Per N.R.S. Ganesan (JM) All the appeals of the taxpayer and the revenue arise out of the search conducted by the revenue on 21-08-2007. Therefore, we heard all the appeals together and dispose them off by this common order.
2. The first common ground in all the appeals of the revenue is with regard to the deletion of addition made by the assessing officer on account of suppression of sales.
3. Ms. A.S. Bindu, the ld.DR submitted that during the course of search operation it was found that the taxpayer is not issuing sale bills for sale of jewellery. The jewellery is being sold on the basis of the estimate slip issued to the customers. The ld.DR pointed out that in the course of pre-search enquiry on 24-07-2007 a gold ornament purchased by the personnel from Investigation Wing of the department. On purchasing 2.040 gms of gold the taxpayer issued only estimate slip for Rs.1,940. No sale bill was issued. This was further confirmed in the course of enquiry during the course of search operation. According to the ld.DR, the cashier, one Shri Joshi Abraham was examined, who stated that only estimate slip was issued for sale of jewellery and part of the sales were recorded through sale bills. The ld.DR further pointed out that while purchasing old gold ornaments, the taxpayer is not issuing any purchase bills. Therefore, there was an unaccounted sales and purchase of jewellery and old gold ornaments. The ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 ld.representative further pointed out that one Shri Pintu Jacob was examined, who stated that he is issuing the estimate slip and it is not known whether sale bills were issued to the customers or not. The ld.DR further pointed out that in the course of search in the premises of Sunny Jacob Gold Hyper Market, Kollam three note books marked as MSP-1, MSP-2 & MSP-3 were found and seized. These note books contained accounts for purchase and issue of gold ornaments. When these note books were compared with regular register maintained by the taxpayer there was wide variation in the accounting of purchase and sales of gold jewellery. The ld.representative further pointed out that Commercial Tax Department inspected the taxpayers premises on 24-02-2006 and it was found by the Commercial Tax Department that the taxpayers were selling the gold ornaments only through estimate slips. However, the Commissioner of Income- tax(A) deleted all the additions on the ground that there was no material unearthed during the course of search operation. According to the ld.representative, the material available on record clearly shows that the gold jewellery was sold on the basis of the estimate slip which was not recorded in the books of account and no sale bills were issued. Referring to the judgment of the Kerala High Court in Commissioner of Income-tax vs Hotel Meriya ITA No.551 of 2009 and submitted that the Commissioner of Income-tax(A) is not justified in deleting the addition. According to the ld.DR, during the course of search operation the revenue authorities found that the taxpayers were suppressing the sales of jewellery and even during the inspection by the Commercial Tax Department on 24-02-2006, the very irregularity was noticed by the Commercial Tax Department. Therefore, according to the ld.DR, the Commissioner of Income-tax(A) has committed an error in deleting the addition made by the assessing officer. The ld.DR has also placed his reliance on the judgment of the ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 Andhra Pradesh High Court in the case of Rajnik & Co vs Commissioner of Income-tax 251 ITR 561 (A.P.). The ld.DR further submitted that for the assessment year 2008-09, the CIT(A) has confirmed the addition against which the taxpayer has filed the appeal.
4. On the contrary, Shri Anil D Nair, the ld.counsel for the taxpayers submitted that the taxpayers are in the business of retail jewellery. Whenever the customers go to the shop they will select one or two designs and patent and ask for the price of all the items. Therefore, it is usual practice in this line of business to prepare an estimate slip for all the items preferred by the customers and thereafter the customer may choose one or two items for which sale bills would be issued. In some cases, after getting estimate slip for one or two items which was identified by the customers they may not purchase anything and the estimate remains to be an estimate. Therefore, it is not correct to say that the taxpayer is selling all the jewelleries on estimate basis. According to the ld.counsel issuing estimate slip is usual in this line of business; therefore, the taxpayers cannot be found fault with. The ld.counsel further pointed out that the search was made on 21-08-2007. All the materials which were collected by the revenue relates to assessment year 2008-09. There was no other material for the assessment years 2002-03 to 2007-08. In the absence of any material for suppression of sale for the assessment years 2002-03 to 2007-08 the Commissioner of Income-tax(A) has rightly deleted the addition. However, for the assessment year 2008-09 the Commissioner of Income-tax(A) confirmed the addition without understanding the nature of business of the taxpayers. The ld.counsel further pointed out that even for assessment year 2008-09 though certain estimate slips are available with the department, these slips were issued ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 to the customers at their requests on their purchase. The customer decides to purchase the jewellery after identifying the patent and model of jewellery after comparing the price in the estimate slip and sale bills will be issued. Therefore, the addition which was confirmed by the Commissioner of Income-tax(A) for assessment year 2008-09 is not justified. The ld.counsel placed his reliance on the decision of this Tribunal in Martha Enterprises vs DCIT in ITA Nos 269 to 275/Coch/2010 order dated 24 January, 2011 and submitted that where no material was available with respect to any assessment year, there cannot be any estimation of suppressed sales turnover and profit. The ld.counsel has also placed reliance on the decision of this Tribunal in P.A. Kuriakose in ITA Nos.455 to 461/Coch/2010 dated 04-05-2011 and submitted that in the absence of any material evidence for assessment years 2002-03 to 2007-08 there cannot be any addition. Therefore, according to the ld.counsel, the Commissioner of Income- tax(A) has rightly deleted the addition made by the assessing officer.
5. We have considered the rival submissions and also perused the material available on record. Admittedly, there was a search in the premises of the taxpayer on 21-08-2007. During the course of search operation it was found that some of the sales were effected without sales bill by issuing estimate slips. The contention of the ld.counsel for the taxpayer is that it is usual in this line of business to issue estimate slips whenever the customer is in the process of selecting gold jewellery. According to the ld.counsel, when the customer decides to purchase the jewellery, sale bills are issued. However, there was a concrete evidence to show that the tax payer was issuing only estimate slips for sale of jewellery. In fact, the departmental personnel purchased jewellery in the course of pre-search enquiry and the taxpayer issued only estimate slip for sale. It is also ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 on record to show that sale bills were issued only for part of the sales and the balance sales were effected on estimate slip. This was confirmed by the cashier of the taxpayer, Shri Joshi Abraham. From the material available on record it appears that one Shri A Babu was examined on 21-08-2007 during the course of search operation. The said A Baby purchased gold ornaments on 20-08-2007 after exchanging old gold ornaments. On 21-08-2007 the said A Baby came to the shop to get back the old gold ornaments since he was not satisfied with the purity of the gold ornaments. He produced estimate slip No.17 dated 20-08-2007 which shows net weight of 12.691 gms after reducing 2.599 gms towards weight of the stone. The taxpayer has not issued any purchase bill for the old gold ornament received from Shri A Baby and for sale of jewellery. The Commissioner of Income-tax(A) found that there was no evidence for the assessment years 2002-03 to 2007-08 for suppression of sale, therefore, he deleted the entire addition. However, for the assessment year 2008-09 the Commissioner of Income-tax(A) confirmed the addition on the ground that the evidence collected by the revenue shows suppression of sales. The Commissioner of Income-tax(A) placed his reliance on the judgment of the Andhra Pradesh High Court in Rajnik & Co (supra).
6. We have carefully gone through the judgment of the Andhra Pradesh High Court in the case of Rajnik & Co (supra). In the case before the Andhra Pradesh High Court there was a search in the business premises of the taxpayer and it was found from the loose sheets suppression of sales for the financial years 1995-96 to 1996-97. Apart from the materials recovered at the time of search sworn statement was also recorded by the department wherein one of the partners admitted in his statement before the officers that the taxpayers firm was ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 practicing suppression of sales from day to day basis through out the assessment year not only during the assessment years 1996-97 and 1997-98 but also during the earlier assessment years 1986-87 to 1995-96. Based on the material found during the course of search operation and the admission of the partner in the sworn statement, the assessing officer made addition towards suppression of sales. This was confirmed by the Tribunal. When the matter travelled to the High Court the High Court found that with reference to the addition made for assessment years 1986-87 to 1995-96 no doubt there is no material but it is admitted by the partner of the firm that the taxpayer has practiced suppression of sales turnover. Accordingly, the High Court found that the authorities are justified in making the addition. In the case before us also though the estimate slip found by the revenue authorities relate to assessment year 2008-09 the cashier, Shri Joshi Abraham said in his statement that he is issuing bills only for part of the sales and the balance sales were effected on estimate basis. This statement of the cashier was ignored by the Commissioner of Income-tax(A). Moreover, during the inspection by Commercial Tax Department on 24-02-2006 they found a similar practice adopted by the taxpayer in sale of jewellery by issuing estimate slip. Though proceedings under the Commercial Tax Department are different from income-tax proceedings while computing the total income the modus operandi adopted by the taxpayer can be taken into account in the income-tax proceedings also. The income-tax authority has to reappreciate the materials found by the Commercial Tax Authorities. Moreover, one Mr. Pintu Jacob claimed that he was issuing only estimate slip. Moreover, several investment in the landed properties were found from assessment year 2002-03 to assessment year 2008-09. The agreement for sale was found and the assessing officer claims that the profit on suppressed sales was invested in landed ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 properties. Therefore, it may not be correct to say that there was no material for the assessment years 2002-03 to 2007-08. In those circumstances, this Tribunal is of the considered opinion that Commissioner of Income-tax(A) is not justified in deleting the addition for the assessment years 2002-03 to 2007-08. However, the statement recorded from the cashier and other persons and the material collected by the Commercial Tax Department needs to be examined after giving an opportunity to the taxpayer. The taxpayer had no occasion to respond to the material collected by the sales-tax department during their inspection on 24-02- 2006. It is also pertinent to note that the impugned assessment proceeding was initiated u/s 153A of the Act. In proceedings u/s 153A, the assessing officer can take into account all the evidences / materials including materials found during the course of search operation. Therefore, in all fairness, this Tribunal is of the considered opinion that one more opportunity shall be given to the taxpayer to present his case before the assessing officer. Accordingly, the orders of the lower authorities for the assessment years 2002-03 to 2007-08 are set aside and the entire issue with regard to addition of suppressed sales is remitted back to the file of the assessing officer. The assessing officer shall reconsider the issue afresh after reconsidering all the statements recorded and the material found during the course of inspection by the Commercial Tax Department, all the materials including the materials collected during the course of search operation and thereafter decide the same in accordance with law after giving a reasonable opportunity to the taxpayers.
7. Now coming to appeal for assessment year 2008-09 the Commissioner of Income-tax(A) confirmed the addition. Therefore, the taxpayer has filed the appeal before this Tribunal. For the assessment years 2002-03 to 2007-08 the ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 matter is remitted back to the file of the assessing officer to examine the statement recorded during the course of search operation and the other materials available on record including the seized materials. Therefore, the decision that may be taken for the assessment years 2002-03 to 2007-08 may have its impact for the assessment year 2008-09 also. Therefore, for the sake of consistency and to have comprehensive adjudication, this Tribunal is of the considered opinion that the issue for the assessment year 2008-09 also needs to be considered. Accordingly, the orders of the lower authorities for assessment year 2008-09 are also set aside and the issue of suppressed sales turnover and profit is remitted back to the file of the assessing officer. The assessing officer shall decide the issue afresh in line with the direction issued for the assessment years 2002-03 to 2007-08 after providing opportunity of hearing to the taxpayer.
8. Now coming to appeal for assessment year 2001-02 in ITA No.692/Coch/2010 the Commissioner of Income-tax(A) confirmed the addition made by the assessing officer with regard to the credit received from George Joseph.
9. Shri Anil D Nair, the ld.counsel for the taxpayer submitted that the taxpayer has received a gift of Rs.3,47,580 from Shri George Joseph through banking channel. According to the ld.representative, the identity of the creditor was proved, the transaction was through banking channel; therefore, the genuineness of the transaction was also proved. The capacity of the donor is also proved by producing sufficient material. The ld.representative submitted that since the taxpayer has discharged its burden, there cannot be any disallowance. ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011
10. On the contrary, Ms. A.S. Bindu, the ld.DR submitted that the taxpayer claims that the amount was received through foreign remittance. The capacity of the donor, Shri George Joseph to give the so-called gift was not established. According to the ld.representative, it is the responsibility of the taxpayer to prove the identity, creditworthiness and genuineness of the gift. The taxpayer has not established any of the three essential ingredients, which are essential for proving the credit. The ld.representative placed his reliance on the judgment of the Apex court in the case of Commissioner of Income-tax vs P Mohanakala 291 ITR 278 (SC).
11. We have considered the rival submissions and also perused the material available on record. During the course of assessment proceedings, the assessing officer found that there was a credit in the capital account. When the assessing officer asked the taxpayer to explain the source of investment in the capital account it was claimed that an amount of Rs.3,47,580 was said to be received from Shri George Joseph. The taxpayer has not produced any confirmation letter. He produced only an entry from the bank account. No other material was produced before the lower authority. In view of the judgment of the Apex Court in the case of P Mohanakala (supra) merely because the money was transferred through banking channel it will not prove the genuineness of the transaction. It is for the taxpayer to prove the identity of the creditor, creditworthiness of the creditor to give the gift and the genuineness. Since no material was filed except the entries in the bank passbook the Commissioner of Income-tax(A) also confirmed the addition. This Tribunal finds that giving one more opportunity to the taxpayer to prove the identity of the creditor, genuineness of the credit and capacity of the creditor may not prejudice the interest of the revenue. In respect ITA No.690 to 696/2010 ITA No.23 to 43/Coch/2011 of suppression of sales for all the assessment years the matter was remitted back to the file of the assessing officer. Therefore, for the sake of consistency, the addition of Rs.3,47,580 also needs to be reconsidered after giving reasonable opportunity to the taxpayer. Accordingly, the orders of lower authorities are set aide and the issue of addition of Rs.3,47,580 is also remitted back to the file of the assessing officer. The assessing officer shall examine the issue afresh and thereafter decide the issue in accordance with law after giving reasonable opportunity to the taxpayer.
12. In the result, all the appeals of the taxpayers and the revenue are allowed for statistical purpose. Order pronounced in the open court on this 16 November, 2012. Sd/- sd/- (B.R. Baskaran) (N.R.S. Ganesan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin, Dt : 16 November, 2012 pk/- copy to:
1. The appellants
2. The respondents
3. The Commissioner of Income-tax
4. The Commissioner of Income-tax(A)
5. The DR (True copy) By order Asstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench