TMI Blog1997 (4) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment is under challenge, it would be proper, first to decide this issue and then, if need be, shall decide the other grounds. 2. Search operations had taken place on 22-12-1988 and 23-12-1988 at the business and residential premises of Shri Parasmal Jain, the father of the assessee. While searching the residential premises, it was noticed that the assessee was running his personal business of gota making (Zari business) in the same premises. The books of account and other documents pertaining to the assessee's business were seized. The assessee's statement was recorded under section 132(4) wherein it was admitted by him of owning and running the zari business. The Assessing Officer, therefore, applied the provisions of section 132(7) and considered the seized documents while framing the assessment. The validity of the assessment was challenged before the CIT(Appeals) who rejected the ground of the assessee and held the assessment to be valid. 3. Shri Lajpat Rai, the ld. counsel for the assessee, submitted that the assessee's father Shri Parasmal Jain is carrying on independent business. A search warrant under section 132(1) was issued in the name of Shri Parasmal Jain to sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of ITO v. Seth Bros. [1969] 74 ITR 836. The ld. D.R. also placed reliance on another decision of the Supreme Court in the case of Pooran Mal v. Director of Inspection [1974] 93 ITR 505. Thus the ld. D.R. strongly urged to uphold the validity of the assessment made in the assessee's case on the basis of the search carried out on his father. 5. We have heard the parties on the issue of the validity of the assessment. We have duly considered the material placed before us. We are of the considered opinion that on the facts as placed before us and in the circumstances of the case, the assessment cannot be held to be invalid or illegal. 6. It is true that the search warrant was not in the name of the assessee. However, what is important is that the search of the premises is valid. if the search party has entered into the premises with proper authorisation, it is not necessary that the search warrant should be in the name of each person who resides in that premises. In the instant case, there is nothing on record to suggest that the assessee was living separately from his father or that his dwelling unit was separate and distinct from his father's dwelling unit. In a joint f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to be valid. However, assuming that the search was illegal, the bases on which the assessee has been assessed, are evidences found in the course of such search. The question is, can such evidences, which are obtained in the course of an illegal search, be used against the person from whose custody they were seized. The reply is best provided by the Supreme Court in Pooran Mal's case: " It would thus be seen that in India, as in England, where the test of admissibility of evidence lies in relevancy, unless there is an express or necessarily implied prohibition in the constitution or other law of evidence obtained as a result of illegal search or seizure is not liable to be shut out. In that view, even assuming, as was done by the High Court, that the search and seizure were in contravention of section 132 of the Income-tax Act, still the material seized was liable to be used subject to law before the income-tax authorities against the person from whose custody it was seized and, therefore, no writ of prohibition in restraint of such use could be granted. It must be, therefore, held that the High Court was right in dismissing the two writ petitions. The appeals must also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered in the books has not been disputed by the ld. counsel. For this submission, the ld. D.R. drew our attention to certain purchase bills which pertained to August, 1988. The same were not entered in the books upto December, 1988, i.e. upto the month in which the search took place and hence there was every reason to believe that the said purchases were unaccounted transactions. Further, according to the ld. D.R., the story that the accountant had left the services of the assessee was also an afterthought, as was evident from a different version given by the assessee in his statement recorded under section 132(4). 14. After duly considering the rival submissions and the material on record, we do not see any merit in sustaining the addition. The assessee's explanation before the Assessing Officer is very much palatable. It is observed that it has been the consistent practice of the assessee to record the credit purchases directly into the ledger without entering them into any subsidiary books. It is indeed a crude way of writing the books of account, but certainly not unverifiable if the purchase bills are produced. We would have certainly agreed to the Assessing Officer's conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-off of Rs. 1,34,104 against the other additions. No separate addition is called for." 17. The assessee has challenged the above order for sustaining the addition in principle, whereas the department has challenged the set-off allowed by the CIT(Appeals) against other additions. The assessee has also filed his cross-objection against the ground raised by the revenue. 18. The ld. D.R. has relied on the order of the Assessing Officer, whereas the main contention on behalf of the assessee is that in the year under appeal the assessee has declared better results showing G.P. at 17.6 per cent as against 11.9 per cent in assessment year 1987-88 and 10.5 per cent in assessment year 1988-89. Therefore, there is no justification to sustain the addition. 19. At the out set, we do not approve of the Assessing Officer's observation regarding non-maintenance of day-to-day consumption register. Though technically speaking the assessee is a manufacturer, the nature of activity carried on by him (got a making) cannot be equated with a sophisticated industry involving complex manufacturing processes. Moreover, the background of the assessee and the volume of the business also need to be kept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to treat the stocks as unaccounted. The ld. D.R. relied on the order of the Assessing Officer. 22. After considering the submissions and the material on record, we are of the view that the addition is wholly unjustified. Nothing is brought on record to show that the stocks are not accounted for. That the stocks are hypothecated to the bank is also not disputed. Moreover, when the trading account was recast by the Assessing Officer by enhancing the sales and applying 20 per cent of G.P. rate, it necessarily means that the trading account did include stocks, or else how could he arrive at or estimate any rate of gross profit. Moreover, when the stocks were inventorised at the time of search, item-wise verification may not have been possible at the time of assessment proceedings, but in a business like this which is more like a home industry, the Assessing Officer could have satisfied himself by tallying the valuation with a reasonable allowance of error on either side. But the Assessing Officer made no effort at all and says the valuation is not verifiable as wages and other expenses are not vouched. The assessee does not belong to that category of organised or professionalised ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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