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TMI Blog2012 (7) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the assessee initiating his arguments submitted that particularly common orders have been made by the Assessing Officer and adjudicated by the learned CIT(A) in a stereo type manner on the appeals of the respective assessees for the simple reason that a search and seizure operation u/s.132 was conducted in the residential and business premises of the group cases of Shri Gudula Venkanta Raman and Gudula Vaskar Rao, which includes M/s. GRM Enterprises and other assessee being common partners. Returns for the respective AYs have been filed electronically and otherwise when in pursuance to notice u/s.153A returns were filed as were filed earlier u/s.139(1). The learned Counsel for the assessee vehemently argued that no iota of searched material could lead to a finding that the assessees could be subjected to any undisclosed income. In other words, the learned Counsel for the assessee submitted that invariably the source of income rendered by the assessee firms having turnover in Crores of rupees leading to return of income on the turnover was accepted but for the percentage of return thereon which the assessing authorities have tried to tinker with without bringing on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as disallowance of expenditure. He was not passing the order for disallowance of interest and salary to partners as they are to be taxed in the hands of the partners as business income. By inflating the Net Profit rate the expenses stand allowed to the extent the disallowance of expenditures or interest and salary to partners remains the same. This information was procured by the Assessing Officer from the financial statements duly audited under the provisions of Section 44AB when the auditors have categorically submitted that proper books of account are maintained that have been physically verified by them. The purpose for initiating penalty u/s.271A therefore has not been given the finding for an logical conclusion as of now. 4. On the learned CIT(A) confirming all these estimations of income and disallowance of expenditures the learned CIT(A) swayed by the facts that the Assessing Officer was within his right to proceed to reassess the total income as the word "shall" has been purposefully stated by the Statute in the said section. He submitted that a meaning has been given to the word "shall" u/s.153A has been highlighted insofar as Section 153A clearly provides that it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating was highly improbable that the estimation for enhancement of the net profit was either under the provisions of Section 143(3) or u/s.153A. The disallowance of expenditures therefore cannot on an isolated holding for estimation at a particular rate to disallow expense of bills and vouchers. The assessee is a trader and manufacturer having rice mill and oil extraction business has to incur all the expenses for the purposes of its business therefore cannot be disallowed u/s.153A. He prayed that the returns for the respective AYs as filed by the respective assessees in response to notice u/s.153A may be accepted as such. 6. The learned CIT-DR opposed the contention of the learned Counsel for the assessee. She submitted that the search party could not find the books of account on a specific query raised by the search party. Part of the books and records were produced which were the search material for the purpose of making the respective assessments in the case of the assessees. She justified the initiation of penalty proceedings u/s.271A insofar as the Assessing Officer had no alternative but to resort to estimation of NP rate for the impugned AYs in accordance with the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no basis. On our perusal of the assessment orders this fact emerges in favour of the assessee to the extent that the audited figures of turnover, expenditures claimed and the percentage of return as NP has been inscribed by the Assessing Officer in the respective orders. The interest and salary became expenditure to the firm have not been disturbed. The Assessing Officer has accepted the NP as returned by the assessee but at a higher rate which rates has no basis for enhancement insofar as the gross margin on a turnover is directly related to the sales and the expenditures claimed leading to holding of stock which valuation has not been disputed by the Assessing Officer. This indicates that all the facts remaining the same, the Assessing Officer has not estimated the enhanced NP on sound footings. In fact the estimation has been made on mere surmises, conjectures when the facts borrowed for the purpose of revising the NP rate has been inscribed in the very books of account which the authorities below considered as improper, incomplete or to the extent of incriminating. Disallowance of expenditure by no stretch of imagination can be made once one resort to estimate the NP rate. A g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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