c) CIT Vs. Smt. Poonam Rani (2010)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock actually belong to the partner of the assessee firm, veracity of which requires examination, yet the fact remains that the assessee did not account for the same in its books of account, even as per its claim. This fact further reinforces the decision reached by the assessing officer to the effect that the books of account are not reliable. 15. The gold and silver ornaments are high valued items and hence all traders are vigilant over the stock kept by them. Hence, at any point of time, a gold merchant would be in a position to tell the aggregate quantity of stock held by him. If a prudent business man follows a systematic method of accounting only a portion of purchase and sales, then it would be difficult for anybody to find any defect in the books of accounts. For example, as pointed out by the A.O., if the an assessee has followed the practice of accounting for only 10% of the purchase and sales, the accounts systematically prepared in that fashion would not show any defect. But the fallacy could be found on the basis of surrounding circumstances. Hence the books of accounts prepared in a particular methodology would become unreliable. In the instant case also, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a separate entity. However, even under the Income tax Act, the questions relating to the partnership firm can be put to the partner only. The excess stock was found at the business premises of the assessee firm only and hence the questions relating to the same were put to the Managing Partner Shri G. Venkatesan, since the assessee firm is responsible to explain the excess stock found during the course of search. The assessee has not established that Shri G.Venkatesan was indulging into the gold and silver business in his personal capacity even prior to the date of search. Only after the search operations, it appears that the assessee has tried to explain the excess stock of gold and silver ornaments by furnishing a cash flow statement of Shri G. Venkatesan. Further the assessee has not brought on record to show that the excess stock actually belonged to Shri G.Venkatesan. It is well settled proposition of law that the strict rule of evidence would not be applicable to Income tax proceedings and the transactions could be decided on the basis of surrounding circumstances and human probabilities. Though the Ld A.R placed reliance on the decision of Hon'ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1) at 175.174 grams. The AO further noticed that the assessee has accounted for sale of only 17 grams per day. Accordingly, the AO came to the conclusion that the assessee has been accounting for only 10% of actual sales and accordingly determined the total turnover at 10 times of declared turnover. Even though, the assessee was declaring the G.P rate in the range of 36.55% to 48.08%, the AO held that Gross profit at that rate could not be earned in the jewellery business. Accordingly, the AO came to the conclusion that the assessee has been inflating the Gross Profit to account for the part of profit realized on suppressed sales. Though the AO did not bring on record any basis for determining the rate of Gross profit @ 20%, yet he has come to the conclusion that a normal business man can achieve gross profit at that rate only. 20. Though the Ld CIT(A) has held that the estimation made by the AO was on the higher side and accordingly reduced the total turnover to five times of the declared turnover, yet he also did not bring any material on record to substantiate his decision. 21. The fact remains that the AO has arrived at his conclusion on the basis of estimate slips found f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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