Janakkumar Nandlal Patel, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad

ITA 116/AHD/2023

AI Insights

The case involves Janakkumar Nandlal Patel, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which upheld the additions made by the Assessing Officer under sections 69B and 15BBE of the Income Tax Act, 1961, for the Assessment Year 2018-19. The additions pertained to discrepancies in the stock valuation of gold and silver and unexplained bank transactions. The Tribunal noted that the assessee's tax-audit report contained errors and discrepancies that were not adequately addressed or explained, leading to the decision to remand the case for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114215 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-08-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 28-02-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(3); 69B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Ramit Kochar, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Janakkumar Nandlal Patel, C/O M.S. Chhajed and Co. CA, “Kamal Shanti” Nr. Sardar Patel Under bridge, Sardar Patel Colony, Ahmedabad PAN: AAWPP0818K (Appellant) Vs The ACIT, Circle-1(1)(1), Ahmedabad (Respondent) Assessee Represented: Shri Hem Chhajed & Shri Mahesh Chhajed, A.R. Revenue Represented: Shri Kamlesh Makwana CIT-DR Date of hearing : 16-08-2023 Date of pronouncement : 06-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 20.02.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the assessment order passed under ITA No. 116/Ahd/2023 Assessment Year 2018-19 I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 2 section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2018-19. 3. The brief facts of the case is that the assessee is an individual and engaged in the business of trading in Gold & Silver in the name and style of M/s. Shreeji Jewellers. For the Assessment Year 2018-19, the assessee filed its Return of Income on 07-09-2018 declaring a total income of Rs. 23,19,660/-. 3.1. During the scrutiny assessment, the Assessing Officer found that the assessee declared turnover of Rs. 165,68,81,352/- showing a gross profit of Rs. 64,14,458/- @ 0.39% and net profit of Rs. 24,77,569/- @ 0.15% The Assessing Officer found that the purchase of Gold and Silver have been shown in the Profit and Loss Account totaling to Rs. 1,46,66,83,650/- and sales has been shown for Rs. 165,68,81,352/-, while in Form 3CD sale and purchase has been shown Nil. From the above figures, it is clear that the assessee has not shown the correct figures of opening and closing stock and suppressed the figure in audited balance sheet or auditor has failed to do audit correctly and truly. Therefore the difference of value of stock as on 31-03-2018 shall be added to the income of the assessee u/s. 69B r.w.s. 15BBE of the Act as follows: Item Value calculated above as Value shown in books Difference Gold Buillion 79,46,12,000/- 0.00 79,46,12,000/- Silver Buillion 1,62,62,520/- 1,46,53,537/- 16,08,983/- Total 81,08,74,520/- 1,46,53,537/- 79,62,20,983/- (Addition Rs. 79,62,20,983/-) 3.2. Similarly on verification of the audited balance sheet, a total balance of Rs. 1,48,74,967/- is shown as the total balance in I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 3 various bank accounts. However, as per STR report received by the Assessing Officer, two bank accounts with Axis Bank in the name of the assessee, wherein total transactions/turnover/credits has been reported at Rs.221,68,06,386/-. The assessee neither filed copy of the bank statements nor filed explanation of difference between turnover reported in STR and turnover shown in audited books of accounts. Thus the Assessing Officer treated the books of accounts as not reliable. On further verification, the assessee filed GST return, wherein turnover of Rs. 165,68,81,352/- has been shown. However the assessee has neither filed copy of the bank statements nor filed any explanation of difference between turnover reported in STR and turnover as reflected in the audited books. Therefore the Assessing Officer determined the net profit @ 0.15% on the differential undisclosed turnover of Rs. 55,99,25,034/- which comes to Rs. 8,39,888/-. Thus the Assessing Officer determined the total income of the assessee as Rs. 79,93,80,531/- and demanded tax thereon. 4. Aggrieved against the same, the assessee filed an appeal before Ld. NFAC. The Ld. NFAC after considering the submissions of the assessee dismissed the same observing as follows: “....6.1 The grounds of appeal and well as the submissions made by the appellant are perused with care. In the submissions made by the appellant, it is stated that "Auditors while preparing Tax Audit report inform 3CD, due to some clerical error inventories shown erroneously incorrect. "However there is no confirmation of the same in as much as there is no affidavit/letter from the auditors admitting the same. 6.2 The appellant had also stated that "Further, the Closing stock of previous year was accepted by the department. "In view of this the appellant was asked to submit the 3CD reports of assessment years A.Y.2016-17 and 2017-18 vide notice dated 18.01.2023 and the hearing date 25.01.2023 but there is no reply from the appellant till date. I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 4 6.3 Tax audit report in Form 3CD is report u/s 44AB by an accountant as under section 288 of the IT Act. It is the duty of such accountant to duly audit the books of account of the taxpayer and record his findings in the prescribed Form 3CD. Once the competent person had audited the books and issued a report in Form 3CD, the items mentioned therein carry weight. The appellant cannot just state that the audit report in Form 3CD is incorrect either in part or in full. This has to be corroborated by definite documentary evidence which the auditor issuing the report needs to confirm and admit with due justification. 6.4 In this case the appellant had done precious little to show that the audit report in Form 3CD is not in conformity with the books of accounts except for stating that the report is incorrect. The alleged incorrectness needs to be verified and acknowledged by the person who had conducted the audit and issued the audit report. This was not done by the appellant in the instant case. In view of the aforesaid and as the appellant had not disproved the alleged incorrectness with requisite documentary evidence, the ground of appeal is dismissed.” 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The order passed by the Ld. CIT (A) is against law, equity & justice and without considering submission made by the appellant. 2. The Ld. CIT (A) has grievously erred in law and or on facts in upholding addition of Rs.79,62,20,983/- made by the Ld. A.O. invoking section 69B of the Act for transactions recorded in books of accounts. 3. The Ld. CIT(A) has grievously erred in law and in facts in upholding addition of Rs.8,39,888/- made by the Ld. A.O. by estimating profit @ 0.15% of Rs.55,99,25,034/-. 4. The appellant Craves liberty to add, amends, alter or modify all or any grounds of appeal before final appeal. 6. Ld. Counsel Shri Hem Chhajed appearing for the assessee submitted before us a detailed Paper Book running to 688 pages which contains the Income Tax Return with Tax Audit Report for the present Assessment Year 2018-19 and that of the earlier Assessment Year 2017-18. Copy of stock register, purchase and sales register, Copy of GSTR 9, GSTR 9C and GSTR 3B and Copy of various bank accounts. Ld. Counsel submitted in the Tax Audit I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 5 Report due to some clerical or inadvertent mistake, the Auditors wrongly stated the quantity of Gold in ‘Kilograms’ instead of “Grams” in Form 3CD. This inadvertent mistake was simply due to typographical error on the part of the Auditor. 6.1. In the rectification application before the A.O., the assessee clearly submitted the opening stock, purchases, sales and closing stock as follows: Particula rs Unit Opening stock Purchases Sales Closing stock Quantity Amount Quantity Amount Quantity Amount Quantit y Amount Gold Grams 259.099 742668 10051.53 2033546 10310.629 29822809 0 0 Silver Kilogra ms 424.086 17693886 41970.064 1617699877 42010.605 1627058543 383.54 14653337 6.2. It is claimed by ld. Counsel for the assesse that during the course of assessment proceedings, though the assessee furnished GST Audit Report, Annual Return, etc., wherein correct value of stock has been shown. However the Ld. A.O. did not consider the above documents and valued only closing stock on the basis of erroneous data. It is further claimed by ld. Counsel for the assesse that the Ld. CIT(A) also has not appreciated the above details and relying upon the Audit Report in Form 3CD, thereby confirmed the addition made by the Assessing Officer. Therefore the Ld. Counsel pleaded to set aside the matter back to the file of the A.O. for reconsideration and allow the appeal. 7. Per contra, the Ld. CIT-DR Shri Kamlesh Makwana appearing the for the Revenue supported the order passed by the Lower Authorities and pleaded to dismiss the appeal filed by the assessee. 8. We have given our thoughtful consideration and perused the materials available on record including the voluminous Paper Book I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 6 filed by the Assessee. It is claimed by ld. Counsel for the assesse before us that there is a mistake in the Audit Report in Form 3CD filed by the Auditors. Based on the same, the Assessing Officer valued the stock, on market value and added the difference in valuing of Rs. 79,62,20,983/- as unexplained income u/s. 69B of the Act. It is further claimed by ld. Counsel for the assesse before us that the Assessing Officer failed to appreciate the quantitative details enumerated in Audit Report in Form 3CD. However, the Assessing Officer ought to have considered the data filed by the assessee before GST Authorities namely the monthly return in Form 3B and Annual return in Form 9 and 9C. It is claimed that the Assessing Officer failed to appreciate that the valuation of the stock has a cascading effect, the assessee will get higher value on carry forward of stock as opening stock in the succeeding year. Thus, it is claimed that the addition made by the A.O. of Rs. 79.62 crores is against the provisions of law. We have observed that the tax-audit report filed by the assessee does not carry the details of purchases as well sale of Gold and Silver. The assesse was asked by the authorities below to file revised tax-audit report, but the assesse failed to file the same. The purpose and purport of tax- audit report is to assist the authorities to compute correct tax liabilities in framing assessment. The tax-audit report is certified by qualified Chartered Accountant, and if any discrepancies are found in the tax-audit report, it is incumbent on the assesse to obtain and file Revised Tax-Audit Report. The AO also asked assesse to file documents for preceding years, which the assesse did not file. We have observed that the assesse has filed voluminous paper book containing 688 pages, and the claim made by the assesse requires I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 7 verification by the authorities below. Thus, in our considered view and in the interest of justice and fair play, it will be appropriate, if the matter is restored to the file of the AO for consideration of the claim of the assesse afresh and frame denovo assessment. The assesse is directed to co-operate with AO and file all necessary and relevant details called for by the AO during set aside/remand assessment proceedings. The AO shall give proper opportunity of being heard to the assesse in accordance with principles of natural justice in accordance with law. We order accordingly. 8.1. Similarly the addition made by the Assessing Officer of Rs. 8,39,888/- by estimating profit @ 0.15% being the difference of STR report and turnover wherein the STR report was not provided to the assessee. Therefore in the above circumstances, we deem it fit to set aside the matter back to the file of the Assessing Officer with a direction to pass fresh assessment order by giving adequate opportunity to the assessee to explain its case. Needless to say, the assessee should cooperate with the Ld. A.O. in completing the fresh assessment. 9. In the result, the appeal filed by the Assessee is allowed for statistical purpose. Order pronounced in the open court on 06-10-2023 Sd/- Sd/- (RAMIT KOCHAR) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 06/10/2023 I.T.A No. 116/Ahd/2023 A.Y. 2018-19 Page No Janakkumar Nandlal Patel vs. ACIT 8 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद