Shree Madhav Solvextracts (P) Ltd., Paschim Medinipur V. ACIT, Circle - 1,Midnapore, Paschim Medinipur

ITA 1405/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54765 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 26-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 14-08-2009
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: SUBASH AGARWAL
• Keywords: Business income; Opportunity of being heard

Judgement Text

1 , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B, KOL KATA [ , . .. . ! ! ! !. .. . , , , , '# ] BEFORE SRI N.VIJAYAKUMARAN, JUDICIAL MEMBER & SRI C.D. RAO, AC COUNTANT MEMBER $ $ $ $ / ITA NO. 1405 (KOL) OF 2009 %& '( / ASSESSMENT YEAR 2005-06 SHREE MADHAV SOLVEXTRACTS (P) LTD., (PAN-AACHS6367G) ASSTT.COMMISSIONER OF I.T., CIRCLE-I, PASCHIM MEDINIPORE. (+, / APPELLANT ) - - - VERSUS - (/0+,/ RESPONDENT ) +, 1 2 '/ FOR THE APPELLANT: / SRI SUBASH AGARWAL /0+, 1 2 ' / FOR THE RESPONDENT: / SRI S.K. ROY 3 1 !# / DATE OF HEARING : 08/12/2011 4' 1 !# / DATE OF PRONOUNCEMENT : 29/12/2011 '5 / ORDER ( ), (N. VIJAYAKUMARAN), JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. C.I.T.(A)- XXXVII, KOLKATA DATED 17/06/2009. THE ASSESSMENT YE AR INVOLVED IS 2005-06. THE ASSESSEE ALONG WITH THE MEMORANDUM OF APPEAL HAS FI LED THE FOLLOWING GROUNDS :- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.42,59,860/- REJECTING THE BOOKS OF ACCOUNTS WHICH WERE MAINTAINED IN THE REGULAR COURSE OF BUSINESS A ND ACCORDINGLY AUDITED U/S. 44AB OF THE I.T.ACT, 1961. THE APPLICATION OF SECTION 1 45(3) OF THE I.T.ACT, 1961 DOES NOT APPLY IN THE CASE OF THE APPELLANT. 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIRM ING THE ESTIMATE OF PROFIT @ 1% OF THE TURNOVER AND THE BASIS OF THE APPLICATION HAS NOT S TATED ANY REASON. 3. FOR THAT THE LD. AUTHORITIES BELOW ERRED IN REJECTING THE BOOKS OF ACCOUNT WHICH ARE DULY AUDITED. SUBSEQUENTLY, THE ASSESSEE FILED REVISED GROUNDS, W HICH ARE ALSO ON THE ISSUE OF ORIGINAL GROUNDS AND THE SAME READ AS UNDER :- 2 1. FOR THAT, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A.O. OF R EJECTING THE BOOK RESULTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 145. 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIR MING THE ACTION OF THE A.O. OF ESTIMATING THE INCOME FROM BUSINESS AT 1 PERCENT OF THE TOTAL TURN OVER. 2. THE FACTS RELEVANT ARE THAT THE ASSESSEE-COMPAN Y IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF EDIBLE & NON-EDIBLE OI LS AND OIL CAKES. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONS IDERATION AT NEGATIVE FIGURE OF RS. 39,08,480/-. THE ASSESSEES ACCOUNTS ARE AUDITED U /S. 44AB OF THE ACT. THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT AND SUBSEQUENTLY O N SCRUTINY PROCEEDINGS THE LD. A.O. ISSUED NOTICE U/S. 143(2)/142(1) OF THE ACT, IN RES PONSE TO WHICH THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS, BILLS, VOUCHERS ETC. ON VERIFIC ATION OF THE BOOKS OF ACCOUNT AND DETAILS FURNISHED BY THE ASSESSEE, THE LD. A.O. OBS ERVED THAT THE PRODUCTION REPORTED TO THE BANK DIFFERED FROM THE PRODUCTION SHOWN IN THE AUDITED ACCOUNTS. HE ALSO FOUND ERROR IN THE AUDIT REPORT ACCOMPANYING THE RETURN. THE LD. A.O. POINTED OUT SEVERAL ERRORS/DEFECTS IN THE ACCOUNTS AND THUS REJECTED TH E BOOKS OF ACCOUNT U/S. 145 OF THE ACT AND ESTIMATED THE ASSESSEES INCOME @ 1% OF THE TOTAL TURNOVER AT RS.3,51,380/-IN THE ASSESSMENT FRAMED U/S.143(3) OF THE ACT. 3. THE ACTION OF THE LD. A.O. WAS CONTESTED BY THE ASSESSEE BEFORE THE LD. C.I.T.(A) AND SUBMITTED THAT THE LD. A.O. DID NOT CONSIDER TH E EXPLANATION OF THE ASSESSEE AND ARBITRARILY REJECTED THE BOOKS OF ACCOUNT U/S. 145 OF THE ACT. THE LD. C.I.T.(A), HOWEVER, UPHELD THE ACTION OF THE LD. A.O. BY OBSERVING AS U NDER :- THE APPELLANT DISCLOSED LOSS FROM BUSINESS. THE AO EXAMINED THE APPELLANTS BOOKS OF ACCOUNT, THE STATEMENT OF SALES AND AUDIT REPORT. THE AO NOTICED THAT THERE IS SUBSTANTIAL INCREASE OF EXPENSES THOUGH TH E TURNOVER HAS DECREASED. FURTHER, THE AO NOTICED VARIOUS DISCREPANCIES IN TH E AUDIT REPORT ACCOMPANYING THE RETURN. FURTHER, THE STOCK, QUANTITY OF PRODUC TION REPORTED TO THE BANK DIFFERED FROM THE QUANTITY ADOPTED IN THE BOOKS OF ACCOUNT. IN VIEW OF THE VARIOUS DISCREPANCIES DISCUSSED BY THE AO AT PAGES 2, 3 & 4 OF THE ASSESSMENT ORDER, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE APPELLANT. THE AO IS CORRECT AS PER LAW IN INVOKING THE PROVISIONS OF SEC. 145 A ND REJECTING THE BOOKS OF ACCOUNT OF THE APPELLANT SINCE THEY ARE DEFECTIVE. THE AOS ACTION IS CORRECT AS PER LAW AND IS UPHELD. 3 THE AO NOTICED THAT THE APPELLANT DISCLOSED NET PROFIT OF 0.61% DURING THE EARLIER YEAR. CONSIDERING THE FACTS OF THE APPELLA NTS CASE, THE AO DETERMINED THE BUSINESS INCOME OF THE APPELLANT AT 1% OF THE T URNOVER. THE QUANTUM OF INCOME DETERMINED BY THE AO IS FAIR AND REASONABLE. THE AOS ACTION IS UPHELD HENCE THIS APPEAL BY THE ASSESSEE. 4. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL ASSAILED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT DURING THE YEA R UNDER CONSIDERATION THERE WAS DECREASE IN TURNOVER AND INCREASE IN SALARY & WAGES AND THE EXPLANATION THEREOF WAS NOT CONSIDERED BY THE LD. A.O. IN PROPER PERSPECTIVE AL THOUGH SUPPORTING DOCUMENTS WERE PRODUCED. HE FURTHER POINTED OUT THAT THE ALLEGED DISCREPANCY IN THE PRODUCTION AS WELL AS SALES, AS POINTED OUT BY THE AUTHORITIES BELOW, IS NOT CORRECT, BECAUSE THE LD. A.O. IN THE CHART ANNEXED TO THE ASSESSMENT ORDER HAS WRONG LY TAKEN THE TOTAL PRODUCTION AS SUBMITTED TO THE BANK AT 481.850 MT INSTEAD OF ACTU AL QUANTITY OF 489.450 MT DULY REFLECTED IN THE AUDIT REPORT. HE FURTHER POINTED OUT AUDITORS REMARK FOR THE POINTS RAISED BY THE LD. A.O., ALTHOUGH FILED BEFORE THE L D. C.I.T.(A), WAS NOT CONSIDERED BY THE LD. C.I.T.(A) WHILE UPHOLDING THE LD. A.O.S ACTION IN REJECTING THE BOOKS OF ACCOUNT U/S. 145 OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED T HAT THE LD. A.O. WITHOUT ISSUING ANY SHOW CAUSE NOTICE TO EXPLAIN THE ALLEGED DISCREPANC IES NOTED IN THE ASSESSMENT ORDER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INC OME @ 1% OF THE TOTAL TURNOVER, WHICH IS UNCALLED FOR AND BAD IN LAW. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. BEFORE US, THE ASSESSEE HAS FILED A PAPER BOOK WHIC H, INTER ALIA, CONTAINS AUDITED FINAL ACCOUNTS FOR ASSESSMENT YEARS 2004-05 & 2005-06, AU DITORS REMARK FOR THE POINTS RAISED BY THE LD. A.O. AND PRODUCTION REPORT FILED IN THE BANK. ON PERUSAL OF THE ORDER OF THE LD. C.I.T.(A) WE OBSERVE THAT ALTHOUGH THE ASSE SSEE HAS FILED AUDITORS REMARK ON THE POINTS RAISED BY THE LD. A.O., BUT THERE IS NO DISC USSION ON SUCH REPORT OF THE AUDITOR. FURTHER WE OBSERVE THAT THIS AUDITORS REMARK, WHIC H THE ASSESSEE CLAIMS TO BE AN APPROPRIATE EXPLANATION FOR THE DISCREPANCIES ALLEG ED BY THE LD. A.O., HAS NOT BEEN FILED 4 BEFORE THE LD. A.O. AND IT WAS FOR THE FIRST TIME F ILED BEFORE THE LD. C.I.T.(A). IN VIEW OF THE ABOVE, WE DEEM IT PROPER TO REMIT THE ISSUE BAC K TO THE FILE OF THE LD. A.O. BY SETTING ASIDE THE ORDER OF LD. C.I.T.(A) AND DIRECT THE LD. A.O. TO CONSIDER THE MATTER AFRESH AFTER TAKING INTO CONSIDERATION THE AUDITORS REMAR K ON THE POINTS RAISED BY HIM AND ANY OTHER DOCUMENTS THAT MAY BE FILED BY THE ASSESSEE D URING SET ASIDE PROCEEDING. NEEDLESS TO MENTION THAT THE LD. A.O. SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PASSING THE FRESH ASSESSMENT ORDER IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6 '5 #' 7 8 69 THIS ORDER IS PRONOUNCED IN THE COURT ON 29/12/2011 SD/- SD/- ( . .. . ! ! ! !. .. . ) '# ( ) (C.D. RAO), ACCOUNTANT MEMBER (N.VIJAYAKUMARAN) JUDICIAL MEMBER ( (( (!# !# !# !#) )) ) DATE: 29-12-2011 '5 1 /%% :'';- COPY OF THE ORDER FORWARDED TO: 1. +, / THE APPELLANT : SHREE MADHAV SOLVEXTRACTS (P) LTD., TANTIGERIA, PO- VIDYASAGAR UNIVERSITY, PASCHIM MEDINIPUR-721 102. 2 . /0+, / THE RESPONDENT : A.C.I.T., CIRCLE-I, PASCHIM MEDINIPUR. 3. %5 () : THE CIT(A)-XXXVII, KOLKATA. 4 . %5 / THE C.I.T., KOL , KOLKATA. 5. >%8 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6. GUARD FILE . 0 /%/ TRUE COPY, '5/ BY ORDER, (DKP) ? / DY/ASSTT. REGISTRAR .