JITESH ASHOK JAIN, MUMBAI V. ITO WD 32(2)(1), MUMBAI

ITA 1465/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5463 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S GULATI
• Keywords: Gross profit estimation; Additional evidence
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1465/MUM/2017 ASSESSMENT YEAR: 2012 - 13 MR. JITESH ASHOK JAIN B - 16, CHAWL NO. 4, KAMLA PANDEY SOCIETY PANDEY NAGAR, RAWAL PANA, DAHISAR (EAST) MUMBAI - 400068. VS. INCOME TAX OFFICER WARD - 32(2)(1), C - 11, 3 RD FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 500051. PAN NO. AKSPJ6486D APPELLANT RESPONDENT ASSESSEE BY : MR. DHARMESH SHAH, AR REVENUE BY : MR. C.S. GULATI, DR DATE OF HEARING : 11/07/2018 DATE OF PRONOUNCEMENT : 18/07/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 4 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN REFUSING THE ADJOURNMENT AND DISMISSING THE APPEAL EX - PARTE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A ) ERRED IN CONFIRMING ESTIMATION OF GROSS PROFIT @ 12.5% OF THE TURNOVER OF YOUR APPELLANT. MR. JITESH ASHOK JAIN ITA NO. 1465/MUM/2017 2 3. IN A NUTSHELL, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2012 - 13 ON 28.09.2012 DECLARING TOTAL INCOME OF RS.3,49,201/ - . THE ASSESSEE IS A DIAMOND TRADER IN THE NAME AND STYLE OF M/S SAI SHAKTI ENTERPRISES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ( AO ) NOTICED THAT THE ASSESSEE HAD SHOWN A TURNOVER OF RS.99,57,34,611/ - AND GROSS PR OFIT AT 0.04% AND NET PROFIT AT 0.03%. IN THE ASSESSMENT ORDER DATED 27.03.2015, THE AO HAS MENTIONED THAT HE HAD ISSUED SUMMONS U/S 131 DATED 27.02.2015 TO THE ASSESSEE TO APPEAR BEFORE HIM PERSONALLY OR TO SUBMIT THE DETAILS AS CALLED FOR. THOUGH THE SUM MONS WAS RECEIVED BY THE ASSESSEE ON 27.02.2015, NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE AO ON THE ABOVE DATE. THE AO HAS MENTIONED THAT THE DETAILS CALLED FOR VIDE ORDER SHEET NOTING DATED 03.02.2015 WERE FILED BY THE AS SESSEE ON 05.03.2015. THEN, THE AO ISSUED NOTICE U/S 133(6) TO ALL THE PARTIES ALONG WITH THE ACCOUNTS IN AXIS BANK, SURAT, WHERE THE ASSESSEE WAS HAVING HIS BANK ACCOUNT. HOWEVER, ALL THE NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMAR K UNCLAIMED/LE FT . IN RESPONSE TO A QUERY TO EXPLAIN THE RETURN OF NOTICES U/S 133(6) AND THE LOW GP SHOWN, THE AR OF THE ASSESSEE TRY TO EXPLAIN THAT THE TURNOVER IS HIGH AND THEREBY THE GP HAS BEEN LOW. IT IS FURTHER STATED BY HIM THAT THE GENERAL PRO FIT RATIO IN DIAMOND TRADING IS AROUND 5 TO 6%, WHERE THE TURNOVER IS LOW AND THEREFORE, THE GP SHOWN BY THE ASSESSEE BE ACCEPTED. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE IN VIEW OF THE FACTS THAT ALL THE NOTICE S U/S MR. JITESH ASHOK JAIN ITA NO. 1465/MUM/2017 3 133(6) WERE RETURNED UNSERVED AND THE ASSESSEE WAS NOT ABLE TO SA TISFACTORILY EXPLAIN THE LOW GP. TAKING INTO ACCOUNT THE GP RATIO IN DIAMOND TRADING BUSINESS, THE AO ESTIMATED THE GROSS PROFIT RATIO AT 12.5% OF THE TURNOVER OF RS.99,57,34,611/ - AND THUS MADE AN ADDITION OF RS.12,40,44,187/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS MENTIONED THAT THOUGH THE CASE WAS FIXED FOR HEARING ON 20.09.2016, 26.10.2016 AND 07.12.2016, NEITHER T HE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE HIM ON THE ABOVE DATES. FURTHER, ON THE NEXT DATE FIXED FOR HEARING ON 25.01.2017, THE ASSESSEE FILED SIMPLY A LETTER SEEKING AN ADJOURNMENT. IN VIEW OF THE ABOVE NON - COMPLIANCE, THE LD. CIT(A) DECIDED THE APPEAL ON THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE REASONS GIVEN BY THE AO IN HIS ASSESSMENT ORDER AND CONFIRMED THE ADDITION OF RS.12,40,44,187/ - MADE BY THE AO. 5. BEFORE US, THE LD. COUNSEL OF THE ASSE SSEE FILES A PAPER BOOK (P/B) CONTAINING (I) COMPUTATION OF INCOME OF APPELLANT FOR AY 2012 - 13, (I I ) AUDITED FINANCIAL STATEMENTS OF THE APPELLANT FOR AY 2012 - 13, ( III ) T AX A UDIT R EPORT OF APPELLANT FOR AY 2012 - 13, ( I V) LEDGER ACCOUNT OF PURCHASES IN THE BOOKS OF THE APPELLANT FOR AY 2012 - 13, (V) LEDGER ACCOUNTS OF VARIOUS PURCHASE PARTIES IN THE BOOKS OF THE APPELLANT FOR AY 2012 - 13, (VI) LEDGER ACCOUNT OF SALES IN THE BOOKS OF T HE APPELLANT FOR AY 2012 - 13, (VII ) LEDGER ACCOUNTS OF VARIOUS SALES PARTIES I N THE BOOKS OF THE APPELLANT FOR AY 2012 - 13, (VIII ) B ANK BOOK IN THE BOOKS OF T HE APPELLANT FOR AY 2012 - 13, (IX ) BANK STATEMENT OF TH E APPELLANT FOR AY 2012 - 13, (X ) STATEMENT OF THE APPELLANT RECORDED U/S 131 OF MR. JITESH ASHOK JAIN ITA NO. 1465/MUM/2017 4 THE ACT O N 10.02.2017, (XI ) STATEMENT OF MR. RAJKUMAR AGARWAL RECORDED U/S 13 1 OF THE ACT ON 10.02.2017, (XII ) ASSESSMENT ORDER IN CASE OF THE APPELLANT FOR AY 2013 - 14 U/S 143(3) OF THE ACT ON 29.02.2016. THE LD. COUNSEL SUBMITS THAT THE ABOVE DOCUMENTS ARE AVAILABLE BEFORE THE AO AND LD. CIT(A). A LSO AN APPLICATION IS SUBMITTED BY HIM FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF THE ITAT RULES, 1963 STATING THAT BEFORE THE AO, THE DETAILS AS REQUIRED WERE PROVIDED BY ME TO THE CHARTERED ACCOUNTANT WHO WAS REPRESENTING MY CASE. THESE DETA ILS WERE FILED BY HIM AT THE TIME OF ASSESSMENT PROCEEDINGS. FURTHER, AS NO SPECIFIC DETAILS WERE CALLED FOR BY MY CHARTERED ACCOUNTANT, IT WAS PRESUMED THAT THE DETAILS FILED WERE SUFFICIENT AND THAT NO ADDITION WOULD BE MADE. HOWEVER, THE AO HAD, IN THE MEANWHILE, CARRIED OUT INDEPENDENT ENQUIRIES WITH THE PURCHASE AND SALE PARTIES, WITH WHOM I HAD TRANSACTED DURING THE YEAR. AS NO RESPONSE WAS RECEIVED FROM THEM MY BOOKS OF ACCOUNTS WAS REJECTED AND PROFIT WAS ESTIMATED AT 12.5% OF THE TURNOVER IN THE AS SESSMENT ORDER PASSED U/S 143(3) OF THE ACT ON 27.03.2015. ............AT THE TIME OF HEARING BEFORE THE LD. CIT(A), THE ERSTWHILE CHARTERED ACCOUNTANT ADVISED ME TO APPOINT A COUNSEL TO REPRESENT THE APPELLATE PROCEEDINGS. AS I WAS IN THE PROCESS OF APPOI NTING A COUNSEL AND ALSO GATHERING ALL THE DETAILS FROM THE ERSTWHILE CHARTERED ACCOUNTANT, I COULD NOT MAKE COMPLIANCE BEFORE THE LD. CIT(A). FURTHER, AT THE TIME OF HEARING ON 25.01.2017, THE COUNSEL ADVISED ME TO SEEK DATE AS HE WAS OUT OF STATION. HOWE VER, THE ADJOURNMENT REQUEST WAS REJECTED AND THE ORDER OF THE LD. CIT(A) CAME TO BE PASSED ON 30.01.2017 WITHOUT GIVING OPPORTUNITY OF EFFECTIVE HEARING TO ME. THE LD. COUNSEL FILED AN AFFIDAVIT DATED 06.07.2018 BY THE ASSESSEE ON THE ABOVE ISSUE. IT IS SUBMITTED BY HIM THAT THE ABOVE MR. JITESH ASHOK JAIN ITA NO. 1465/MUM/2017 5 MATTER MAY BE RESTORED TO THE FILE OF THE AO TO ALLOW THE ASSESSEE AN OPPORTUNITY FOR FILING OF HIS SUBMISSIONS AND EVIDENCES. 6. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THERE WAS NO COMPLIANCE BY THE ASSESSEE BEFO RE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS THE ASSESSEE FAILED TO RESPOND TO THE SUMMONS ISSUED U/S 131 DATED 27.02.2015. ALSO THE ASSESSEE FAILED TO EXPLAIN TO THE AO THE REASONS FOR WHICH THE NOTICES U/S 133(6) WERE RETURN ED UNSERVED BY THE POSTAL AUTHORITIES. THE LD. DR ALSO SUBMITS THAT THOUGH THE CASE WAS FIXED FOR HEARING ON 20.09.2016, 26.10.2016, 07.12.2016 BY THE LD. CIT(A), THERE WAS NO COMPLIANCE BY THE ASSESSEE. ALSO IT IS STATED THAT AGAIN WHEN THE CASE WAS FIXED FOR HEARING ON 25 .01.2017 BEFORE THE LD. CIT(A) NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE HIM AND ONLY AN ADJOURNMENT LETTER WAS FILED. THUS THE LD. DR SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL S UBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND FROM THE ASSESSMENT ORDER DATED 27.03.2015 PASSED BY THE AO THAT THERE IS NO MENTION OF THE NAME OF THE PARTIES TO WHOM THE NOTICES WERE ISSUED BY HIM U/S 133(6) OF THE ACT. AT LEAST THE NAME S SHOULD HAVE BEEN MENTIONED. IN THE PROCESS, THE AO HAS MADE A HUGE ADDITION OF RS.12,40,44,187/ - TO THE INCOME SHOWN BY THE ASSESSEE. IN THE ORDER DATED 30.01.2017, THE LD. CIT(A) HAS NOT MENTIONED THE MODE THROUGH WHICH THE NOTICE WAS SENT BY HIM FIXI NG THE CASE FOR HEARING ON 20.09.2016, 26.10.2016 AND 07.12.2016. IT IS MR. JITESH ASHOK JAIN ITA NO. 1465/MUM/2017 6 ALSO NOT MENTIONED WHETHER THESE NOTICES WERE RECEIVED BY THE ASSESSEE OR NOT. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS - EXAMINE WITNESSES. IN ITO VS. M. PIRAI CHOODI (2012) 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT ORDER OF ASSESSMENT PASSED WITHOUT GRANTING AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE BY HIGH COURT; AT MOST, HIGH COURT SHOULD HAVE DI RECTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE CONCERNED WITNESS. IN VIEW OF THE ABOVE FACTS, WE ADMIT THE ADDITIONAL EVIDENCE AND SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A DE NOVO ORDER AFTER EXAMINING THE PARTIES AND ALLOWING THE ASSESSEE AN OPPORTUNITY FOR CROSS - EXAMINATION. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY, THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE BEFORE FINALIZING THE ORDER. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18/07/2018. SD/ - SD/ - ( JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; MR. JITESH ASHOK JAIN ITA NO. 1465/MUM/2017 7 DATED: 18/07/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI