COMMISSIONER OF INCOME TAX Vs. ZUHARA U. V.

JUDGEMENT

(1.) The Respondent/ Assessee is engaged in a retail business of medicines known as Palakki Medicals. A search was conducted under Section 132 of the Income-tax Act (hereinafter referred to as 'the Act') at the business premises of the Respondent/ Assessee on 29-8-2002, 30-8-2002 and 3-9-2002. A search was also conducted at the residential premises where the Assessee is staying with her husband, daughter and son-in-law, on 29-8-2002. The Respondent's business premises is located in the premises of one Manzoor Hospital, Kanhangad. The hospital is owned by the Assessee's daughter. Several incriminating documents evidencing large scale suppression of income came to light. Accordingly, proceedings were initiated under Chapter XIV-B of the Act against the Assessee. Pursuant to the notice, the Assessee filed a return showing undisclosed income of Rs. 13,96,680 for the assessment years from 1997-98 to 2002-03 relating to the block period 1-4-1996 to 31-3-2002. The Assessing Officer found, however, that the total undisclosed income as rounded off was Rs. 54,66,280. The Appeal filed by the Respondent was dismissed. In the Appeal filed by the Respondent before the Appellate Tribunal, the Tribunal partly allowed her Appeal and directed deletion of the addition made of Rs. 7,35,562 for the broken period 1-4-2002 to 29-8-2002. The substantial questions of law raised for decision before us are as follows:

(2.) Whether on the facts and in the circumstances of the case and also in the light of the facts narrated/noted in the statement of the case and the grounds raised, the Tribunal is right in law and fact in deleting the addition made for the broken period (1-4-2002 to 29-8-2002) in a sum of Rs. 7,35,562

(3.) The Assessing Officer unearthed evidence of cash purchases aggregating to a sum of Rs. 35,71,007 by the Assessee for the period 1-4-2002 to 29-8-2002. The Assessee contended that the income relating to the unaccounted purchases for the period should not be considered as undisclosed income because of the provisions of Section 158BB(1)(d) of the Act, as the due date for filing of the return of income was not over as on the date of the search and the purchases made during the period 1-4-2002 to 29-8-2002 were fully reflected in the seized records. The Assessing Officer rejected the said contention, finding that there were no regular Books of Account for the period, found and seized. It is stated that the Respondent and her employee who managed the medical shop has categorically stated that no Books of Account were maintained by the Assessee. It is also stated that the purchase bills for the amount aforesaid were in respect of cash purchases and corroborative evidence in support of such cash sales were obtained from the dealers. The Assessing Officer further found that no evidence was forthcoming from the Respondent even after she was asked to produce evidence to prove that the cash purchases were actually reflected in her regular Books of Account. She was further asked to produce the copies of the monthly sales tax returns to the Sales Tax Department for the months April, 2002 to August, 2002. To the same, the Respondent/ Assessee responded by pointing out that there were no monthly returns as medical shops attached to hospitals are exempted from sales tax. The profit relating to the unaccounted purchases was computed by adopting the gross profit margin of 17.02 per cent as had been adopted by the Assessee herself in her return for the immediately preceding assessment year (2002-03) and thus, the undisclosed income was determined as Rs. 7,35,562 for the year 2003-04.