TMI Blog2018 (6) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... would have earned from 84 chitties - thus we are of the opinion that there is nothing wrong in the estimation based on the computation made and the assessment carried out by the AO - hence appeal of assessee is rejected. - I. T. A. No. 82 of 2015. - - - Dated:- 3-1-2018 - K. Vinod Chandran and Ashok Menon JJ. Mohan Pulikkal, R. Sudhir, Smt. Manju Rajan and P. N. Narayanan for the appellant. P. K. R. Menon, Senior Counsel, Jose Joseph, Standing Counsel and Mohammed Rafeeq, Government Pleader for the respondent. JUDGMENT K. Vinod Chandran . The income tax appeal was comprehensively heard on December 7, 2017 and we were of the opinion that no appeal lies since there is no question of law arising from the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer and the Assessing Officer, to be present today the January 3, 2018, on which date the matter was again heard. 3. The appeal is concerned with the block assessment for the financial years 1995-96 to 2001-02, i.e., a total of seven years. The assessee, a chitty company, was subjected to a search on October 18, 2001 which included the business premises and the residence of the directors. The Assessing Officer issued notice under section 158BC on the basis of the material found on search, which included documents, cash and gold. The assessee filed return showing the undisclosed income at nil. The Assessing Officer requested for permission to appoint a special auditor, which was granted and which was consented to by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessment order were with respect to (i) the selection of 8 out of 84 chitties, which was alleged to be not a proper sampling, (ii) the adoption of a profit, far beyond that which is normally acceptable in chitty transactions and (iii) the expenditure having not been fully allowed. 6. With respect to the sampling, the first appellate authority found that the sala of the 8 chitties, the special auditor selected, reflects 43 per cent. of the aggregate sala of the 84 chitties. It was noticed that the assessee did not have an alternative suggestion for sampling and that the special auditor specifically contended that out of the 84 chitties, accounts of only 51 were furnished and the sample taken had the most complete records. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itty transaction the foreman's commission would not exceed 6 per cent. and hence the higher rate adopted cannot be countenanced. The first appellate authority found that the undisclosed income was not confined to the foreman's commission and that the special auditor had found numerous discrepancies in the accounts of the company specifically indicating that the company had also earned income from defaulter's tickets, forfeited tickets ; and company's tickets, over and above the foreman's commission. Defaulters tickets and forfeited tickets were not entitled to any dividend and the same had to be distributed to the current active subscribers which was not done. Hence the assessee, the foreman had collected more amounts fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer by following the above method the profit from 84 chits conducted by the assessee during the block period was esti mated as under : (Rs.) Total sala amount as per annexure 22,10,55,000 Cash collection estimated at 53.5% 11,82,64,425 Profit by applying the profit percentage of 15% on the above 1,77,39,663 9. We have already found that there is no valid ground available to challenge the sampling or the computation of income made based on the special auditor's report, which the company would have earned from 84 chitties. The only question that remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undisclosed income revealed from the documents and materials revealed on search, in the business premises of the assessee and the residential premises of the directors. The undisclosed income is that which the assessee failed to return during the block period. In computing the undisclosed income received by the assessee and taxable in its hands the total expenditure for the entire period would not at all be relevant. 11. The expenditure revealed from the accounts produced is for the entire business during the whole period. This cannot be set off against the undisclosed income. The assessee would definitely claim the expenditure as available in its books of account in the returns filed for the respective years. In fact, when undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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