TMI Blog2016 (12) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... estimating any escaped turnover, Abdulai acknowledges, inevitably there is going to be some guess- work. The assessing authority while making the "best-judgment" assessment no doubt should conclude rationally and unbiased. If the AO's estimate is bona fide and rational, that there is no good proof to support that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation; it is his "best-judgment" and not of anyone else's. No court could substitute its "best-judgment" for that of the assessing authority. The courts should first see, Abdulai asserts, whether the accounts maintained by the assessee were rightly rejected as unreliable. If they conclude that they were rightly rejected, the next question is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be relevant, even though the courts may think that it is not the most appropriate basis, the assessing authority's estimate cannot be disturbed. Unexplained investment - Held that:- The Tribunal has found that, about this investment, the Department has failed to find any corroborative material under Section 69 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) has agreed with the AO's findings. The finding is that the assessee has claimed no agricultural income in the return, but showed it in the statement-of-account filed during assessment proceedings. Indeed, the assessee's claim seems to be against the established practice of reckoning income from agricultural activities. Excluding the house, whatever remains of 21 cents may not be, as has been concurrently held, sufficient to generate the income shown by the assessee from agriculture. We, therefore, find no reason to interfere with the concurrent findings entered by both the fora on this aspect - a question of fact. Interest on Fixed Deposits the assessee had with Gokulam Chit Funds - Held that:- Indisputably, the assessee showed fixed deposits; but, correspondingly, failed to reveal in the returns any interest. Absent any explanation from the assessee, the AO adopted interest @10% per annum. To be more explicit, the assessee showed ₹ 10 lakh fixed deposit from 13-11-2002 to 31-03-2005, and ₹ 5 lakh from 21-01-2003 to 31-03-2009. As noted, he showed no income as interest on those deposits - Given the size of the deposits, it is but inevitable that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 25,63,500/-, we also hold that the addition of interest on those deposits cannot be sustained. Fishing Boats - Held that:- We may focus on the additions made by the AO because of estimated income from fishing boats for the AYs 2005-06, 2006-07 2007-08, and 2008-09. Undeniably the seized diary revealed income from fishing boats amounting to ₹ 38,750/-, ₹ 43,900/-, ₹ 32,100/-, and ₹ 8000/- for the years mentioned above. As has been rightly and concurrently observed by the adjudicatory authorities, there was precious little explanation from the assessee. We, therefore, uphold the Tribunal's findings and dismiss the appeal for the AYs 2007-08 & 2008-09. All issues against the assessee save the addition of amounts the assessee allegedly lent to other people, totaling to ₹ 25,63,500/- and the interest component thereon. - IT Appeal Nos. 106, 108 to 110, 112 & 113 of 2012 - - - Dated:- 16-12-2016 - Antony Dominic And Dama Seshadri Naidu, JJ. T.M. Sreedharan, Sr. Adv., Smt. Nisha John, V.P. Narayanan and Smt. Boby M. Sekhar, Advs. for the Appellant. P.K.R.Menon, Sr. Counsel and Jose Joseph, SC, Advs. for the Respondent. JUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon order, dt.22.09.2011, in I.T.A. Nos. 208 to 214/Coch/2011. 7. Under the above circumstances, the assessee filed these income tax appeals before this Court: Table of Cases: I.T. Appeal Arises From Assessment Year 106 of 2012 ITA No.208/Coch/2011 2002-03 108 of 2012 ITA No.209/Coch/2011 2003-04 109 of 2012 ITA No.210/Coch/2011 2004-05 110 of 2012 ITA No.211/Coch/2011 2005-06 112 of 2012 ITA No.213/Coch/2011 2007-08 113 of 2012 ITA No.214/Coch/2011 2008-09 Submissions: Appellant's: 8. Sri T. M. Sreedharan, the learned Senior Counsel for the assessee, has submitted that the Tribunal, to begin with, has mechanically accepted the appellate authority's findings; it ought to have independently considered the issues keeping in view the appellant's explanation. According to him, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio of Velukutty and Padamachand Ramgopal, the learned Senior Counsel contends that the propositions are entirely fact based. 13. The learned Senior Counsel for the Revenue has relied on CIT v. Hotel Meriya [2011] 332 ITR 537/195 Taxman 459 (Ker.) and CST v. H. M. Esufali H. H. Adbulali [1973] 90 ITR 271 (SC). Issues Raised: I.T. Appeal Questions of Law 106 of 2012 1. Whether the rejection of books of accounts and returns of income for the AY 2002-03 is legal and sustainable? 2. Should not the statutory authorities and the Appellate Tribunal have considered that at the time of search in the residential premises and the survey in the business premises no unaccounted material or evidence was found to justify the rejection of the sales turn over as per the books of accounts for the AY 2002-03 and on that basis is not that addition of undisclosed business income arbitrary and illegal and liable to set aside? 108 of 2012 -do- for AY2003-04 -do- for AY 2003-04 109 of 2012 -do- for AY2004-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,05,314 ₹ 2,32,480 14,06,190 7,12,610 2003-04 1,00,605 1,88,800 24,55,550 11,87,940 2004-05 1,24,140 2,54,470 53,54,340 27,78,570 2005-06 1,35,372 2,13,990 52,97,530 26,42,860 2007-08 92,550 92,250 26,94,770 12,06,820 2008-09 -------- 4,09,450 28,82,220 10,15,100 16. The above tabulation would show that as against the declared turnover of ₹ 13,44,729/- for the relevant Assessment Year ('AY'), the suppressed turnover over the declared turnover was estimated at ₹ 1,15,43,534/-. It was confirmed by the Appellate Authority. 17. On appeal, the learned Tribunal has framed the following issues: (i) Would the statement of an assessee's partner, as well as that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the search conducted in the assessee's house, there is no issue raised about its legality. 21. Explanation to Section 132 (4) of the Act clarifies that the evidence so collected would be relevant for any investigation connected with any proceeding under the Act. A person's examination is not only regarding any books of account, other documents, or assets found because of the search, but also regarding all matters relevant to any investigation connected with any other proceedings under the Act. 22. Now we may get down to the brass-tacks. Once a search is conducted under Section 132, the AO will issue a notice calling on the assessee to furnish the return of income for each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made . The explanation to the provision adds that in an assessment or reassessment made concerning a particular assessment year, the tax will be chargeable at the rate or rates as applicable to that assessment year. 23. The pivotal provision is Section 153-C, which concerns the assessment of 'any other person'. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but no return of income has been filed, the following are the options: (A) based on entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition, if those entries result in the computation of loss for any previous year falling in the block period; or (B) based on entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition, if the income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (d) if the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 has not expired, it must be based on entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the search or requisition relating to those previous years; (e) if any order of settlement has been made under sub-section (4) of Section 245-D, the computation will be based on such order of settlement; (f) if an assessment of undisclosed income had been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Travancore-Cochin General Sales Tax Act, 1125 M.E. (XI of 1125): He (the assessing authority) must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, Their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess work in the matter, it must be honest guess work. In that sense, too, the assessment must be to some extent arbitrary. 32. Velukutty adumbrates the limits of the power implicit in the expression best of his judgment . It holds that 'judgment' is a faculty to decide matters with wisdom truly and legally. A judgment does not depend upon the caprice of a Judge, but on settled and invariable principles of justice. Though there is an element of guesswork in a best-judgment assessment , it will not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed. In such a situation, it was not possible for the Sales Tax Officer to find out precisely the suppressed turnover; he could only estimate it based on the material before him. 38. Abdulai disapproves of an approach that insists on the assessing authority's having material before him to prove the exact turnover suppressed. If it were insisted upon, there would be no best-judgment assessment. The assessee cannot be permitted to take advantage of his own illegal acts, for it is his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove what turnover he had suppressed, which fact is within his personal knowledge. The AO's task in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, Abdulai acknowledges, inevitably there is going to be some guess- work. The assessing authority while making the best-judgment assessment no doubt should conclude rationally and unbiased. If the AO's estimate is bona fide and rational, that there is no good proof to support that estimate is immaterial. Prima facie, the assessing authority is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Turnover of Sales-Net Profit-Addition of 5% 44. The learned Senior Counsel for the assessee has emphasised that during the search the authorities found no discrepancy in the stock. Further, he has brought to our notice the defence set up by the assessee: The impounded bills were adjustment bills issued by the assessee for the sales effected to dealers in Kerala. Compared with Kerala, Mahe (Pondichery) has a low tax-rate. So dealers in Kerala get bills from Mahe for which they give 1% commission to the assessee. The assessee has asserted that it is a normal practice. But, as has been held by the AO, the assessee showed no income by way of commission in the returns filed. 45. Absent any cogent explanation from the assessee, the AO estimated the sales at ₹ 1,36,40,319/- by reducing 10% from each year from the sales effected for the period 01-04-2006 to 31-03-2007. He computed the GP @ 6.52%, which comes to ₹ 8,89,348/-. He added this amount to the assessee's total income as undisclosed business income. Similarly, the AO estimated the sales for the remaining years; he took GP @12.67%, 11. 76%, 11.37% and 9.7% for the AYs 2003-04, 2004-05, 2005-06, and 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing income from agricultural activities. Excluding the house, whatever remains of 21 cents may not be, as has been concurrently held, sufficient to generate the income shown by the assessee from agriculture. We, therefore, find no reason to interfere with the concurrent findings entered by both the fora on this aspect - a question of fact. For AYs 2003-04 and Other AYs: 49. The next issue concerns the AYs 2003-04, 2004-05, and 2005-06. It is about the income in the form of interest on Fixed Deposits the assessee had with Gokulam Chit Funds. Indisputably, the assessee showed fixed deposits; but, correspondingly, failed to reveal in the returns any interest. Absent any explanation from the assessee, the AO adopted interest @10% per annum. To be more explicit, the assessee showed ₹ 10 lakh fixed deposit from 13-11-2002 to 31-03-2005, and ₹ 5 lakh from 21-01-2003 to 31-03-2009. As noted, he showed no income as interest on those deposits. 50. Given the size of the deposits, it is but inevitable that the assessee ought to have earned some interest on the fixed deposits. As he has failed to show in his returns any income by way of interest, the concurrent finding ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be sustained. Addition of Interest: 55. On the above mentioned amounts, the AO has estimated interest component at ₹ 1,48,000/-. For the reasons weighed with us in disallowing the AO's best-judgment the addition of ₹ 25,63,500/-, we also hold that the addition of interest on those deposits cannot be sustained. Fishing Boats: 56. Finally, we may focus on the additions made by the AO because of estimated income from fishing boats for the AYs 2005-06, 2006-07 2007-08, and 2008-09. Undeniably the seized diary revealed income from fishing boats amounting to ₹ 38,750/-, ₹ 43,900/-, ₹ 32,100/-, and ₹ 8000/- for the years mentioned above. As has been rightly and concurrently observed by the adjudicatory authorities, there was precious little explanation from the assessee. We, therefore, uphold the Tribunal's findings and dismiss the appeal for the AYs 2007-08 2008-09. Conclusion: In the end, we answer the questions of law on all issues against the assessee save the addition of amounts the assessee allegedly lent to other people, totaling to ₹ 25,63,500/- and the interest component thereon. Thus, the above IT Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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