TMI Blog2013 (10) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically noted is that these assessments were done under Section 153C read with Section 143(3) of the Act - The Assessing Officer was not constrained by the fetters of evidence found at the time of search alone. Assessment under Section 153C/153A cannot be treated on par with block assessments done under Chapter XIVB of the Act. Contents of the books found at the time of search, has to be considered as true by virtue of Section 132(4A) of the Act, though it is a rebuttable presumption. Admittedly, nothing was seized which would show that opening balance as on 8.11.99 was the income of the assessee for assessment year 2000-01. Considering these aspects, addition made for investment in Sahukhari Byaj business for assessment year 2000-01 was not warranted and rightly deleted by the CIT(Appeals). However, the additions made by the Assessing Officer for interest earned by the assessee in such business for various years were, unjustly deleted by ld. CIT(Appeals). Such additions are reinstated. Order of the CIT(Appeals) to this extent is set aside. In regard to the addition to be made in the jewellary business, there were more than sufficient evidence found at the time of search t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001-02 Rs. 89,702 Not available 2002-03 Rs. 93,776 Rs. 6,52,019 2003-04 Rs. 92,897 Not available 2004-05 Rs. 93,887 Not available 2005-06 Rs. 1,10,614 Not available Assessee never returned any income from its money lending business in regular returns. 3. Subsequent to search, notices were issued under Section 153C of the Act requiring the assessee to file returns for impugned assessment years. In the returns filed in pursuant to such notices, additional income declared by the assessee were as under:- Assessment Year Admitted for unexplained investment in loan against PN (Rokas) called as business loans or Sahukhari Byaj (Rs. ) Admitted for unexplained cash credit/ loans (Rs. ) Admitted for inadequacy of drawing (Rs. ) Admitted for additional interest on loan against Rokas or business loan (Rs. ) 2005-06 53,17,500 Nil 1,00,000 5,38,500 2004-05 Nil Nil 1,00,000 1,78,325 2003-04 Nil 50,000 1,00,000 1,97,750 2002-03 7,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , followed by the assessee. As per such books, on 8.11.99, there was total debtors balance of Rs. 1,24,35,793/- and creditors balance of Rs. 21,83,638/- in such money lending business. It is to be noted that assessee was having two types of money lending business. One was called Sahukhari Byaj Investment, which were loans given on security of promissory notes or Rokas and the other was loans given on the security of gold jewellery, which was called Girivi Byaj business. The debtors and creditors as on 08.11.99 mentioned above pertained to the Sahukhari Byaj business. After netting the debtors and creditors, and a few other miscellaneous credit balances, Assessing Officer determined the unexplained investment in the Sahukhari Byaj business at Rs. 74,45,523/- for assessment year 2000-01. Though the assessee filed fund flow statement and argued that debtors and creditors were netted over a period of time and the actual investment of Rs. 76,42,159/- stood admitted over various years in the returns filed after the search, Assessing Officer was of the opinion that such unexplained investment ought have been disclosed in the return for assessment year 2000-01 itself. According to him, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown in his return of income for assessment year 2006-07 value of unexplained surplus stock found on the date of search, viz. Rs. 95,48,810/- , A.O. was of the opinion that surplus stock had to be shown in assessment year 2005-06 itself. Additions made under various heads in the assessments completed under Section 153C read with Section 143(3) are summarized hereunder:- Assessment Year For unexplained investment in loan against PN (Rokas) / Sahukhari Byaj business ( ) For inadequacy in drawing ( ) For undisclosed interest on loan against Rokas or business loan ( ) For undisclosed income from jewellery business ( ) For excess stock in gold Jewellery business ( ) 2005-06 8,12,000 42,282 8,61,500 24,90,595 95,48,810 2004-05 Nil 98,011 19,21,675 25,22,686 Nil 2003-04 Nil 1,00,627 19,02,250 26,48,421 Nil 2002-03 5,25,000 1,16,794 20,28,110 42,18,044 Nil 2001-02 13,659 1,54,436 20,86,500 25,00,000 Nil 2000-01 2,74,000+74,45,52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny income was earned by the assessee through the Sahukhari Byaj business. Further as per assessee, reliance placed by the A.O. on the statement recorded under Section 132(4) for making such addition was not warranted since such statement stood retracted. 13. Insofar as addition made for excess stock for assessment year 2005-06, assessee submitted that value of excess stock was shown by him in his return for assessment year 2006-07. As per the assessee, this could not have been considered as undisclosed income for assessment year 2005-06, since search was on 3.8.2005. 14. CIT(Appeals) was appreciative of these contentions. According to him, the addition of Rs. 74,45,523/- made for investment in Sahukhari Byaj business, for assessment year 2000-01, was not at all called for. The said amount represented only opening balance. Nothing was found during the course of search to show that it represented the investment of the assessee during the relevant previous year. Further, according to him, the statement recorded on 29.9.2005 and the admissions therein could not be considered for making additions, since these were retracted by the assessee. 15. As for the addition for undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 251 ITR 561). 19. Insofar as Sahukhari Byaj business was concerned, learned D.R. submitted that no interest income from such business was ever shown by the assessee in his returns filed prior to the date of search. Even in the returns filed after the date of search, the interest returned were nominal ranging from Rs. 13,500/- to Rs. 5,38,500/-. The opening balance of debtors in assessee's Sahukhari Byaj business as on 8.11.2009 itself came to Rs. 1,24,35,708/-. That assessee was earning substantial interest income came out from the records seized at the time of search, which included books of accounts of Sahukhari Byaj business for two Diwali years. Assessee, therefore, could not say that it was not having income from Sahukhari Byaj business. Assessing Officer had estimated the interest income considering these aspects and also considering admission of the assessee. In the statement recorded, assessee had mentioned that he was earning Rs. 20 lakhs to 22 lakhs as interest since very many years except for two years wherein the incomes were Rs. 13 lakhs to 15 lakhs. Assessing Officer had made the addition considering such admission as well as volume of the Sahukhari Byaj business ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before Dy. Director of Income-tax (Inv.), Chennai, submitted that assessee had admitted a sum of Rs. 2,03,15,674/- over various years and surplus stock in gold and silver jewellery was admitted in his return for assessment year 2006-07. Investment in Sahukhari Byaj admitted over various years came to Rs. 76,42,159/-. Therefore, additions on these were not at all warranted and rightly deleted by the CIT(Appeals). 22. Further, as per the learned A.R., additions made for interest income and gold jewellery business were purely estimates and not based on any records found at the time of search. Without incriminating material, an addition of that nature could not have been made. Therefore, as per learned A.R., these additions were rightly deleted by the CIT(Appeals). Learned A.R. pointed out that only material found at the time of search pertained to previous year relevant to assessment year 2000-01. Such material had relevance only for assessment year 2000-01. For assessment done pursuant to the search, as per learned A.R., existence of seized material was a sine qua non and for this reliance was placed on the decision of Hon'ble jurisdictional High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3.2002 the Sahukari Byaj (interest on business loans) collected in cash comes to Rs. 20,00,470/-. Go through the same and explain? Ans: I have gone through the seized material Annexure/MPB/ B D/S-15 shown by you. I do agree that my income by way of Sahukhari Byaj onbss loans was around Rs. 20 lakhs to 22 lakhs in a year over the last six years. In the last two years it has come down to Rs. 13 lakhs to Rs. 15 lakhs. Q.78: What is the rate of interest you charge on sahukari loans? Ans: The rate of interest charged by me on the Sahukari loans range between Rs. 1.20 to Rs. 1.40 per hundred per month. For the last two years the interest varies between Rs. 1 to Rs. 1.30. Q.79: I am showing you page 43 47 of seized material in Annexure MPB/B D/S.15. Go through the same and explain? Ans: I have gone through the page 43 47 of seized material of Annexure MPB/B D/S-15 shown by you and the same is explained as under:- Page No.43 contains the monetary transactions with S.K. and page No.47 contains the monetary transactions with V.J. These are the two major persons from whom I give and take money as and when required. But I cannot divulge the full details. Q.80: I am showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption. Admittedly, nothing was seized which would show that opening balance as on 8.11.99 was the income of the assessee for assessment year 2000-01. Considering these aspects, we are of the opinion that the addition made for investment in Sahukhari Byaj business for assessment year 2000-01 was not warranted and rightly deleted by the CIT(Appeals). However, the additions made by the Assessing Officer for interest earned by the assessee in such business for various years were, in our opinion, unjustly deleted by ld. CIT(Appeals). Such additions are reinstated. Order of the CIT(Appeals) to this extent is set aside. 25. Coming to the aspect of addition made for income from jewellery business, admittedly, a cash book was found at the time of search and seized as per Annexure MPB/B D/S-24. Assessee was required to explain such cash book and in answer to question No.51 in the statement recorded from assessee on 29.9.2005, it was mentioned by the assessee as under:- "Q.51: I am showing you the Cash Book found during the course of search on 3.8.2005 in your residence at No.12, Moulana Abdul Kalam Azad Street, Red Hills, Chennai-52 and seized as per Annexure MPB/B D/S-24 dated 3.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an error on my part. Q.68: You have seen and vouched for yourself the actual sales of financial year 2000-2001 was more than ten times of your admission. I give you one more opportunity to state the correct sale turnover of your jewellery business for the last seven years. Please state the actual sale turnover for the last six years? Ans: I do admit that my actual sale turnover of gold jewellery and silver articles for the last six years starting from financial year 1999-2000 to 2004-2005 was in the range of Rs. 1.8 Crores to Rs. 2.25 Crores per annum. Q.69: Do you accept then that your profit by adopting a barest minimum of 10% gross profit also was in the range of Rs. 18 lakhs to Rs. 22.5 lakhs? Ans: Yes I do accept that the minimum gross profit at 10% of sales turnover was ranging between Rs. 18 lakhs to 22.5 lakhs in the last six years. Q.70: It means that the maximum gross profit at 20% was also possible? Ans: The gross profit margin normally varies between 10% to 15%. Q.71: If the minimum gross profit per year of Rs. 18 lakhs to 22.5 lakhs is taken for the last six years your profit from jewellery business alone works to Rs. 108 lakhs 135 lakhs for the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the assessee from jewellery business for various years. Nevertheless, for assessment years 2000-01 and 2001-02, Assessing Officer did not give any reduction for the income returned in the regular returns. But for that, additions were rightly done by the Assessing Officer. We are of the opinion that CIT(Appeals) was not justified in deleting such additions. These additions are reinstated. However, the A.O. is directed to exclude the income of Rs. 1,05,528/- and Rs. 89,702/- returned by the assessee for assessment year 2000-01 and 2001-02 respectively, in the regular returns while reinstating the additions. 26. Coming to last addition, which was deleted by the CIT(Appeals), pertaining to excess stock of gold and silver jewellery for assessment year 2005-06, there is no doubt that such excess stock was found at the time of search. The date of search fell in previous year 2005-06 relevant to assessment year 2006-07. Assessee had admitted value of such stock in his return for assessment year 2006-07. Assessing Officer had made the addition for assessment year 2005-06, but nevertheless, deleted such amount admitted by the assessee in his return for assessment year 2006-07. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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