9911796707
TMI Blog2014 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... m doing the business of chitty. The assessee filed its original return of income along with audit report u/s 44AB of the Act.There was a search operation at the business premises as well as the residences of its partners on 26th March 2008. There was no search or survey operation conducted in the business premises of the assessee's sister concerns i.e. M/s Edassery Ceramics, ET Decvassy & Sons Edassery Jewellers, St Francis Clay Works, St Francis Clay Décor Tiles and St Francis Tile Industries on the same date. The funds of the assessee firm and its partners are intermingled with the funds of other sister concerns mentioned above. During the course of search operation an amount of Rs. 50,000/- and FD receipts worth Rs. 5,48,787/- were seized from the entire group. Subsequent to the search, the AO issued notice u/s 153A on 12.3.2009 and in response, the assessee filed return of income on 27.8.2009 showing Rs. 17,380/- as income.Due to certain reasons beyond the control of the assessee, the assessee could not file certain details before the AO on time. Accordingly, the AO made certain additions and completed the assessment in the above assessment years. 4.1 Against the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e / material requisitioned from an assessee by the first appellate authority with a view to proper disposal of proceedings before him. In our opinion while the provisions of rule 46A apply to the former, the same have no application to the latter. 8.1. Rule 46A of I.T. Rules has been inserted by the Income-tax (Second Amendment) Rules, 1973 with effect from 01-04-1973. This rule provides that an assessee shall not be entitled to produce before the first appellate authority evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the assessing officer. Rule however enumerate certain exceptional circumstances such as where the assessing officer has refused to admit evidence which ought to have been admitted or where the assessee was prevented by sufficient cause from producing the evidence he was called upon to produce by the assessing officer or which is otherwise relevant to any ground of appeal taken by the assessee or where the assessment order itself is made without giving sufficient opportunity to the assessee to adduce evidence relevant to any ground of appeal. Provision of rule 46A enjoins upon the first appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 251 of the Act in the case of Smt. Mohinder Kaur v. Central Government 104 ITR 120 (All). After consideration of the provisions of Sections 250 and 251 of the Act as well as Rule 46A of I.T. Rules the High Court arrived at the conclusion in the following words: Sub-rule (1) of the said rule lays down the circumstances in which alone the assessee is entitled to produce additional evidence. Sub-section (4) preserves the power of the Appellate Assistant Commissioner to make further inquiry as contemplated by Section 250 of the Act. Thus, it is clear that no part of rule 46A whittles down or impairs the power to make further inquiry conferred upon the Appellate Assistant Commissioner by Section 250 of the Act. Similarly, Sub-section (5) of the said section confers a power on the Appellate Assistant Commissioner to permit the assessee to raise a fresh point. This power has not been even touched by rule46A. The Appellate Assistant Commissioner could permit the production of additional evidence if he thought it was necessary to enable him to dispose of the appeal, or if he thought it fit to make further inquiry; but under Sub-rule (1) of rule 46A the assessee had a right to produce additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court "It is true, as was contended by counsel for the assessee, that the Appellate Assistant Commissioner has very wide powers and in the interests of justice he can make further enquiry and he can admit new ground of appeal. He can also give deductions not claimed by the assessee. As was held by the Calcutta High Court in the case of Union Coal Co. Ltd. v. Commissioner of Income tax reported in 70 ITR 45 (Cal). In this case counsel for the revenue also did not dispute that in certain circumstances the Appellate Assistant Commissioner had jurisdiction to admit new grounds if it was necessary to admit new evidence. The point in this case is not whether the Appellate Assistant Commissioner is entitled to admit new ground or evidence either suo motu or at the invitation of the parties. In this case it is apparent that the Appellate Assistant Commissioner was not acting suo-moto in admitting additional evidence. If the Appellate Assistant Commissioner was acting on being invited by the assessee, then there must be some ground for admitting new evidence in the sense that there must be some explanation to show that the failure to adduce evidence earlier sought to be adduced before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision not to remain present because he considered it unnecessary to do so in the context of the existing record. He could not have anticipated or reasonably foreseen that the record was going to be augmented by adducing fresh evidence. Besides, he had a right to object to the production of additional evidence. Since something adverse to the ITO was sought to be done in the course of the appeal by way of augmenting the record, the ITO ought to have been heard and given an opportunity to meet with the additional material by way of cross examination, counter evidence and urging submissions in the context of the augmented record. Of course, if the appeal was going to be decided on the basis of the existing record of which he had notice, no such question could arise and no grievance could be made as the ITO had failed to exercise his option to remain present. He has no notice of the application for additional evidence as no notice was issued. When a prayer for additional evidence was made, it was an independent and substantive application seeking a new right. Notice of such application was necessary to the !TO and he ought to have been afforded both an opportunity to oppose it and to te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of the appellant to produce before the Appellate Assistant Commissioner any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the Income-tax Officer, except in the circumstances set out therein. It does not deal with the powers of the Appellate Assistant Commissioner to make further enquiry or to direct the Income-tax Officer to make further enquiry and to report the result of the same to him. This position has been made clear by Sub-rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the appellant would not affect the powers of the Appellate Assistant Commissioner to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Under Sub-section (4) of Section 250 of the Act, the Appellate Assistant Commissioner is empowered to make such further inquiry as the things fit or to direct the Income-tax Officer to make further inquiry and to report the result of the same to him. Sub-section (5) of Section 250 of the Act empowers the Appellate Assistant Commissioner to allow the appellant, at the hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the assessing officer. 9. In the instant case the entire additional evidence has come on the record of the first appellate authority because the first appellate authority decided to examine the facts of the case in depth and adjudicate upon the matter on the basis of evidence and material thus gathered. The learned CIT(A) was empowered to do so under the provisions of Section 250(4). The results of enquiry conducted by him could either go to further cement the case made out by the assessing officer or to help out the assessee against the findings of the assessing officer. The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of Revenue has no bearing on the jurisdiction and powers of the learned CIT(A). The learned CIT(A) has confronted the assessing officer with the evidence thus received and the material thus gathered and allow the assessing officer to have his say in the matter vide remand report dated 29.4.2013 and being done so this dispute have no merits. We do not see any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further estimated the profit earned from own chits @ 10%. 11.2 Before the CIT(A), it was submitted that the assessee firm was investing in own chits for business convenience. It was submitted that the AO was not correct in presuming that there will always be profit in respect of investment in chits. It was further submitted that the profit/loss in respect of own chits was based on the seized materials and accordingly, the total profit/loss in respect of various terminated own chits for the AYs 2004-05 to 2008-09 was a loss ofRs. 19,88,116/-. 11.3 After considering the submissions made by the assessee the CIT(A) observed that for the AY 2002-03, the addition on account of profit from own chitty investments was made purely on estimate basis and there is no evidence to suggest the addition.The ld CIT(A) placed reliance on the decision of the Special Bench of the Tribunal in the case of All Cargo Logistics Ltd reported in 137 ITD 287 (Mum)(SB wherein it has been held that: "66. We find that the solitary decision in this case by any High Court is in the case of Container Corpn. of India Ltd. (supra). In this case it has been held that an ICD is not a port but it is an inland port. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the same at 10% on the assumption that usually subscribers invest in chits because it was more profitable than investing in banks or other financial institutions. Accordingly, the ld AR submitted that the investment in own chits are made not with a view of profit but under certain compelling circumstances. It was explained that sometimes certain kuries which are announced for commencement may not be fully subscribed and in that event, the assessee firm has to subscribe the unsubscribed tickets, otherwise the chit could not be commenced and it will affect the reputation of the firm. In certain cases, the subscribers who have paid certain installments may opt out due to various reasons and in that event, the assessee has to take over the same for the smooth progression of the chit. It was also pointed out that the assessee firm was mainly doing financing business which earns around 18% interest income and the presumption of the AO that the assessee was investing in own chits with profit motive was not correct in view of the fact that chit investment can never provide such income. Accordingly, the CIT(A) was in agreement with the contention of the ld AR that there will not be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to other AYs on the assumption that percentage growth of kuri late fee collection was @ 10%. 14.2 On appeal, the CIT(A) observed that no incriminating materials relating to the income from kuri late fee were found/seized during the course of search.The CIT(A) observed that the AO has not verified whether the amount of Rs. 2,04,464/- is disclosed by the assessee in the return of income and madeand estimated addition of Rs. 4,08,928/- for AY 2007-08.. The CIT(A) observed that in the remand report, the AO admitted that the assessee has disclosed a sum of Rs. 3,83,968/- in the return of income under the head "kuri late fee". Accordingly, the CIT(A) was of the view that no addition was warranted for the AY 2007-08 on account of income from Kuti late fee.He further observed that in respect of estimated additions made for the AYs 2002-03 to 2005-06, the assessee's case was squarely covered by the decision of the Special Bench of this Tribunal in the case of All Cargo Logistics Ltd (supra). Accordingly, he deleted the addition of Rs. 2,53,913/- for the AY 2002-03; Rs. 2,79,304/- for AY 2003-04; Rs. 3,07,234/- for the AY 2004-05 and Rs. 3,37,957/- for the AY 2005-06. In respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vances to sister concerns during the relevant years. Since there was no material detected or found during the course of search, which even remotely suggest that the advances made to the sister concerns are out of the borrowed funds, the AO was not justified in disallowing a portion of interest claimed on the borrowed funds in the AYs 2002-03 to 20067-07.Accordingly, he deleted the addition of Rs. 10,94,280/- for the AY 2002-03, Rs. 9,06,025/- for the AY 2003-04, Rs. 9,06,025/- for the AY 2004-05 and Rs. 16,32,612/- for the AY 2005-06. Against this, the revenue is in appeal before us. 17. We have considered the rival submissions and perused the relevant material. In this case, the addition was made by the AO without referring any seized material and the addition was only on presumption without any material to show that borrowed funds have been advanced to sister concerns during the relevant assessment years. In the absence of any material to suggest that the advance made to sister concerns were out of borrowed funds, the deletion of addition by the CIT(A) for the assessment year under consideration is justified. Accordingly, this ground raised by the revenue is accordingly rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the claim of the revenue. Accordingly, this ground raised by the revenue is rejected. 20. In the result, all the appeals filed by the revenue in ITA nos 539 to 545/Coch/2013 are dismissed. 21 Now we will take up the Cross Objections filed by the assessee. Cross Objections Nos 112 to 118/Coch/2013 : 22 The first common ground raised by the assessee in all these cross objections is regarding no search warrant and hence assessment is bad in law. 23 At the time of hearing, the ld AR of the assessee has not pressed this ground and accordingly, the same is dismissed as not pressed. 24 The next common ground in the Cross Objection relates to assessment of profit from own chits. 25 This ground came before us while adjudicating the appeals of the revenue wherein we have confirmed the order of the CIT(A) on this issue. Being so, the ground raised by the assessee in the Cross Objection has become infructuous and hence the same is dismissed for all the AYs. 26 Next common ground in cross objection is with regard excess interest received from money lending business. 26.1 According to the AO, the assessee received income by way of excess interest in respect of money lending business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35.3 I have considered the arguments of the ld AR as well as the AO and the material available on record. The appellant firm is doing money lending business. The AO applied the rate of interest i.e. 20.56% on the balance as on the closing day i.e. 31st March, of every financial year. I find that this method is totally unfair, sinc4 the total advances vary day by day de to sanctioning of the new advances and closure of existing advances. It is the normal practice that if the day to day balances are not available for computing interest income on product method, the average of the opening and (i.e. 1st April) closing i.e. 31st March) balance of the financial year is taken for application of interest. In the present case also, rue income can be estimated only by following average method. The contention of the AO that if this method is followed, in certain years the income disclosed will be more than the income estimated is devoid of any merit. In that case, no addition towards undisclosed interest is to be made. Therefore, I hold that in the present case, interest income shall be estimated on the average balance of advances" Accordingly, he held that the addition on account of excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission during the relevant year compared to the earlier year. Accordingly, the AO stated in the remand report that the income from foreman's commission as computed in the assessment for the AY 2008-09 may be sustained. 29.3 In the rejoinder before the CIT(A), the ld AR submitted before the CIT(A) that the working based on which the AO arrived at the figures of foreman's commission receivable was only received by the assessee now along with the copy of remand report and on verification, he found certain errors in the working for the AY 2002-03 as given by the AO. According to the AR, the figure admitted by him was the correct one and the assessee also furnished a detailed chart with evidences in support of its argument. In respect of AY 2008-09, the AR submitted that the working given by the AO was not fully correct and the foreman receivable during the year was Rs. 23,63,326/- as against Rs. 26,04,095/- as computed in the asst order and Rs. 17,05,250/- as admitted by the assessee earlier. 29.4 The CIT(A), after considering the assessment order, submissions of the assessee, remand report of the AO and the rejoining of the assessee and other relevant material on record, found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vert the above findings of the CIT(A). Being so, we are not in a position to disturb the above findings of the CIT(A) and addition sustained by the CIT(A) is confirmed. Accordingly, the ground taken by the assessee in its Cross Objection is rejected. 31 Next common ground relates to disallowance u/s 40(a)(ia) of the Act. 31.1 Facts of the case are that the AO noticed that for the AY 2007-08, the assessee has paid canvassing commission without deducing tax at source.Before the CIT(A), the ld AR submitted that the assessee has not deduced tax at source in respect of the canvassing commission payments. 31.2 After considering the submission and the admission of the ld AR, the CIT(A) observed that there was no dispute in respect of the disallowance of Rs. 83,608/- u/s 40(a)(ia) and accordingly, the same was sustained. 32 After hearing both the parties and perusing the relevant material on record we do not find any infirmity in the order of the CIT(A) on this issue. Accordingly, the ground raised by the assessee in its cross objection is rejected. 33 Next common ground in the cross objection relates to disallowance of profit from terminated kuries. 33.1 The AO assumed that the auct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) observed that even though the decision was rendered by the Hon'ble High Court in the case of penalty proceedings u/s 271(1)(c), of the Act, while delivering the judgment, the Hon'ble High Court observed that outstanding balance in respect of forfeited kuries which have been terminated long back cannot be treated as a liability and shall be assessed as income. The CIT(A) further observed that in the list provided by the AO, he has included kuries which have been terminated and those which have not been terminated. According to the CIT(A), the decision of the Hon'ble jurisdictional High Court is applicable only to outstanding balances in respect of kuries which have been terminated log back where the subscribers are not entitled to the amount under the law of chits which is existed at the relevant point of time. From the list of 412 subscribers as provided by the AO, the assessee extracted the outstanding balance in respect of chits that have been terminated beyond three years from the cut-off date i.e. 31.3.2008 and as per the list, the total outstanding credits works out to Rs. 3,13,771/-.According to the CIT(A), the working seems to be in order. Accordingly, considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ys 2002-03 to 2005-06 were concluded as on the date of search and no proceedings are pending, the scope of assessment u/s 153A for these assessments years was restricted to the incriminating materials relating to those years found during the course of search.The assessee further submitted that since no incriminating materials relating to these years were found or seized during the course of search, the AO has not jurisdiction to initiate proceedings u/s 153A of the act for these AYs. 38.2 In the remand report, the AO has stated that in this case, incriminating documents in the form of day book and ledger relating to AYs 2006-07 to 2008-09 were found and seized from the business premises of the assessee firm. The AO further stated that since material belong to the assessee firm were found and seized in the course of a search and seizure operation conduced u/s 132 of the I T act, the AO was bound to issue notices to the assessee firm to furnish return for each assessment year falling within the six assessment years immediately preceding the asst year relevant to the previous year in which the search was made. Thus, according to the AO, under the provisions of law, notice u/s 153A ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to abate and the assessments which are not pending i.e. completed assessments as on the date of search would hold their base and would not abate. He further observed that the scope of assessment u/s 153 in the case of assessment that are abated and in the case of assessments that have been attained finality as on the date of search, which has been settled by the decision of the Special Bench of the Tribunal in the case of All Cargo Logistics Ltd (supra) wherein the Special Bench held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction u/s 153A for which assessment shall be made for each assessment year separately.Thus, in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. The CIT(A) further observed that in other case the Special Bench held that the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property found during the course of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see will go before the Division Bench which shall dispose of the appeals in the light of this Order. In the case of interveners, all the appeals will go back to the respective Division Benches who shall decide their grounds having regard to the facts of those cases and the findings given herein on the disputed issues to the extent the same are found relevant in the cases before them." Accordingly, the ground taken by the revenue in all the appeals is dismissed. 41 The ground taken in ITA NO.536, 537 and 538/Coch/2013 for the three years relates to profit computed by AO from seized materials. 41.1 On comparison of the books of account seized during the course of search with the results shown in the return of income, it was found that these two sets of accounts do not tally. According to the AO, practically all the figures in the seized books of account are higher than the figures given in the return of income. The AO found that the Managing Partner of the assessee firm admitted that the books of account seized are the actual accounts. Therefore, the AO arrived at a conclusion that the accounts corresponding to the financial statements filed along with the return are false and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year 2007-08, expenditure towards depreciation and interest was not provided. The assessee also furnished detailed working regarding proportionate interest to be allowed while arriving at the net profit for the relevant financial year.The assessee further submitted that a capital receipt viz collection under Swaran Prabha Scheme amounting to Rs. 2,30,656 was treated as direct income in the profit and loss account for the financial year 2007-08. 41.3 The CIT(A) forwarded the submissions of the assessee to the AO for his report. 41.4 The CIT(A), after considering the assessment order, submissions made by the assessee, remand report of the AO and the relevant material available on record observed that during the search in the premises of M/s Edassery Jewellers, books of account in the form of day book and ledger for the AYs 2006-07 to 2008-09 were found and seized. The AO prepared profit & loss account and balance sheet from the seized books of account and on comparing the financial statements prepared from the seized books with the financial statements filed along with the return of income, it was revealed that the stock in trade, purchases, sales expenses etc., do not tal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the totality of the facts and circumstances of the case, and keeping in mind the provisions of sec. 44AF of the I T Act which contains the special provisions for computing profits and gains of retail business, the CIT(A) was of the view that if the net profit rate at 5% on the turnover is adopted, it would meet the ends of justice. Accordingly, the AO was directed to estimate the net income of the assessee's business at 5% for the AYs 2006-07, 2007-08 and 2008-09. Further, considering the income admitted by the assessee in the return of income, the net addition was restricted to the following amount to the respective asstt years: Asst Year Total income estimated(Rs) Income returned (Rs) Addition (Rs) 2006-07 12,47,888 1,03,809 11,44,079 2007-08 15,00,921 1,37,483 13,63,438 2008-09 15,08,894 1,05,898 14,02,996 Accordingly he directed the AO to modify the assessment for the AYs 2006-07, 2007-08 and 2008-09. 42 We have heard the rival submissions and perused the material on record.According to the CIT(A) the seized books are not correct and complete and it do not reflect the true state of affairs of the assessee firm and hence he was of the view that a reasonable e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections filed by the assessee in Cross Objections nos. 50 to 56/Coch/2013 are dismissed. ITA NOS. 592 & 593/Coch/2013 ITA Nos.587 to 591/Coch/2013 ITA No.525 to 531/Coch/2013 ITA No. 594 to 600/Coch/2013 ( by the revenue) &CROSS OBJECTIONS NOs. (by the assessee) Cross Objection Nos.121 to 122/Coch/2013 Cross Objection Nos. 119 & 120/Coch2013 Cross Objection Nos. 110 & 111/Coch/2013 Cross Objection Nos. 107 to 109/Coch2013 51 The first ground in all these appeals relates to admission of additional evidence in violation of Rules 46A(1) of the IT Rules 1962. 52 Identical issue was considered in the case of New Kerala Investment & another while deciding the appeals in ITA No. 539 to 545/Coch/2013 where we have decided the issue against the revenue and in favour of the assessee. In view of our findings in the foregoing paras 8 to 10 in the case of New Kerala Investment, we decide the issue in favour of the assessee and against the revenue. Accordingly, the ground taken by the revenue in all these appeals is dismissed. 53 Next issue in all the appeals relates to estimate of profit based on seized materials. 54 We have considered identical issue while deciding the appeals of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coch/2013 is with regard to admission of additional evidence by CIT(A) without satisfying the conditions of Rule 46A(1) of Income Tax Rules, 1962. 63. After hearing both the parties, we find that this issue came up for consideration in the Department appeals in I.T.A. Nos. 539 to 545/Coch/2013 in the case of New Kerala Investments and we have discussed the issue in the foregoing paras 8 to 10 and decide the issue in favour of the assessee.Accordingly, following our findings in the case of New Kerala Investments (supra), we dismiss the ground taken by the revenue in all these appeals also. 64. The next ground in I.T.A. Nos. 518 - 524, 631-637, 638-644, 573-579 and 566-572, 580-586 and 612-618/Coch/2013 is with regard to treatment of agricultural income. 65. The facts on this issue being the same, for the sake of brevity, we consider the facts as narrated by the CIT(A) in I.T.A. No. 518/Coch/2013 for the AY 2002-03. The assessee claimed agricultural income in the returns under section 153A of the I.T. Act as under: Asst. Year Agricultural Income 2002-03 5,00,000 2003-04 6,00.000 2004-05 7,00,000 2005-06 8,00,000 2006-07 10,00,000 2007-08 11,00,000 2008-09 12,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Assessment Years from 2002-03 to 2008-09 are tabulated as under : Assessment Year Paddy field (in acres) Dry land (in acres) Total Agricultural income claimed 2002-03 1.66 12.46 14.125,00,000 2003-04 2.15 13.65 15.806,00,000 2004-05 4.38 13.66 18.047,00,000 2005-06 4.38 13.77 18.158,00,000 2006-07 4.38 22.20 26.58 10,00,000 2007-08 4.38 22.20 26.58 11,00,000 2008-09 4.38 22.20 26.58 12,50,000 65.3 The details of the Agriculture holdings of the assessee including Date of Acquisition, Property Purchase Document Particulars, Location of the property with survey no. and village, extent, crops grown in each plot etc. were furnished by the assessee in chart form in the paper book. It was submitted that the assessee family consists of wife Smt.K.D.Lilly and sons E.D Shaju. E.D Jaison. E.D.Sabu, E.D Salu and ED. Salu and E.D.Benny(who have also filed separate appeals in respect of their search assessments for the assessment years 2002-03 to 2008-09) own 70 acres of paddy field and 47 acres of other agricultural properties. The details of agricultural land owned by the assessee and his family members are furnished as under: Sl. No. Name Paddy field (in acres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings. The AO made detailed investigations made on the fresh evidences placed by the assessee on record. Regarding the agriculture income, the AO has stated that inspector attached to this Circle was deputed to inspect the various agricultural land holdings of the assessee and to verify the genuineness of the bills produced as fresh evidences claimed by the asssessee. According to the AO, as per the report dated 23.2.2011 submitted by the inspector, he had visited the agricultural lands held by the assessee on 22.2.2011 and given his report as under : As per the direction of the Dy.C.I.T Central Circle, Thrissur, the Assessing officer had visited the agricultural lands of the assessee situated in various villages and satisfied with the documents produced by the assessee. The assessee hold approximately 26 acress of cultivable land in different villages in which 4 acres are paddy field. The agriculture income claimed by the assessee as per bills/vouchers produced as fresh evidences were verified with the original bills/vouchers with dealers and the genuineness was verified. I have verified the original bills/vouchers from the following dealers for the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are joint properties which are cultivated together. The assessee further claimed that in addition to the agricultural properties mentioned above, the family owns 26 acres of landed properties which were mainly used for industrial purposes i.e. factory premises and properties used for mining clay in the 90's before the ban imposed by the government.In support of the claim of the assessee regarding the extent of land owned by the assessee group (Paddy Field - 70.49 acres, Dry Land - 46.80 acres and Industrial Land - 26.67 acres), the following details were furnished by the assessee:- i) Details of the agricultural properties (in chart form) showing date of acquisition, document no. location with survey No. and village, extent,nature, crops, etc. ii) Details of the properties which were used for industrial purposes in chart form with details as above. iii) Copy of property purchase documents. 65.8 From the agricultural properties mentioned above, the assessee's family claimed agricultural income for the assessment years 2002-03 to 2008-09 as given below:- Asst. Year Paddy LandDry Land Total Agrl. Income claimed (Rs.) Extent (in acres) Agrl. Income (Rs.) Extent (in acres) Agrl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roximately 26 acres of cultivatable land in different villages out of which 4 acres are paddy filed, as claimed in the submissions before the CIT(A).It was further observed that In the case of the family members also, the Assessing Officer has no dispute with the extent of agricultural land cultivated by them. The CIT(A) noticed that the remark of the Assessing officer in the assessment order that the land holdings of the assessee were mainly used for industrial purposes was made without proper appreciation of the facts. It was observed by the CIT(A) that according to the Assessing officer, the Income Tax Inspector was satisfied with the documents produced by the assessee along with the submissions. The Assessing officer also stated that the bills/vouchers of sale of agricultural produce/expenditure towards agricultural operations for the period from 02-04-2010 to 03-08-2010, furnished by the assessee were verified and found them to be genuine. According to the CIT(A), the only objection raised by the Assessing officer in the remand report was that these bills/vouchers should not be accepted as an evidence for the search assessment period, since the same relate to assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 24,343/- in the case of paddy and Rs. 36,402/- to the normal effect of price increase for the agricultural products year by year. The CIT(A) further observed that according to the assessee,if the agricultural income of the earlier years are extrapolated by applying the inflation index published by the CBDT, taking the certified income for the F.Y. 2009-10 as the base, the extrapolated income per acre for the F.Ys. 2001-02 to 2007-08 will be as under: Cost inflation index F.Y. Income from Paddy per acre (Rs.) Income from other crops per acre (Rs.) 632 2009-10 37,648 92,092 582 2008-09 34,669 86,263 551 2007-08 32,833 80,289 519 2006-07 30,916 75,626 497 2005-06 29,606 72,420 480 2004-05 28,593 69,943 463 2003-04 27,580 67,466 447 2002-03 26,627 65,134 426 2001-02 25,376 62,074 65.13 The CIT(A) observed that the assessee has claimed nominal income from agriculture per acre for each year in comparison with the extrapolated income worked out as above. The CIT(A) found that the certificates given by the concerned Agrl. Officers/Village Officers are elaborate and prove that the assessees are getting income from the same during the Assessment Years 2002- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties from which agricultural income is assessable, do not exceed 5 hectares. The agricultural income assessable do not include any income derived from cultivation of crops such as paddy, tapioca, plantain, ginger, vegetables, pineapple, turmeric, etc. The Ld. AR submitted that in the case of Shri E.T. Devassy, excluding the extent of paddy field (5 acres) and the extent of properties situated in Tamil Nadu (9 acres), the total extent do not exceed the basis limit and hence not liable for taxation under the Kerala AIT Act. According to the Ld. AR, the decision of Jaikisan R. Agarwal vs. ACIT (2006) 66 TTJ (Pune) 704 relied upon by the Assessing officer was not applicable in the present case.It was submitted that In that case, the assessee was a dealer in country liquour and the assessee declared an income of Rs. 15 lakhs as unaccounted income.At the time of filing block return, the assessee retracted and offered Rs. 13,15,000/- which consist of business income of Rs. 10,65,000/- and agrl. income of Rs. 2,50,000/-. In this case, the Tribunal accepted the retraction to Rs. 13,15,000/- but rejected the claim of agrl. income of Rs. 2,50,000/- in the absence of any material evidences to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the CIT(A) in I.T.A. No. 518/Coch/2013. In the cash flow statements, the assessee claimed receipt from sale of trees for AY 2002-03 at Rs. 4 lacs and AY 2003-04it was at Rs. 6 lacs. The AO did not accept the receipt from sale of trees claimed by the assessee for the following reasons: i) The properties of the assessee are mostly wet lands acquired for the purpose of clay mining and it cannot yield timbers. ii) The assessee has not furnished documentary evidences in support of the claim. 68.2 In respect of the above, before the CIT(A), the Ld. AR submitted that the inflow claimed on account of receipt from sale of trees was supported by agreement with the purchasers and the same were filed before the Assessing officer. The ld. AR submitted that since the receipts claimed on account of sale proceeds of trees are properly supported with documentary evidences, the Assessing officer was not justified in disallowing the same. 68.3 In the remand report, the AO stated that the required particulars i.e., inflow in the cash flow statement, details of sale of trees and agreement with purchasers etc. were produced before the appellate authority as fresh evidence which were not produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m sale of trees as claimed by the assessee. Therefore, the CIT(A) deleted the addition of Rs. 4,00,000/- for the A.Y. 2002-03 and Rs. 6,00,000/- for the A.Y. 2003-04. Against this, the revenue is in appeal before us. 69. We have heard both the parties and perused the record. .The assessee was having landed properties where the trees were grown. The reason for rejection of the assessee's plea by the Assessing officer is that the certificate from the Revenue authorities was not produced before him. However, the AO has not doubted the certificate issued by the revenue authorities which suggest the availability of timber therein. Being so, it is natural to earn income from sale of trees. Accordingly, we do not find any reason to interfere with the order of the CIT(A) and the same is confirmed. This ground of the Revenue is rejected 70 Since the facts and circumstances in other revenue's appeals in ITA Nos 631-637, 638-644, 573-579 and 566-572, 580-586 and 612-618/Coch/2013 are similar; therefore, by applying the above ratio, we are inclined to dismiss the similar ground in these appeals of the revenue also. 71. The next common ground in I.T.A. Nos. 518-524, 631-637, 638-644 and 580- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the firm M/s. New Kerala Investments during the Asstt. Year 2004-05 " 11058 40,000 " " 11059 40000 " Total 1,20,000 A.Y. 2006-07 Name of the bank Deposit No. Amount (Rs.) Explanation SCB,Vennoor 13079 50,000 Accounted in the books of the firm M/s. New Kerala Investments during the Asstt. Year 2006-07 " 13080 50,000 " " 13076 50,000 " " 13077 50,000 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flow statement of Asst. Year 2007-08 " 20030060 4,375 " " 20030061 3,281 " " 20030062 3,281 " " 20030063 3,417 " " 20030064 25,431 " " 20030065 18,981 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;29,291 " " 20050220 29,291 " " 20050221 29,291 " Total 1,52,953 71.6.The Ld. AR relied upon the workings and evidences in the form of financial statements of the firm M/s. New Kerala Investments to substantiate his explanation regarding exclusion of certain fixed deposits from the cash flow statements. 71.7 After perusal of the evidences/explanations furnished by the Ld. AR, the CIT(A) observed that deposits appeared to be in order. The CIT(A) also observed that in the remand report, the Assessing Officer has not rebutted the explanation offered by the assessee for not including certain fixed deposits in the cash flow statements. Accordingly, the CIT(A) held that the assessee has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book. According to the Ld. AR, after examining the chart, it can be seen that the additions made by the Assessing Officer on the above account was unwarranted. In the remand report, the Assessing Officer stated that investments in immovable properties were ascertained on the basis of seized documents. The amounts shown as outflow towards investment in immovable properties in the cash flow statement was made as a result of an afterthought and hence be rejected. 74.2. The Ld. AR also submitted that no additional evidences were furnished by the assessee in respect of the above addition at the appellate stage. The assessee only explained that certain investments which were treated as not included in the cash flow statements are in fact reflected in the cash flow statement and further the reason for not including certain investments in the cash flow statements. According to the assessee, from the remand report, it can be seen that the Assessing Officer had no objection with regard to the merit of the explanation furnished by the assessee in respect of the addition towards investments in immovable properties. 74.3. On appeal, the CIT(A) observed that the Assessing Officer prepared a li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 697 Accounted in the books of M/s. E.T. Devassy & Sons Edassery Jewellers 28.05.2001 1792/01 12.557 cents Devassy E.T. 9,160 9,160 " 15.06.2001 (Agreement) 1792/01 12.557 cents Devassy E.T. 23,25,000 23,25,000 As per agreement date 15.06.2001, the appellant paid Rs. 2,00,000/-as advance for the purchase of this property (Accounted in the books of M/s. E.T.Devassy & Sons Edassery Jewellers). This deal did not materialize an the property was not purchased by the appellant. 05.02.2002 517/02 20.456 cents Devassy E.T. 16,03,005 16,03,005 Accounted in the books of M/s. E.T. Devassy & Sons, Edassery Jewellers. 40,16,862 A.Y. 2003-04 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 03.04.2002 1127/02 19.91 cents Devassy E.T., 12,59,505 12,59,505 Accounted in the books of M/s. E.T. Devassy & Sons Edassery Jewellers 18.01.2003 168/03 1 acre 64 cents Devassy E.T., Lilly, Shaju & othres 13,44,000 4,48,000 Accounted in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay Décor Tiles. 09.02.2004 426/04 51.5 cents Devassy E.T., Lilly, Shaju and others 44,978 22,489 Accounted in the books of M/s. St. Francis Clay Décor Tiles. 3,43,033 A.Y. 2005-06 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 26.06.2004 2588/04 50 cents Devassy E.T., Lilly, Shaju, Jaison, Salu, Sabu & Benny 1,32,500 44,167 Shown in the cash flow statement 03.09.2004 25 cents Devassy E.T. 53,005 53,005 Accounted in the books of Saj Cera Colours 40,16,862 A.Y. 2006-07 Doc. Date Doc. No. & Extent Name of the Purchaser Total cost including registration (Rs.) Assessee's share (Rs.) Explanation 13.05.2005 1861/05 60.745 cents Devassy E.T. Lilly, Shaju, Jaison, Sabu, Salu, Benny 2,01,600 1,00,800 Shown in the Cash flow statement 13..06.2005 2260/05 11 cents Devassy E.T. 10,30,605 10,30,605 Shown in the unaccounted Cash Flow S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 55,125 Shown in the cash flow statement. 24.04.2007 273/4 cents Devassy E.T. 55,000 55,000 " On the various dates in F.Y. 2007-08 Shares of Hotel Lucia Devassy E.T. 8,00,000 8,00,000 Shown in the cash flow statement of E.D. Shaju.. 02.01.2008 36.65 cents 96,75,000 96,75,000 This is not a purchase but sale of property. As per agreement dated 02.01.08, E.T. Devassy agreed to sell 36.65 cents of land to Mr. Antu for Rs. 96,75,000/-. A sum of Rs. 10,00,000/- was received as advance, which is shown in the cash flow statement as inflow. 29.02.2008 Manamadhurai Property Devassy E.T. 4,82,540 4,82,540 Shown in the cash flow statements of E.D. Sabu & E.D. Jaison. 1,11,14,790 74.6 The assessee also furnished the evidences in the paper book to substantiate his explanation regarding exclusion of certain investments in immovable properties from the cash flow statements. 74.7 After perusing the explanations/evidences furnished by the assessee, the CIT(A) observed that most of the properties were purchased jointly by the assessee with his family members a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the investments in the properties in the cash flow statements. The CIT(A) had also called for remand report. After going through the remand report, the CIT(A) has observed that the unexplained investments in immovable properties were accounted for as fixed assets in the regular books of account of the firm in which the assesses were partners and the same cannot be considered as unexplained investment in immovable properties and it is to be excluded and the properties are owned by the assesses which are duly accounted for in the regular books of accounts. Being so, we have no hesitation in confirming the order of the CIT(A). This ground in all the Revenue appeals is rejected. 76 Since the facts and circumstances in other revenue's appeals in ITA Nos 631-637, 638-644; 566 to 572 and 612 to 618/Coch/2013 are similar; therefore, by applying the above ratio, we are inclined to dismiss the similar ground in these appeals of the revenue also. 77 Now we will take up the cross objections filed by the assesses: CO nos. 57 to 63/Coch/2013 - CO nos.100 to 106/Coch/2013 CO nos. 79 to 85/Coch/2013 - CO nos. 86 to 92/Coch/2013 CO nos. 93 to 99/Coch/2013 - CO nos. 72 to 78/Coch/2013 & CO n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer did not take into account of the fact that Srhi E.D. Sabu got married only in the assessment year 2007-08 and Shri E.D. Benny got married only in the assessment year 2008-09. Moreover, the elder daughter of Shri E.D. Salu started going to school only during the assessment year 2008-09. The assessee further submitted that, the Assessing Officer also did not consider the fact that the assessee is an agriculturist and is cultivating paddy and other vegetables for household consumption. According to the assessee if these facts are taken into account, it can be seen that the drawings submitted by the Assessing Officer in respect of the Asst. Years 2005-06 to 2008-09 and hence there is no question of any further addition for these years. According to the assessee, difference of opinion exist only in respect of the initial assessment year i.e. 2002-03, 2003-04 and 2004-05 where the Assessing Officer estimated huge figures without considering the general inflation in the economy. For example, the Assessing Officer estimated monthly drawings for the year 2008-09 at Rs. 20,000/- and for the year 2002-03 at Rs. 17,000/- which is not reasonable at all. 81.3.On appeal, the CIT(A) ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with drawings estimated by the Assessing Officer. On this issue, the assessee offered an explanation that while estimating drawings for these years the Assessing Officer has not taken into account of the general inflation in the economy year by year. But according to the CIT(A), the assessee has not adduced any evidence to substantiate his arguments for the low drawings admitted for the relevant years. In these circumstances, the CIT(A) was of the view that no interference was required in respect of the drawings estimated by the Assessing Officer for the assessment years 2002-03 to 2004-05. Therefore, considering the drawings admitted by the family members, additions to the extent of Rs. 72,000/- (Rs. 2,04,000/- - 1,32,000/-) for the assessment year 2002-03, Rs. 68,400/- (Rs.2,10,000 - Rs. 1,41,600) for the assessment year 2003-04, Rs. 24,000/- (Rs.2,16,000 - Rs. 1,92,000) for the assessment year 2004-05 were sustained by the CIT(A).Against this asseessees have raised Cross Objections. 82. We have heard both the parties and perused the record. As seen from the above,, the Assessing Officer estimated very huge drawings. Considering the drawings estimated by the Assessing Officer, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if these facts were also taken into account, it can be seen that the cost of construction at R.15,00,000/- admitted in the cash flow statement is fair and reasonable. Therefore, the addition made towards unexplained investments in residential house is unwarranted. 83.6. In the remand report, the Assessing Officer stated that in this respect it has to be stated that in the cash flow statement filed by the assessee's son Shri E.D.Jaison, as fresh evidence, he had shown Rs. 15,00,000/- as cash out flow equally for the three financial years 2003-04, 2004-05 and 2005-06. 83.7. The Ld. AR further submitted that from the remand report it can be seen that the Assessing Officer has admitted the fact that an investment of Rs. 15,00,000 in residential house was reflected in the cash flow statements of Shri E.D. Jaison. The Ld. AR submitted that it was clear from the remand report that the Assessing Officer has no dispute with the merit and evidentiary value of the additional evidences filed by the assessee in connection with the cost of construction of the residential house. According to the Ld. AR, from the remand report it is also clear that the Assessing Officer had no objection with reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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