TMI Blog2016 (11) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... ous documents, etc. that pointed to undeclared income. In these circumstances, the assessee’s argument that they could not be acted upon or given any weight is insubstantial and meritless. This court also notices that the decision in CIT Vs. Anil Bhatia (2012 (8) TMI 368 - DELHI HIGH COURT ) which held that such statements are relevant, though noticed, has not been doubted in any later decision, including Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ], which is the mainstay of the assessee’s case. Consequently the first question of law is answered against the assessee and in the revenue’s favour. Rejection of books of accounts - estimating turn over and applying a high GP rate to estimate profit - Held that:- ITAT’s findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials – since they could be scanty (as one habitually concealing income or indulging in clandestine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee sons and their wives namely Deepa Gupta, Sunita Gupta and Preeti Gupta, along with Varun Gupta, surrendered a sum of ₹ 3.5 crores at the time of the search, as additional income in respect of business carried on outside books of accounts in connection with production and sale of Gutka. Statement of the assessee Smt. Dayawanti proprietor of M/s. Assam Supari Traders was also recorded in the course of search. In this statement she said that she had no source of income; that she does not even own any bank account and that she was not assessed to tax. She admitted to being proprietor only on the record and Shri Anoop Gupta looked after all operations along with the help of other family members. Notice under Section 153A was issued on 21st August 2006 requiring the assessee to furnish returns. In response the assessee filed no proper return, though on 22nd December 2007 a photocopy of the return filed earlier under Section 139(1) along with an audit report was placed on record before the AO. In the original return the assessee declared gross profit of ₹ 7,30,961/- on sales of ₹ 69,28,582/- yielding gross profit rate of 10.55%. The AO asked the assessee to produce vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as such, provision u/s 153A of the Act was rightly triggered and invoked thereafter. 6. There was no dispute about the above findings, based on an appreciation of facts. In the circumstances the facial challenge to the applicability of Section 153A notice as not preceded by a valid warrant is baseless and unmerited. The ITAT also rejected the plea principally urged by the assesses that since no material was recovered or discovered during the search and seizure proceedings, finalized assessments for the periods covered by block years could not be re-opened. The additions made were challenged on this ground. Apart from this, the imposition of a turnover on the basis of a notional calculation and the adoption of 12% GP rate was challenged. These contentions were rejected by the ITAT. Re Question No. 1 7. A fundamental attack to the block assessment was made by both assesses viz. Dayawanti and Ajay Gupta (the latter being appellant in ITA Nos. 360-61/2015). They argued, before ITAT, that since no incriminating material was found during or pursuant to the search, additions, made on the basis of block assessment, were unsustainable inasmuch as they revisited finally settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of unearthing of incriminating material during search, the AO is empowered to compute the total income for six assessment year prior to the year of search. There are no fetters or limitation under the statute, so as to curtail the jurisdiction of the AO. The ITAT also relied on Commissioner of Income tax v Anil Bhatia 352 ITR 493 (Del) where it was held by this Court as under:- The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and the arguments before the Departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summarizing the contentions of the assessee in paragraph 5 of its order, the Tribunal itself has referred to the contention that no document much less incriminating material was found during the search of the assessee's premises, except one unsigned undertaking for loan. .... We are unable to appreciate how the Tribunal can say in paragraph 9.6 that no material was found during the search and at the same time in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that on merits also the addition cannot be sustained and the addition required deletion. 12. Mr. Kapoor also argued that the ITAT s decision is incorrect and not supportable on facts, because the imposition of a higher GP rate and the amount of profits calculated were entirely arbitrary, based on no materials. It was urged that the materials seized could at best lead to some inference; to the extent that some addition was made on the basis of those, the revenue could have been justified. However, that did not permit the income tax authorities to add amounts, by way of spread over for previous block periods, assuming, arguendo that the surrender alleged could not be interfered with. It was submitted that the increased income should be rooted on actual figures that were withheld at the stage of original assessment and not notionally derived on application of a statistical method. 13. Mr. Kapoor also argued that the so-called admission could not have been relied upon in view of a Board circular, CBDT Instruction dated March 23, 2003. Having regard to statements recorded followed by retractions on the ground of coercion and threat in the course of search and survey oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven documents, which may not be accurate or complete in themselves, have to be scrutinized in the backdrop of probabilities of human conduct. Counsel argued that perfect books of account and materials are not expected in search and seizure cases, which are clandestine income and would in all probabilities be kept outside the books for the shortest possible time. Reliance was placed on BhagirathAggarwal v Commissioner of Income Tax[2013]351ITR143(Delhi) where it was held that an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect. Analysis and Findings 16. Section 153A, which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 w.e.f. 01.06.2003, does not provide that a search assessment has to be made strictly on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier Section 158BB which is not applicable in case of a search conducted after 31.05.2003, provided that the computation of the undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days were of the value of ₹ 31,171.28. From this circumstance, it was open to the Sales Tax Officer to infer that the assessee had large-scale dealings outside his accounts. The assessee has neither pleaded nor established any justifiable reason for not entering in his accounts the dealings noted in the bill book seized. It is obvious that he was maintaining false accounts to evade payment of sales tax. In such a situation, it was not possible for the Sales Tax Officer to find out precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an over-estimate or an under-estimate or an under-estimate. But, that is no ground for interfering with his best judgment . It is true that the basis adopted by the officer should be relevant to the estimate made. The High Court was wrong in assuming that the assessing authority must have material before it to prove the exact turnover suppressed. If that is true, there is no question of best ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We do not agree with the High Court that it is the duty of the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales Tax Officer was a relevant one whether it was the most appropriate or not. Hence the High Court was not justified in interfering with the same. 17. The impugned order dealt with this aspect and concluded that the statement made under oath could be acted upon, especially since materials and documents were recovered during the search proceedings: 22. In the instant case we find that AO had rejected the books of accounts and made additions by estimating the sales GP rates, inter-alia on the ground that in the course of search, a statement was recorded by Shri Abhay Gupta u/s 132(4) of the Act on behalf of the assesse too. In the said statement dated 18.04.2006, a copy of which has been placed before us, in Page 89, 90, 91, 92, 93 94 of the PB, he has stated as under on behalf of assesse and other assesses in appeal before us which is evident from his opening remarks and signatures of assesse and other appellents appended below the statement recorded on oath u/s 132(4) of the Act. The relevant answers to questions le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Q. No. 9 What are the books of account maintained by your firms? Ans:- To the best of my knowledge, both our firms maintained cash books, ledger, sales register, bills books and other general books of accounts. Q,. No. 10- I am showing your annexure A-3 (Page 60 and 61) found I seized from your residence at A-2/14-A, Model Town-I, Delhi on 23.03.2006 during the course of search, seizure please explain the nature, contents and details of these small hand written paichies. Ans: These small handwritten on unaccounted cash purchase/ sales of various items in Supari which were made by firm M/s. AsomSupari Traders and M/s. Balaji perfumes. Also purchase dated 19.10 on page No. 60 of this annexure represented unaccounted and credited. Q. No. 11. I am showing your Annexure A-2 having page No. 1 to 29 found and seized form your residence at A-2/14-A, Model Town-I, Delhi on 23.03.2006 during the course of search and seizure operation. Please explain the nature of contents and details of these pages. Ans:- I hereby admit that these papers also contend details of various transactions include purchase/ sales/ manufacturing trading of Gutkha, Supari made in cash o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that the ld AR, had also stated that no material Per-se was found pertaining to the year under consideration. However, this argument also does not hold any water because once Section 153A is triggered on account of unearthing of incriminating material during search, the AO is empowered to compute the total income for six assessment year prior to the year of search. There are no fetters or limitation under the statute, so as to curtail the jurisdiction of the AO. We derive support from the judgment of jurisdictional High court in the case of CIT Vs. Anil Bhatia 352 ITR 493 (Del).. 18. The nature of the books included katchaparchas, papers containing calculations and amounts routed to bank accounts of various members of the family, sums receivable towards business, etc. They also included documents relating to purchase of property. The statements were made under oath on 18-04-2006 and 03-05-2006. No doubt, they were not during the course of search. Yet, they were made voluntarily. There was no allegation ever that the assessee or any of her family members, including Abhay and Varun Gupta, who made the main statements under oath, were pressurized to do so; there was in fact n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not see how this circular would, in any way, come to the aid and assistance of the appellant. All that it shows is that the Income-tax Officers should not try to force a confession from an assessee. However, if an assessee voluntarily makes a surrender, the officials of the income tax department are bound to record that statement u/s. 132 (4) and such a statement, voluntarily made, is relevant and admissible and is liable to be used as evidence. 19. Earlier, the Supreme Court had held, in P.R. Metrani v. Commissioner of Income-tax (2006) 287 ITR 209 (SC) that: 18. Section132 is a Code in itself. It provides for the conditions upon which and the circumstances in which the warrants of authorization can be issued. Sub-section (2) authorizes the authorized officer to requisition the services of any police officer or of any officer of the Central Government or of both to assist him for all or any of the purposes for which the search is conducted. Under sub-section (4) the authorized officer can during the course of search or seizure examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first question of law is answered against the assessee and in the revenue s favour. Re Question No 2: 21. The assessee s argument on this aspect was that the lower authorities approach in rejecting the books, estimating turn over and applying a high GP rate to estimate proft, was arbitrary. 22. The AO noticed that in the audited account for the year under consideration, the assessee declared sales of ₹ 69,28,582/- and Gross Profit of ₹ 7,30,961/- yielding gross profit rate of 10.55%. He observed that the assessee produced only computerized books of account and did not produce sale-bills, purchase bills and vouchers for expenses incurred by it; the AO also pointed out that the assessee did not file confirmation proof to establish the amounts towards sundry creditors and debtors other than five creditors. Based on these, the AO rejected the books of account and adopted the sale at ₹ 1 crore and GP rate at 20% and addedRs. 12,69,039/-. The CIT(A) concurred with this, saying that in the absence of bills and vouchers entries made in books/ bahis were unverifiable and consequently, the book results could not be accepted. The Commissioner, after noticing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 to 3 that as a result of search, shri Ajay Gupta on behalf of assessee has admitted to unaccounted transactions outside regular books of accounts. It is also true that there is no material indicating unaccounted transactions particularly for the instant year unearthed during search, but it cannot be denied that once book results for the year under consideration are unverifiable in the absence of supporting vouchers, bills then the factum of admission u/s 132(4) of the Act made by Shri Abhay Gupta on behalf of the assessee that unaccounted transactions took place for earlier years would be relevant consideration for estimation. In such circumstances the burden was on the assessee to show as to how the estimation as made by the AO was arbitrary or unreasonable. No material has been placed before us to discharge the said burden. The AO has increased the sales from ₹ 69 lakh to ₹ 1 crore which on the facts cannot be said to be arbitrary, where assessee has admitted unaccounted transactions albeit for later years. However in respect of GP rate, while perusing the GP rate estimated by the AO for subsequent Assessment Years. We find the following addition has been made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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