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The Commissioner of Income Tax, The Asst Commissioner of Income Tax Versus Shri S Rudramuniyappa, M/s Ravi Wines Traders

Unaccounted sales - variation in stock at the time of search - Tribunal has allowed the appeals on the ground that other than the papers seized by the Department, there was no direct or indirect documents to prove that the assessees indulged in unaccounted sales - Held that:- Appellate Authority while dealing with this aspect of the matter has come to the conclusion that it is not the case of the assessees that the entries recorded are untrue and they do not relate to the assessees and according .....

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.17 of the assessment order. - The order of the Assessing Authority is cogent and well reasoned. Every minute detail is reflecting in the said order. In a case of search of seizure, the revenue may discover assessees’ failure to account several transactions which ought to have been brought to tax. It is only in such circumstances that the provisions of search and seizure are invoked. Assessee took a definite stand that the entries found in the loose sheets were reflecting in the regular book .....

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re of documents and the assessee as well as the Chartered Accountant were given sufficient opportunity to substantiate their claim but they miserably failed justify their stand.The substantial questions of law raised in these appeals are answered in favour of the revenue. - I.T.A. No. 81/2008 C/W I.T.A. No. 83/2008 - Dated:- 30-7-2015 - Ravi Malimath And P. S. Dinesh Kumar, JJ. For the Petitioner : Sri Y V Raviraj For the Respondent : Sri Shashank Hegde JUDGMENT Revenue has preferred these appea .....

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ubstantial questions of law: i) Whether the tribunal was correct in holding that the addition made of ₹ 5,38,145/- and ₹ 3,01,027/- on the papers seized in the course of search had not stood corroborated by other evidence and therefore the addition cannot be added back? ii) Whether the tribunal was correct in holding that the addition of ₹ 8,14,907/- was made on the corresponding unaccounted sale and not based on any materials other than the documents seized? iii) Whether the t .....

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s loose sheets of papers, (117 in number) marked as ARW/6, is perverse and arbitrary and unsustainable in law? 2. Whether the finding of the Tribunal that a sum of Rs. .13,84,050/- is liable to be deleted, is perverse and arbitrary and contrary to law? 4. The case of the revenue in these appeals is that the respondents/assessees are in the business of wholesale liquor trading. A search was conducted under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as the Act , for short) in .....

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tedly on 10.07.2001 declaring undisclosed income of Rs.NIL. During the course of seizure, large bunch of loose sheets numbering 117 pages in a file captioned Paramount Double Extra was seized from the business premises of the assessees. Page 1 to 89 of the file contained cash receipts and payments for the period 09.01.2000 to 19.08.2000. Writing on these papers was in vernacular language Kannada . S.Rudramuniyappa (respondent in ITA 81/2008) while recording his statement on oath on 07.09.2000 st .....

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g Authority observed that there were large number of entries in the file. To re-confirm the correctness of figures mentioned in the sheets, efforts were made to correlate entries with other entries in the seized documents. A bunch of loose sheets pertained to Surya Bar which is owned by his son S.R.Satish Babu and managed by a salesman. The sheets seized revealed that the stock of liquor, receipt of stock, sale of liquor in units, payment receipts, pay outs and payment towards rent, taxes, salar .....

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by the accountant, the Assessing Officer started correlating the figures and also collected information from the Commercial Tax Department with regard to the turn over declared by the assessees in respect of various concerns. Papers found during the search relate to the period between 09.01.2000 and 19.08.2000. Loose sheets and the yellow coloured file disclosed that the cash was received not only from various retail shops and bars, but also from various persons called Swamy, Shiva, Balraj etc. .....

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o March 2000 was computed at ₹ 34,32,140/-. The turn over for the period April 2000 to August 2000 was computed at ₹ 48,41,150/-. There was gross discrepancy between the turn over declared to the Sales Tax Department and the Income Tax Department. A turn over for a three months period declared before the Sales Tax Authorities was comparable with the turn over declared by the assessees for the entire year to the Income Tax Department. Therefore, the Assessing Authority took the turn o .....

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re, the Assessing Authority came to the conclusion that turn over of ₹ 76,87,799/- (Rs.1,53,19,064 - 76,31,265) was with regard to sales outside the books of accounts which was not disclosed by the assessees. The turn over for the period 09.01.2000 to 19.08.2000 as could be gathered from the loose sheets and yellow colour file accounted for ₹ 82,73,290/-. The details such as information about withdrawal by the assessees personal expenses, bribes paid were also found in the loose shee .....

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completely corroborated the department s claim that transactions recorded in the loose sheets were true but not disclosed to the Department. Thus, on a reasonable estimate, turn over was computed at ₹ 76,87,799/- for year 1999-2000 after giving due credit to turn over declared by the assessee in the return of income for the year ending 2001-02 which included period from 01.04.2000 to 07.09.2000. Therefore, Section 158BB(1)(d) was invoked for the said period and the turn over of ₹ 48, .....

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over ratio and the initial capital calculated at 10.6% worked out to ₹ 8,14,907/- and the same was brought to tax. 6. A proposition notice was issued to the assessee which was replied on 09.08.2002 and 16.08.2002, wherein the assessee disputed the estimated turn over for the year 2000-01. At the same time, the assessees were not able to establish that the turn over declared by him was correct. Assessing Authority made a fair and reasonable estimation. The documents found during the search .....

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and included in the regular books of accounts. Therefore, an opportunity was given to prove this stand. The assessees and the Chartered Accountant who appeared on 16.08.2002 were unable to substantiate their stand and expressed their inability to produce the books of accounts for the year 2000-01 and 2001-02. Thus, though assessee took a categorical stand that the names found in the loose sheets were included in the regular books of accounts, they miserably failed to establish their stand when a .....

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the result, the Assessing Authority determined the tax in the following manner: SUMMARY OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD Sl. No. Assessment Year Total Undislosed Income 1 2000-01 3,481,667 2 2001-02 301,027 Total Undisclosed Income 3,782,694 Rounded off to 3,782,690 and held total tax payable at ₹ 27,58,035/-. The order of Assessing Authority was challenged before the Commissioner of Income Tax and the same was allowed in part vide order dated 29.12.2005 in appeal No.ITA No.325/C .....

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ssioner of Income Tax (Appeals) and the ITAT, submits that the Tribunal committed an error in holding that the addition of ₹ 5,38,145/- and ₹ 3,01,027/- based on the papers seized in the course of search were not corroborated by other evidence. He submits that Tribunal was also in error in holding that addition of ₹ 8,14,907/- was based on material other than the seized documents. He further submits that the view of the Tribunal with regard to the addition of ₹ 21,28,815/ .....

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the assessee has admitted that the said Car belonged to his brother. This is a sufficient circumstance to hold that the contents of loose sheets were correct. He further submits that though several opportunities were given, the assessees and the Chartered Accountant were unable to substantiate their specific stand that the receivables had found their place in the regular books of accounts. Under these circumstances, the Assessing Authority was correct in coming to the conclusion which have been .....

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mated figures. 11. We have given our anxious considerations to the submissions made by the learned Counsels and perused the records. 12. The grievance of the Revenue in these appeals is that the Tribunal has allowed the appeals on the ground that other than the papers seized by the Department, there was no direct or indirect documents to prove that the assessees indulged in unaccounted sales. Therefore, the financial figures arrived by the revenue are result of a guess work and bereft of any doc .....

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the assessees and accordingly held that Section 292C would not come in aid of the Department to draw an inference that all entries relate to sale. The Tribunal has further come to the conclusion that there is nothing in the seized material to show that unaccounted sales were found in the course of search. This finding of the ITAT is factually incorrect. As observed supra, the Assessing Authority has referred to the sale invoices to an extent of ₹ 5,40,765/- and deducted the said amount as .....

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il is reflecting in the said order. In a case of search of seizure, the revenue may discover assessees failure to account several transactions which ought to have been brought to tax. It is only in such circumstances that the provisions of search and seizure are invoked. Assessee took a definite stand that the entries found in the loose sheets were reflecting in the regular books. The assessees were given a fair and reasonable opportunity to substantiate their stand. Both the assessee and the ch .....

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