M/s P.A.Kuriakose Jewellers, Angamally v. ACIT, Ernakulam

PER BENCH: This set of seven appeals are filed by the assessee, viz. M/s. P.A. Kuriakose Jewellers, Angamally pertaining to the assessment years 2001-02 to 2007-08. Since the assessee is one and the same, we have clubbed & heard these appeals together and are being disposed of by this common order, for the sake of convenience.

2. The assessee is a firm doing business in jewellery. The business was started for the first time in 1999. The assessee was subjected to search and seizure operation ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers u/s.132 on 13-02-2007. During the course of search, no cash or valuables were found and seized.

3. For the assessment years 2001-02, 2002-03, 2003-04 and 2004-05, facts of the case are similar and as such first we shall take up the appeals for those years. According to the Assessing Officer the seized material found during the course of search related to assessment years 2005-06 and 2007-08. These documents and books of account evidenced unaccounted purchases and non-billing of sale leading to sales suppression. The accounts maintained in the computers did not tally with the accounts maintained manually. The Assessing Officer found that in the assessment year 2005-06, as against the admitted sales of Rs.17,71,297/-, the sale as per the seized material was Rs.3,84,71,852/- The percentage of suppression worked out to Rs.2071.95%. For the assessment year 2007-08, sale suppression ratio to disclosed sale was at 497.76%. In view of this position, Assessing Officer was of the opinion that the assessee was indulging in such suppression of sale for all these years. He further opined that the search and surveys conducted in the group concerns reveal a pattern of such suppression of income. Since the Assessing Officer ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers was not satisfied without correctness or completeness of the accounts, Assessing Officer estimated the sale suppression and consequent profits and brought the same as assessees undisclosed income from business. While completing the assessment, Assessing Officer charged interest u/s.234A, 234B and 234C.

4. Against the above order of the Assessing Officer, assessee carried the matter in appeal before the ld. CIT(Appeals) and urged that there was lock of opportunity, section 145(3) r.w.s.144 was wrongly invoked, assessment is not valid on merit. The assessee also challenged the legality of search. 4.1 The ld. CIT(Appeals), after hearing the ld. counsel for the assessee, rejected the ground of authenticity or legality of search. 4.2 With regard to lack of opportunity, the ld. CIT(Appeals) held that the assessment was framed in accordance with provisions of law and there was no legal infirmity. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers 4.3 With regard to the merits of the case, i.e. addition made on account of profit from undisclosed/suppressed turnover, the ld. CIT(Appeals) observed as under: I find that most cl inching evidences recovered during the course of search action were print outs from CPU pertaining to assessment years 2005-06 & 2007-08. Though the appellant disputed the reliabil ity of these documents, the claim of the appellant was not supported by any evidence. In the absence of any evidence to the contrary, these documents therefore establ ish that the appellant was in the habit of suppressing the turn over and the consequential income in a substantial manner in a consistent manner. The evidential value of these documents was highest for assessment year 2005-06 and 2007-08 to which these documents pertain. There is evidence of suppression of turnover in the period relevant to the assessment year 2005-

06 and 2007-08 and therefore a reasonable presumption can be drawn that there was suppressed turnover even during the intervening period, i.e. in assessment year 2006-07. The existence of such business practice of suppression in turnover through the relevant accounting years, therefore, can be reasonably presumed fol lowing the ratio laid down by the Honble Supreme Court in the case of CST v. HM Esufali, HM Abdulali [1973] 90 ITR 271(SC) wherein the Apex Court upheld estimation of undisclosed turnover for the entire period of one year on the basis of undisclosed sales detected for the period of 19 days. I, therefore, hold that these documents were specific for assessment years 2005-06 & 2007-08 and establ ished suppressed turn over during these assessment years and that they were quite reliable for drawing reasonable and judicious conclusions for the period relevant to A.Y.2006-07 which falls in between the two years. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers Thereafter, the ld. CIT(Appeals) worked out the suppression in sales for the assessment year 2005-06 at 2025.28% of disclosed turnover as against 2071.95% adopted by the Assessing Officer and for the assessment year 2007-08 of 497.76%. Thus, the average ratio of suppression to disclosed turnover worked out to 1261.52% as against 1284.85% adopted by the Assessing Officer and the Assessing Officer was directed to adopt the same. Thereafter, ld. CIT(Appeals) considered the claim of application of GP rate and after elaborately discussing the matter in page 22 and 23 at para.8.9 of his appellate order, directed the Assessing Officer to adopt the GP rate at 13.92% as indicated in the seized document and thus gave partial relief to the assessee.

5. In respect of levy of interest u/s.234A and 234B, the ld. CIT(Appeals) rejected the claim of the assessee and upheld the action of the Assessing Officer. However, the ld. CIT(Appeals) directed the Assessing Officer to re-compute the interest on the basis of quantum relief granted by him.

6. The ld. CIT(Appeals) also rejected the additional grounds raised before him. Against the above order of the ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers ld. CIT(Appeals), the assessee is on second appeal before the Tribunal. The assessee has raised the following common grounds for the assessment years 2001-02, 2002-03, 2003-

04 and 2004-05: . The order of CIT(Appeals) to the extent of confirming the order of the assessing authority is i l legal, arbitrary and unauthorized. B. The CIT(Appeals) erred in confirming the assumption of jurisdiction u/s.144 and invocation of powers u/s.145(3) of the Act for completing the assessment. C. The CIT(Appeals) went wrong in confirming the appl ication of the theory of preponderance and applying the data which he made use of for the past years namely 2005-06 and 2007-08 on the presumption that the appel lant had suppressed its sales for this assessment year also. D. The CIT(Appeals) went wrong in confirming the assessment based on un-proving data on the assumption that i t constituted the evidence in a manner un-known to law. E. The confirmation of levy of interest u/s.234A, B and C is against the provisions of law. The CIT(Appeals) ought to have been appreciated the fact that during the search, no un-disclosed cash, jewel lery or valuable articles or investments were found or noticed, justi fying the assumption that there was any un-disclosed business. F. The CIT(Appeals) went wrong in not taking cognizance of the explanation regarding the computer print out being an unrel iable balance sheet and profit and loss account because of the compel l ing circumstances as explained in ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers the letter dated 26-12-2008. It neither reflects the appel lants business nor is a statement of accounts. Similarly a bunch of loose sheets relating to a few days of November 2006 and February 2007 also does not reflect the completed sales. Hence, the estimation and addition solely on the basis of these loose sheets especial ly in the absence of corroborative evidence is bad in law. G. The appel lant had fi led returns u/s.139 of the Act and the same was processed u/s.143(1) of the Act. It is, therefore, submitted that the assessment for thee say year is completed and therefore, the provisions of Section 153A would not apply to the said completed assessment as expressly stated in the proviso to section 1153A of the Act and therefore, the same shal l abate. For these and other grounds and documents to be submitted at the time of hearing and it is humbly prayed that the Tribunal be pleased to al low the appeal.

7. Now let us turn to ITA No.459/Coch/2010 pertaining to the assessment year 2005-06. In this case, in response to notice u/s.153A, assessee filed its return of income on 7-10- 2008 declaring total income of Rs.94,500/-. 142(1) notice was also issued. During the course of search on 13-2-2007, many books of accounts and documents wwere seized and entered in Annexure SSA. A CPU of a computer was seized in Aannexure-SS-O. A loose sheet bunch marked SSA (29)was also seized from the premises of the assessee firm, which contained computer print-pouts of trading and profit ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers and loss account and balance-sheet as on 31-3-2005. In response to 142 notice, Mr Poly Kuriakose informed the investigating officers that the software was in the development stage and hence data extracted from the computer could not be relied. Entries posted into the system were giving totally irrational figures and the developer was in the process of fixing the bugs and rectifying the errors one by one. In the process of fixing the bugs and rectification of software, the developer had entered test data figure which are dummy entries, which got mixed up with the actual entries. Hence, computer has given out anomalous and abnormal figures in certain accounts. Trial balance, cash books, were extracted from the computer on the date of raid and subsequently. In all these documents, erroneous figures have been noticed. This is evident from the fact that the debit and credit sides of the trial balances and balance sheets extracted do not tally. It is a basic principle in accounting that trial balance should always tally. Untallied trial balances on subsequent dates show that software is not free from bugs and errors even as on that date. Even the sale summary statement and the daily statement summary extracted from the system do not mach. The assessee also submitted the original certificate given by ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers the software vendor confirming the above mentioned facts. To verify the correctness and the genuineness of the certificate issued by M/s. Infosel Systems, Two Inspectors were sent to Infosel Systems, and a statement was given by Miss. Nachema, Administrative officer, who specifically stated that no specific complaints regarding malfunctioning of the programme were reported by PA Kuriakose Jewellers; main problem reported by the assessee was inability to take print outs or closing reports, transaction, etc. In the old and new software, whatever data entered are correctly recorded by the software. The software cannot change the data entered into the system by itself. There had been no such complaints by any of our customers. Miss. Nachema identified the personwho signed the certificate of Infosel Systems as Saji Varghese, who was summoned to the office and statement was recorded u/s.131. In his statement, in reply to question No.4, Saji Varghese admitted that there was no truth in the contents of the certificate and this certificate was issued at the request of Sri Poly Kuriakose, an e-mail was reecei ed from Poly Kuriakose which contained a format and in which the certificate was required to be issued. The deposition of this witness was read by Shri Poly ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers Kuriakose and he was given an opportunity to cross examine the witness and the witness was cross examined.

8. According to the Assessing Officer there is presumption regarding the correctness of the entries found recorded in the records found as a result of search. From the documents and books of account found and seized during the search and the computer print out from the seized CPU evidence suppression of sales by the assessee. Except the statement of Shri Poly, assessee did not produce any evidence to show that the data from CPU could not be relied upon. 8.1. In the P&L Account filed along with the return of income for this year, assessee shown a GP of Rs.6,15,339/- on a total sale of Rs.17,71,297. The GP works out to 34.73% but the P&L Account shows a loss ofRs.5,23,502. By offering an income of Rs.6,20,000/- the loss of the assessee for the year became a positive income of Rs.94,497/-. According to the Assessing Officer this is the further proof that the books of accounts are not correct and complete and hence a notice u/s.144(1) r.w.s.145(3) was issued but no reply was filed. Therefore, assessment was made u/s.144(1) of the Act. The Assessing Officer ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers estimated gross profit at Rs.1,33,61,274/- on the sale of Rs.3,84,71,852/- at the rate of 34.73% GP as admitted by the assessee and treated the same as undisclosed income of the assessee. 8.2. The opening stock of the assessee as per the books of accounts shows at Rs.1,46,57,757/- whereas as per SSA(29), sheet (6) the opening stock of gold is Rs.1,91,65,000/-. Therefore, the difference of Rs.45,07,243/- was treated as unexplained investment of the assessee in the form of stock and added to the total undisclosed income of the assessee. 8.3 While completing the assessment, the Assessing Officer levied interest u/s.234A and 234B of the Act.

9. On appeal, the assessee challenged the authenticity of the search, lack of opportunity and section 145(3) r.w.s.144 wrongly invoked, validity of the assessment on merit,etc. 9.1 The ld. CIT(Appeals) rejected the arguments of the assessee with regard to the authenticity or legality of search. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers 9.2 With regard to the lack of due opporotunity granted and invoking the provisions of section 145(2) r.w.s.144, the ld. CIT(Appeals) held that the assessment was framed in accordance with provisions of law and there was no legal infirmity in the same. 9.3 With regard to the merits of the case, the ld. CIT(Appeals) categorically held that most clinching evidences recovered during the course of search action were print outs from CPU pertaining to the assessment years 2005-06 and 2007-08. Though the assessee disputed the reliability of these documents, the assessee was utterly failed to produce any supporting evidence. In the absence of any evidence to the contrary, the CIT(Appeals) was of the view that these documents clearly establish that the assessee was in the habit of suppressing the turnover and the consequential income in a substantial manner in a consistent manner. However, the ld. citaa directed tehe Assessing Officer to work out the gross profit on suppressed turnover by applying GP rate of 13.92% as indicated in the seized document. The ld. CIT(Appeals) accepted the net turnover ofRs.3,76,44,998 as against Rs.3,84,71,852/- adopted by the Assessing Officer. Assessee has disclosed ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers sales of Rs.17,71,298 and accordingly suppression in sales for the year worked out to Rs.3,58,73,700 and the GP @ 13.92% which worked out to Rs.49,93,619/- and to this extent the findings of the Assessing Officer upheld. The Assessing Officer has not given credit to additional income of Rs.6,20,000 offered by the assessee to cover low profit worked out in the regular P&L Account. Therefore, after giving credit to this amount, the CIT(Appeals) sustained the addition tonRs.43,73,619/- and thus gave part relief to the assessee.

10. Turning to the unexplained investment in stock of Rs.45,07,243/-, the CIT(Appeals) upheld the determination of undisclosed stock. However, he was of the view that the assessee should get the benefit of telescoping on the addition of undisclosed income in different assessment years which was upheld by him. Therefore, CIT(Appeals) directed the Assessing Officer to identify the undisclosed assets and after telescoping the addition of undisclosed income determined in the assessment years 2001-02 to 2004-05, grant benefit of telescoping for the impugned assessment year. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers

11. The ld. CIT(Appeals) upheld the levy of interest u/s.234A and 234B. However, CIT(Appeals) directed the Assessing Officer to re-compute the interest after taking into account the quantum relief granted.

12. Being not satisfied with the relief granted by the ld. CIT(Appeals), the assessee is on appeal on the following issues:

a) Regarding assumption of jurisdiction u/s.144;

b) Assumption of jurisdiction u/s.145(3);

c) Estimation of sale and consequential GP;

d) Addition of unexplained investment in stock; and

e) Levy of interest u/s.234A and 234B.

13. Now we shall take up the appeal for the assessment year 2006-07. Here, the facts are similar to that of the earlier years, which we have dealt with in the preceding paragraphs. 13.1 The first issue is in respect of rejecting the books of accounts and applying the provisions of section 145(3) of the Act and the other issue is in respect of estimation of sale ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers suppression and consequent profits. According to the Assessing Officer the seized material found during the course of search related to assessment years 2005-06 and 2007-08. These documents and books of account evidenced unaccounted purchases and non-billing of sale leading to sales suppression. The accounts maintained in the computers did not tally with the accounts maintained manually. The Assessing Officer found that in the assessment year 2005-06, as against the admitted sales of Rs.17,71,297/-, the sale as per the seized material was Rs.3,84,71,852/- The percentage of suppression worked out to Rs.2071.95%. For the assessment year 2007-08, sale suppression ratio to disclosed sale was at 497.76%. In view of this position, Assessing Officer was of the opinion that the assessee was indulging in such suppression of sale for all these years. On the basis of the above finding, Assessing Officer determined the undisclosed income of Rs.2,05,07,875/- and added to the total income. Consequently, he levied interest u/s.234A, 234B and 234C. 13.2 It was the contention of the assessee before the ld. CIT(Appeals) that estimation of undisclosed income by the Assessing Officer was on the basis of the materials ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers seized during the course of search pertaining to the assessment years 2005-06 and 2007-08 and not on the basis of seized materials available for the assessment year under consideration. Thus, the estimation has been made on the basis of assumption and presumption that the assessee has suppressed its sales, which is irrational, arbitrary and without any reason, which is grossly unsustainable in law. However, the ld. CIT(Appeals) as in the earlier years gave partial relief to the assessee and confirmed the levy of interest but directed to re-compute the same on the basis of quantum relief granted. Hence, assessee is on second appeal before the Tribunal. 13.3 Turning to the appeal for the assessment year 2007-08, here also the issue relates to assumption of jurisdiction u/s.144, estimation of undisclosed income and levy of interest u/s.234A, 234B and 234C. Since the facts of the case are similar to that of the assessment year 2005- 06, we are not repeating those facts, here once-again.

14. We have considered rival submissions and perused thee materials available on record including the precedents relied upon by the parties. We first proceed to consider the ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers assessment years 2005-06 to 2007-08. The search u/s.132 was conducted on 13-2-2007 in the group cases of P.A. Kuriakose and Paulson Varkey Group. This group is mainly engaged in Hotel and jewellery business. M/s. P.A. Kuriakose Jewellers- the assessee was subjected to search u/s.132 of the Act on the very same day of 13-2-2007. A statement was recorded from Shri Poly Kuriakose, partner of the firm, who was available at the time of search. During the course of search books of accounts, documents relating to the income of the assessee, besides a CPU of computer was seized in Annexure SSO, loose sheet bunch marked as SSA(29) was also seized from the premises of the assessee. This bunch contained computer printout of trading and profit and loss account as on 31-3-2005[loose sheets (6)] and a balance-sheet as on 31-3-2005 [loose sheets (4&5)]. To a question (question No.10) at thje time of search relating to the use of computer in the premises of the assessee which was subsequently seized, was put to Shri Poly Kuriakose. He replied that it was used as billing unit only. In reply to the question No.11, he stated that Goldest software developed by Infosel, Kodungallur was used in the computer. The relevant Questions and Answers are 10,11,14 & 15. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers

15. During the post search enquiry on 29-5-2007, a statement was recorded u/s.131 from Shri Poly. The loose bunch sheet marked as SS-29 seized during the course of search was shown to him and he was requested to explain the contents. A print out of cash book was available from the seized CPU which was taken on 06-03-2007 in the presence of Shri Poly Kuriakose by the DDI(Inv.) during the post search investigation. Though it was claimed by the partner that the software was not dependable, enquiry conducted by the Income-tax Inspector and the statement recorded from the Goldest supplier, it was found that no complain was lodged with the supplier of this software, i.e. Infosel Systems. The Assessing Officer proceeded to compare the loose sheets, computerized trading and profit and loss account and the P & L Account filed along with the returns. On the basis of the above materials, the Assessing Officer found that there is ample proof that that books of accounts of the assessee did not reveal the correct picture of the assessees business. Under the circumstances, he came to the conclusion that the assessees books of accounts are not correct and complete. Hence, he issued a notice u/s.144(1) r.w.s. 145(3) requiring the assessee firm to show cause why the assessment of the firm should not be made. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers Hence, for the assessment year 2005-06 the Assessing Officer proceeded on the basis of materials and framed the assessment u/.144(4) r.w.s.153A and 145(3) of the I.T.Act. The Assessing Officer based on the above material was of the opinion that there is suppression of sales and suppression of consequential profit which made the Assessing Officer to estimate the sales, suppression and estimation of profit for the purpose of bringing into tax the income escaped. While arriving at the profit, the Assessing Officer adopted the figure which in average comes to the ratio of suppression to disclosed turnover of Rs.1261.52 as against 1284.85% adopted by the Assessing Officer. The ld. CIT(Appeals) on appeal directed the Assessing Officer to work out gross profit on suppressed turnover by applying GP rate of 13.92% as indicated in the seized document as against the substantial higher GP disclosed by the assessee in the books. Therefore, the ld. CIT(Appeals) was of the view that it is judicious in respect of suppressed turnover worked out on the basis of seized document, the GP rate as indicated in the seized document is only to be applied. Thtus, the ld. CIT(Appeals) has no hesitation in coming to the conclusion that the estimation of undisclosed turnover by the assessee on the basis of seized document is justified and ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers the ld. CIT(Appeals) found that the Assessing Officer refused to accept the GP rate as indicated in the seized document, which according to the ld. CIT(Appeals) is alone applicable as the Department cannot blow hot and cold that once they accept the suppressed turnover and proceed on estimate on the basis of the seized document, the GP rate as indicated in the books of accounts alone is to be taken as a justifiable action. Instead, the Assessing Officer refused to adopt the GP rate indicated in the books only on the reason that the assessee has shown a higher GP rate. In other words, admitted higher GP rate comes to 34.73% which would beneficial to the Revenue was taken by the Assessing Officer to work out this GP. This has been rightly appreciated by the ld. CIT(Appeals) that in the seized document GP was 13.92%. However, the GP disclosed by the assessee in the books is higher and it has been rightly appreciated by the ld. CIT(Appeals) as the difference in GP occurs only on account of the fact that when the appellant sales out of opening stock brought forward from earlier years. As per the conduct of the assessee a big element of appreciation in gold price coupled with that increases the GP rates substantially. The ld. CIT(Appeals) compared that over the years also. Therefore, the ld. CIT(Appeals)s decision directing the ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers Assessing Officer to accept the GP ratio of suppression to disclosed turn over which works out to 1261.5% as against 1284.85% adopted by the Assessing Officer. In that way he restricted the quantum of disclosed turn over and further the ld. CIT(Appeals) directed the Assessing Officer to adopt the GP rates found and indicated only in the seized document as the suppressed turnover worked out on the basis of seized document by way of judicious approach, the GP rate 13.92%. The decision of the ld. CIT(Appeals) is quite justified and in accordance with law which requires no interference. Therefore, we see no justification to disturb the finding arrived at by the ld. CIT(Appeals) on the suppressed turnover and the GP rate as found in the seized document for the above years, viz. 2005-06, 2006-07 and 2007-08. Accordingly, the assessees appeals deserves to be dismissed for the above three years.

16. Coming to the assessment years 2001-02 to 2004-05, the issue being same, all these four appeals are considered and disposed of by this common order. For the purpose of discussion, we will take the assessment year 2001-0. For this assessment year assessee filed the regular return. No incriminating documents were seized. Therefore, ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers the decision of the Apex Court in the case of CST v. HM Esufali 90 ITR 271 will not be applicable as there are no seized materials suggesting that there was alleged suppression of sales. In this case, assessment was reopened by issuing notice u/s.153 based on the search on 13-2-2007 in the case of the assessee jewelers. There is no material found relating to this year is not disputed. The contention of the ld. counsel for the assessee is that there cannot be any escape of income and the assessee filed the return showing the same income as returned originally. However, this assessment was framed u/s.153A as has been made for the assessment years 2005-06 to 2007-08 applying the same ratio of profit under the presumption that there would have been suppression of turn over and escapement of income. In the absence of any material connecting these assessment years it is only surmises and conjunctures to arrive at the above estimated income by rejecting the books of accounts. The co-operation of the assessee has also been rightly pointed out by the ld. counsel for the assessee on the ground that the assessments were completed in a hurried manner. Therefore, the Assessing Officer was precluded from judging the assessees objections as it was Xmas eve and the time considered by the Assessing Officer was very ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers short. The ld. Assessing Officer has not considered the submissions of the assessee in proper perspective as he went to follow the search related years for these years also. The case of the Assessing Officer is that the assessee would have been indulged in sales suppression as in the assessment year 2005-06 and onwards. Further the Assessing Officer estimated the identical ratio of sales and profit suppression for these years under consideration. The reason for rejection and resorting u/s.144(1) and 145(3) by the Assessing Officer is very obvious, according to the ld. counsel for the assessee. The Assessing Officer recorded that as I was not satisfied about the correctness or completeness of the accounts of the assessee, a notice under section 144(1) read with section 145(3) was issued to the assessee and it was asked to show cause why the books should not be rejected and the assessment should not be completed to the best of my judgment. No reply was received to this notice. The ld. counsel objected to the finding of the Assessing Officer that no reply was received by him. On going through the records, as pointed out by the assessees paper book Page Nos. 1 to 11 this amply proved that the reply has been filed, which clearly establish that there was response and co-operation from the assessee. ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers In fact, vide letter as available in page No.12 the assessee requested the Assessing Officer to grant a fair opportunity to cross examine Shri Saji. The ld. counsel further submitted that the assessee is running a small shop in Angamaly, which is not a thickly populated urban area. The assessee is also exchanging old gold. There is a difference in computer pass word. Behind the back of thee assessee the vendor of the computer examined and the assessee was asked to cross examine. Complaint was raised by the assessee to the vendor of the computer. The entire ornaments were tagged. The customer will identify the product. The product will follow the customer to the different floors and ultimately the customer chooses the product and then the same will be completed. Otherwise, the sale will be fructified. The product like ring, bungles or otherwise when the sales fructified, the product will go to the respective counter. There is no element of sale during the above products and this practice is followed by all the jewelers because moving the product from one counter to the other counter requires some indication as an element of sale, then if the customer is not satisfied and unintended to purchase the product, the product will come to the respective counter. Further the product can be exchanged ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers as barter. It is is subjected to sale consideration and the present value as on date the sale. The assessee is enjoying compounding benefit and paying higher tax in the compounding Sales-tax benefit. Further, the ld. counsel submitted that this practice is being forced on all the jewelers. Therefore, the decision of Honble Supreme Court in the case of CST v. HM Esufali 90 ITR 271 is not applicable to the case of the assessee. The ld. counsel relied on the decision of the Cochin Bench in the case of Matha Entnerprises, which is one of the group case, wherein the Tribunal has decided the very same issue on the same set of circumstances, regarding the application of the seized material by the Assessing Officer beyond the period covered in the seized material which was held by the Tribunal as unjustified.

17. On the other hand, the ld. Commissioner of Income- tax., DR objected to the appeal of the assessee and contended that notice and other things has to be verified with reference to the assessees paper book page Nos. 1 to

11. The ld. DR further submitted that the statement of Nachamma, 153A proceeding is applicable to all these four assessment years, even though there is no seized material. Further, the ld. CIT(Appeals) submitted that the assessee ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers did not cross examine Nachamma or Saji Varghehse though opportunity has been given. The ld. DR further submitted that the benefit of compounding sales-tax itself shows that the assessee is not making out proper accounts. The assessee is not recording results in the books. It is a calculative manner they made out. Therefore, the ld. DR opposed the appeals vehemently and prayed for the dismissal. The ld. DR relied on the decision in the case CST

v. HM Esufali 90 ITR 271(SC).

18. We have considered rival submissions and perused the materials. It is an admitted fact that there is no seized material. The assessee filed regular return of income is not disputed. The decision of the Tribunal (THIRD MEMBER) in the case of Samarat Beer Bar vs. Commissioner of Income- tax -251 ITR 01 will also support the case of the assessee. No proceedings were pending for the impugned four years. Further, the explanation of the assessee will amply make it clear that CST v. HM Esufali 90 ITR 271 will not apply. The reliance of the ld. counsel in the case of Matha Enterprises in ITA No.302 to 308/Coch/2010 dated 24-01- 2011 is directly on the issue and having a bearing in the given set of facts and circumstances. In this decision we have discussed the effect of extending the decision in the ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers case of CST v. HM Esufali 90 ITR 271 wherein the assessee has established that there is no seized material and on surmises and conjunctures the estimation was made by the authorities and the assessee was able to establish that there cannot be any suppression of sales. Hence, the decision of the Tribunal in the case of Matha Enterprises is directly applicable. Respectfully following the said order of the Tribunal, we set aside the orders of the authorities below and allow the appeal of the assessee for the assessment years 2001-02, 2002-03, 2003-04 and 2004-05.

19. Levy of interest u/s.234A, 234B and 234C are consequential in nature and as such no adjudication is called for.

20. S.P.Nos.54 to 60/Coch/2010 arising out of the above appeals were heard on 08-10-2010 and petitions were rejected. However, early hearing was granted and accordingly appeals were posted for hearing on 12-01-2011.

21. In the result, the appeal of the assessee for the assessment years 2001-02, 2002-03, 2003-04 and 2004-05 ITA Nos. 455 to461/Coch/2010 M/s.P.A.Kuriakose Jewellers are allowed whereas the appeal for the assessment years 2005-06, 2006-07 and 2007-08 are dismissed. Sd/- Sd/- (SANJAY ARORA) (N.VIJAYKUMARAN) Accountant Member Judicial Member Ernakulam, Dated the 04 th May,2011. Copy forwarded to:

1. M/s. P.A. Kuriakose Jewellers, Padayattil Towers, Highway Junction, Angamally.

2. The Assist. CIT.,Central Circle-1, Ernakulam.

3. CIT(A)-I, Kochi.

4. CIT, Central, Kochi.

5. D.R.