Income Tax Appellate Tribunal - Pune
J.D.Thote Dairies, vs Department Of Income Tax on 13 February, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA NO. 286/PN/2004
(Block Period 01-04-1988 to 07-01-1999)
ACIT, Circle-2,
B.J. Market, Jalgaon. .. Appellant
Vs.
Haji Habibulla Khan Haji Ayyub Khan,
Prop. Savda Golden Transport Company,
Savda, Tal : Raver,
District : Jalgaon. .. Respondent
CO. No.55/PN/2004
(Block Period 01-04-1988 to 07-01-1999)
Haji Habibulla Khan Haji Ayyub Khan,
Prop. Savda Golden Transport Company,
Savda, Tal : Raver,
District : Jalgaon. .. Appellant
Vs.
ACIT, Circle-2,
B.J. Market, Jalgaon. .. Respondent
Appellant by : Smt. Deepa Khare
Respondent by : Sri S.K. Singh
Date of Hearing : 13-02-2013
Date of Pronouncement : 28 -02-2013
ORDER
PER R.K. PANDA, AM :
The appeal filed by the revenue and the CO filed by the assessee are directed against the order dated 29-10-2003 of the CIT(A)-II, Nashik relating to the Block period 01-04-1988 to 07-01-1999. For the sake of convenience, these were heard together and are being disposed of by this common order.
2. Facts of the case, in brief, are that the assessee is an individual and is carrying out business of transportation under the name and style of Savda Golden Transport Company. He transported the Banana of Traders from Savada and 2 Raver to various upcountry traders and charged commission on transportation. He also derives income from insurance commission on such transported goods. A search action u/s.132 of the Income Tax Act was carried out in the residential-cum- business premises of the assessee on 07-01-1999 which continued upto 09-01- 1999. During the course of such search it was found that the assessee is not maintaining regular books of accounts nor was assessed to tax prior to the date of search. During the course of search various incriminating documents/records were found and seized by the department which are as per Annexure A/1/A/2 of the Panchnama. Further, an amount of `10,27,500 in shape of cash was found out of which an amount of `9,50,000 was seized. The assessee in his statement recorded u/s.132(4) declared an amount of `13,50,000 as his undisclosed income, the details of which are as under :
i. M/s. Sava Golden Transport Co. `10,50,000
ii. M/s. Janata Fair Scale ` 2,00,000
Prop. Shri Akhatar Khan
iii. M/s. Sameer Communication ` 100,000
Prop. Shri Ajamal Khan
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TOTAL ``13,50,000
---------------
3. In response to the notice u/s.158BC the assessee filed his block return for the period 01-04-1988 to 07-01-1999 declaring undisclosed income of `4,53,554 as against his disclosure of `13,50,000 during the search in the group. The declared undisclosed income of `4,53,554 was as under :
Undisclosed income for the A.Y. 98-99 (F.Y. 97-98) `1,04,812 Undisclosed income for the A.Y. 99-2000 (upto 07-01-2000) `3,48,742
--------------
TOTAL `4,53,554
--------------
4. During the course of assessment proceedings the Assessing Officer noted that the assessee in his block return estimated income for A.Y. 1997-98 at `1,04,812 and for A.Y. 1998-99 at `3,48,742. He observed that the assessee, while 3 estimating the above income has not given any concrete evidence. Since the assessee was not assessed to tax earlier, the Assessing Officer tried to make estimate of the income earned by the assessee. He observed from the seized documents that assessee is carrying on business of transportation of Banana on commission basis from the F.Y. 1990-91. Similarly, he is also in receipt of commission income out of insurance in respect of banana transported. The assessee is not maintaining books of account and he only maintains daily cash payment register, receipt register and insurance register. On verification of these registers, the Assessing Officer noted that the assessee has earned income for the F.Y. 1997-98 and 1998-99 as under :
F.Y. Receipts Payment Claim of loss Net income
97-98 4735345 2298896 600146 1836373
98-99 4832620 2590450 652818 1589352
This fact was also accepted by assessee's son Sri Iliyas at the time of search who is conversant with transportation business, He, however, had claimed that various expenses were not considered in the payments column such as labour payments for loading, unloading, vehicle maintenance, less payments received, compensation for spoiled goods etc. Since the assessee is not maintaining any regular books of accounts, the Assessing Officer estimated the various expenses at 20% of the net income as shown above and worked out the taxable income for F.Y. 1997-98 and 1998-99 as under :
F.Y. Asst. Income 20% allowed Net income
Year after for
payment unrecorded/not
& claims considered
exp.
97-98 98-99 18,36,373 3,67,274 14,69,000
98-99 99-2000 15,89,352 3,17,870 12,71,000
4.2 The Assessing Officer further noted that there was actual base for estimation of income in the form of registers and the real figures of gross income were available for the F.Y. 1997-98 and 1998-99. Such documents were not available 4 for the other years falling in the block period. Following the decision of the Pune Bench of the Tribunal in the case of Koparde group of cases wherein it was held that estimation of income can be made for the earlier years of block period, he proceeded to determine the income for the other years falling under the block period. He observed that Sri Iliyas, son of the assessee who was conversant with transportation business of his father admitted in reply to Question No.20B during the search that net income from commission out of transportation and insurance is not less than `1 lakh per month for the block period. Keeping the above as base and considering the expenditure incurred by the assessee for various major expenses for the very large family he proceeded to estimate the income for the block period which is as under :
F.Y. Asst. Income 20% allowed Net income
Year after for
payment unrecorded/not
& claims considered
expenses
97-98 98-99 18,36,373 3,67,274 14,69,000
(already
estimated
above)
98-99 99-2000 15,89,352 3,17,870 12,71,000
(-do-)
97-97 97-98 10,00,000 2,00,000 8,00,000
95-96 96-97 8,00,000 1,60,000 6,40,000
94-95 95-96 6,00,000 1,20,000 4,80,000
93-94 94-95 4,00,000 80,000 3,20,000
92-93 93-94 2,00,000 40,000 1,60,000
91-92 92-93 1,00,000 20,000 80,000
90-91 91-92 1,00,000 20,000 80,000
TOTAL 53,00,000
4.3 Considering the status of the family and the number of family members etc. the Assessing Officer calculated the household expenses for the block period at `34,63,200, the details of which are as under :
Asst. Year No. of Household Monthly Annual
family expenses expenses expenses
members per day per
person
1991-92 17 30x17=510 15300 183600
1992-93 19 35x19=665 19950 239400
1993-94 20 40x20=800 24000 288000
5
1994-95 20 45x20=900 27000 324000
1995-96 21 50x21=1050 31500 378000
1996-97 22 55x22=1210 36300 435600
1997-98 23 60x23=1380 41400 496800
1998-99 23 65x23=1495 44830 538200
1999-2000 23 70x23=1710 48300 579600
TOTAL 3463200
4.4 The Assessing Officer, however, did not make any further addition on this account on the ground that it will amount to double addition since the business income has already been estimated. After considering the incidental expenses on account of marriage, cloth, medical expenses etc. and other possible investment at `7,87,000 the Assessing Officer held that cash found during the course of search at `10,50,000 is explained after deducting household expenses of `34,63,000 and incidental expenses of `7,87,000 from the business income estimated at `53 lakhs.
Thus, he determined the undisclosed income of the block period at `53 lakhs as against `4,53,554 declared by the assessee in the block return.
5. Before the CIT(A) the assessee challenged the validity of the assessment proceedings and the income determined by the Assessing Officer in the block assessment. It was submitted that the assessee was not maintaining any regular books of accounts and whatever books of accounts were maintained were for the period 01-01-1997 to 09-03-1999. In these books expenses on account of salaries, telephone, claim, freight deduction, travelling etc. were not recorded. In the books found the cash found as maintained in the shop, cash brought from the shop, collection during the day and cash expenses on that day are mentioned. The closing cash was taken to house and the next day the same cash was brought from the house. Since these are kaccha books the expenses mentioned above are not recorded. These expenses are incurred by the various family members from the cash remained at home. The books have been completed after obtaining the copies of the seized material. Whatever income arrived at the 132 proceedings was 6 subject to verification and the expenses mentioned above which also is in line with the reply given by Sri Iliyas Khan. It was accordingly submitted that in absence of any seized material for the remaining period of the block years the Assessing Officer should not have made any estimated addition. Further, whatever income was declared was on the basis of the books of accounts prepared after obtaining seized documents and therefore the Assessing Officer was not justified in determining the income at such high figure. The estimation of household expenses by the Assessing Officer was also challenged on the ground that it is highly arbitrary and excessive.
6. So far as the cash found from the residence of the assessee it was submitted that a part of the said cash was belonging to the truck drivers which were also stated during the course of search in the statement recorded u/s. 132(4). Although the Assessing Officer has not made any separate addition on the ground that the estimated income will take care of the cash found and the household expenses, however, the same is not in accordance with the facts of the case.
7. Based on the arguments advanced by the assessee the learned CIT(A) confirmed the addition on account of cash of `5,42,000 and deleted the remaining addition of `42,72,500. He held that in a block assessment the addition should be based on seized material and no estimation or guess work can be made which does not have nexus with the seized material/documents or evidence. He also distinguished the decision in the case of Kishan Rao Manik Rao Koparde on the ground that the Tribunal in the said decision has clearly stated that computation of undisclosed income for the block period should always be based on seized material and the evidences and documents collected in pursuance of investigation based on such seized documents. He observed that no defect has been pointed out in the 7 profit and loss account filed by the assessee and no information was brought on record which may show that expenses incurred exceeded the withdrawals.
8. Based on such part relief given by the CIT(A) the revenue has filed the appeal. The assessee has also filed the CO by taking the following grounds :
Grounds by Revenue (ITA No.286/PN/2004) :
"1. On the facts and circumstance of the case, the CIT(A) erred in deleting the addition made on account of undisclosed income from business amounting to `27,40,000 for F.Y. 1997-98 and 1998-99 based on seized material `7,23,000 based on estimation of household expenses and `7,87,000 on account of incidental expenses like marriage, clothes, medical etc and other possible investments.
2. On the facts and circumstance of the case, the CIT(A) erred in not appreciating the fact that assessee failed to file the returns of income from year to year, no books of accounts are maintained though he is doing business from last many years.
3. On the facts and circumstance of the case, the Hon'ble CIT(A) erred in not appreciating the fact that the A.O. has completed the assessment on the basis of seized material available with him for two Financial Years, i.s.1997-98 and 1998-99 and for earlier year estimated the income considering the expenditure etc.
4. The order of the CIT(A) may be vacated.
5. The applicant may craves leave to add, amend alter any ground of appeal."
Grounds by Assessee ( CO. No.55/PN/2004 ) :
"1. On the facts and in the circumstances of the case CIT(A) is not justified in holding that block assessment has been framed by giving proper opportunity. The appellant's grievance before him was that no opportunity was given regarding the income assessed, since the assessment framed on the income for which no inquiry or opportunity was given. The appellant therefore submits that assessment be held and illegal and be annulled.
2. On the facts and in the circumstances of the case CIT(A) is not justified in confirming the alleged addition of `5,73,946 on account of unexplained cash found, whereas, no such addition was made by the Assessing Officer. The view of the CIT(A) that appellant declare cash of `4,53,554 as his undisclosed income for A.Y. 1997-98 and 98-99 is not correct, whereas, it is income returned in the block return. The addition, therefore, be deleted.
3. On the facts and in the circumstances of the case CIT(A) is not justified in holding and directing the Assessing Officer to work out the income for the period of one and half month left out to be entered in the books prepared, while giving effect to his order, and Assessing Officer has worked out such income at `1,20,060. The CIT(A) has rejected the books prepared by the appellant and worked out the undisclosed income on the basis of cash found at `10,27,500; whereas, he should have kept in mind that any addition was going to explain the cash found. The addition made by the Assessing Officer be, therefore, deleted.
4. Any other ground at the time of hearing with the previous approval of the Hon. Members"8
9. At the time of hearing the learned counsel for the assessee did not press ground of appeal No.1 challenging the validity of the assessment for which the learned Departmental Representative has no objection. Accordingly the same is dismissed as not pressed.
10. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions brought to our notice. There is no dispute to the fact that during the course of search it was seen that the assessee was not maintaining any books of accounts. Whatever books of account available at the time of search were incomplete and pertain to the F.Y. 1997-98 and 1998-99 only. It is also a fact that the assessee's son in his statement recorded during the course of search had stated that various expenses such as salary, telephone, freight deduction, travelling, claim etc were not recorded for which the Assessing Officer allowed 20% of the income as unrecorded/unconsidered expenses and determined the income for the F.Y. 1997- 98 and 1998-99 at `14,69,000 and `12,71,000 respectively. Similarly, for the various other years the Assessing Officer has estimated the income which is as per Para 4.2 above. There is also no dispute to the fact that during the course of search the assessee in his statement recorded u/s.132(4) had made disclosure of `13,50,000 details of which has already been mentioned at Para 2 of the impugned order. However, the assessee never honoured the disclosure so made and filed his block return declaring undisclosed income of `4,53,554 only. There is also no dispute to the fact that the assessee in the note attached with the block return has stated that he is not assessed to tax although he has paid tax for and from the A.Y. 1989-90 to 1994-95.
9
11. It is the submission of the learned counsel for the assessee that any addition in a block assessment should be based on seized documents. Further, for the F.Y. 1997-98 and 1998-99 the assessee has prepared profit and loss account and balance sheet etc. after obtaining the Xerox copies of the seized documents and after incorporating certain expenses which are routinely incurred by the assessee. The Assessing Officer has completely ignored all these things and has estimated the income without pointing out any defects in the accounts so prepared. It is the case of the revenue that no books of accounts were maintained which was noticed during the course of search, the various expenses debited by the assessee in the profit and loss account are not in commensurate with the expenses for other years and the gross receipts of the assessee. It is also the case of the revenue that the learned CIT(A) has not appreciated the estimated household expenses and incidental expenses like marriage, clothes, medical and other possible investment etc. and accepted the income declared by the assessee for the A.Y. 1997-98 and 1998-99 at `4,53,554 and sustained only an amount of `5,73,946 on account of unexplained cash which is not proper.
12. It has been held by various judicial pronouncements that the addition in case of block assessment should be made on the basis of seized documents and books of accounts. It has also been held that when the assessee is found to maintain books of accounts for some years and does not maintain books of accounts for other years then in that case there can be some estimation or guess work. However, such guess work or estimation should not be arbitrary and hypothetical. In the instant case, no doubt the assessee had not maintained books of accounts. Similarly the profit and loss account and balance etc. filed by the assessee during the assessment proceedings cannot be accepted as fully reliable since various expenses debited in the profit and loss account are not based on the seized documents. Therefore, the 10 learned CIT(A) in our opinion was not justified in accepting the income declared by the assessee for A.Y. 1998-99 and 1999-2000 at `1,04,812 and `3,48,742 respectively. However, it was submitted during the course of hearing before us that the assessee is already dead. The Chartered Accountant who had prepared such books of accounts on the basis of seized documents etc, is also no more alive. Therefore, there is no point in restoring the issue to the file of the Assessing Officer for fresh adjudication. At the same time, since this is a very old matter the litigation also must come to an end. Considering the totality of the facts of the case and considering the fact that assessee had declared an amount of `13,50,000 during the course of search and further considering the fact that no other asset except cash of `10,27,800 was only found during the course of search, we are of the considered opinion that determination of income as under will meet the ends of justice :
Assessment Year Amount
1991-92 40,000
1992-93 45,000
1993-94 50,000
1994-95 60,000
1995-96 80,000
1996-97 1,00,000
1997-98 1,50,000
1998-99 2,50,000
1999-2000 5,00,000
13. So far as the cash found amounting to `10,27,500 is concerned the explanation of the assessee is that part of the cash belong to various truck drivers/truck owners who had kept the cash with the assessee for safe keeping. However, the Assessing Officer has neither accepted the above contention of the assessee nor given any reasons for not accepting the same. The further explanation of the assessee that a part of the cash belonging to his sons out of their salary income and savings has also apparently been rejected by the Assessing Officer but there is no such reason given by the Assessing Officer. Considering the totality of 11 the facts of the case and in the light of determination of income as above and in absence of any other evidence to find out any lavish expenditure incurred by the assessee for self and family members and in absence of any other investment found during the course of search the cash found during the search in our opinion will be explained out of the income estimated above. We hold and direct accordingly.
14. In the result, the appeal filed by the revenue is partly allowed and the CO filed by the assessee is dismissed.
Pronounced in the Open court on this, the 28th day of February 2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated the 28th February 2013
satish
Copy of the order is forwarded to :
1. The assessee
2. The Department
3. The CIT(A)-II, Nashik
4. CIT-II, Nashik
5. D.R. "A" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune