The ITO, Ward-5(1), Surat V. Shri Prakash U.Rathi,Indu., Surat

ITA 2073/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1975 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Gross profit estimation; Unexplained cash credit; Opportunity of being heard
• Section: 143(3); 142(1); 133A; 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI A.N.PAHUJA, A.M. ) I.T.A. NO. 2073/AHD./2008 ASSESSMENT YEAR : 2004-2005 THE I.T.O., WARD-5(1), SURAT -VS- SHIV PRAKASH U. RATHI INDU, SURAT (PAN : ABBPR 3957M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K.DHANESTA, D. R. RESPONDENT BY : NONE O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 28.03.2008 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III, S URAT FOR THE ASSESSMENT YEAR 2004-05. 2. DESPITE SERVICE OF NOTICE FIXING THE DATE OF HEA RING FOR TODAY I.E. ON 10.02.11, NEITHER ANYBODY APPEARED ON BEHALF OF THE ASSESSEE NOR AN A PPLICATION FOR ADJOURNMENT WAS RECEIVED. THE NOTICE OF HEARING WAS DULY ACKNOWLEDGED BY THE ASSESSEE HIMSELF ON 15.01.11 AND THE ACKNOWLEDGEMENT OF THE ASSESSEE HAS BEEN KEPT ON RE CORD BY THE TRIBUNAL. IN THESE CIRCUMSTANCES, WE PROCEED TO DECIDE THIS APPEAL ON THE BASIS OF SUBMISSIONS MADE BY SHRI R.K.DHANESTA, D.R. AND THE MATERIALS AVAILABLE ON R ECORD. 3. FACTS IN BRIEF RELATED TO CONTROVERSY INVOLVED I N THE VARIOUS GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ART SILK CLOTH IN HIS PROPRIETORSHIP FIR M NAMELY, VINAY TEXTILES. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE DECLARED INCOME OF RS.1,28,370/- ON 31.05.04. A SURVEY UNDER SECTION 133A OF THE I.T. ACT WAS CARRIED OUT ON 31. 01.06 IN RATHI GROUP AT SHOP NO. D-1290, C- 1145, D-1288-89, C-1218-19 AND E-1294-95, RADHEKRIS HNA MARKET, RING ROAD, SURAT. DURING THE COURSE OF SURVEY ACTION, A LARGE NUMBER OF UNAC COUNTED BANK ACCOUNTS AND INCRIMINATING PAPERS WERE FOUND AND IMPOUNDED FROM THE AFORESAID PREMISES. ACCORDINGLY, THE ASSESSING 2 ITA NO. 2073-AHD-2008 OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT TO THE ASSESSEE, IN RESPONSE TO WHICH, IT WAS STATED THAT RETURN OF INCOME FILED ON 31.05.04 MAY BE TREATED AS RETURN OF INCOME, IN COMPLIANCE TO NOTICE UNDER SECTION 142(1) OF THE I.T. ACT, 196 1. THEREAFTER, THE ASSESSING OFFICER FINALIZED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS.1 4,04,166/- UNDER SECTION 143(3) READ WITH SECTION 147 OF THE I.T. ACT, 1961 ON 25.06.2007 WHE REIN THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: I) ADDITION OF RS.5,25,796/- ON ACCOUNT OF LOW G.P . II) UNACCOUNTED CAPITAL INVESTMENT OF RS.3 LAKHS, III) CASH CREDIT OF RS.4,50,000/- 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) DELETED ALL THE AFORESAID THREE ADDITI ONS. 5. AGGRIEVED WITH THE ORDER OF THE LD. LEARNED COMM ISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOL LOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III,SURAT HAS ERRED IN DELETING THE ADDITION OF GROSS PROFIT OF RS.5,25,796/- AT 10% OF TOTAL TURNOVER OF RS.1,21,48,375/- MADE BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III,SURAT HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT AMOUNTING T O RS.4,50,000/- MADE BY THE ASSESSING OFFICER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III,SURAT HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED ADDITION TO CAPITAL OF RS.3,00,000/- MADE BY THE AO. 6. AT THE TIME OF HEARING, SHRI R.K.DHANESTA, D.R., APPEARING ON BEHALF OF THE REVENUE, WITH REGARD TO DELETION OF ADDITION OF RS.5,25,796/ -, POINTED OUT THAT THE ASSESSING OFFICER APPLIED G.P. @10% BECAUSE DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT EXPLAIN THE REASONS SATISFACTORILY FOR FALL IN G.P. RATE. THE BOOKS OF ACCOUNTS WERE RIGHTLY REJECTED BECAUSE THESE WERE NEVER PRODUCED BEFORE THE ASSESS ING OFFICER UNDER THE GUISE THAT BOOKS OF ACCOUNTS WERE WASHED DURING THE FLOOD IN AUGUST, 20 06. HE FURTHER POINTED OUT THAT THE ASSESSEE HAS NOT FURNISHED PROOF OF SUCH WASHED BOOKS OF ACC OUNTS OR COPY OF FIR FILED IN THIS REGARD. 3 ITA NO. 2073-AHD-2008 THE ASSESSING OFFICER CORRECTLY MADE ADDITION ON AV ERAGE GP RATE AT 10% , KEEPING IN VIEW THE TRADING RESULT OF ASSESSEES SISTER CONCERN M/S. DH RU PRINTS, PROP. SATYANARAYAN U RATHI, AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER BE RESTORED. 6.1 WITH REGARD TO DELETION OF ADDITION OF RS.3 LAK HS AND RS.4.50 LAKHS, THE LD. D.R. POINTED OUT THAT IN THE IMPUGNED ORDER, THE LD. LEARNED COM MISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION HOLDING THAT HE WAS SATISFIED ABOUT TH E IDENTITY AND CREDITWORTHINESS OF THE CREDITOR. FOR THIS, THE LD. LEARNED COMMISSIONER OF INCOME TA X(APPEALS) ACCEPTED NEW EVIDENCE IN VIOLATION OF RULE 46A OF THE I.T.RULES, 1961. HE HA S NOT GIVEN ANY OPPORTUNITY TO THE ASSESSING OFFICER TO BE HEARD. IN THESE CIRCUMSTANCES, THE OR DER OF THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE SET ASIDE AND HE BE DIRECTED TO COM PLY WITH THE PROVISIONS CONTAINED IN RULE 46A OF THE I.T. RULES, 1961. 7. AFTER HEARING THE LD. D.R., WE HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE REASONING GIVEN BY THE LD. LEARNED COMMI SSIONER OF INCOME TAX(APPEALS), IN THE IMPUGNED ORDER, FOR DELETING THE G.P. ADDITION IS A S UNDER: THE NEXT GROUND OF APPEAL IS REGARDING ADDITION ON ACCOUNT OF LOW GP. THE AO OBSERVED THAT THE G P SHOWN BY THE APPELLANT W AS 5.67% AND CONSIDERED IT TO BE LOW ON THE GROUND THAT COMPARED TO GP IN TH E CASE OF A SISTER CONCERN. HE THEREFORE, ADOPTED A GP RATE OF 10% AND MADE A N ADDITION OF RS.5,25,797/-. I AM AT A LOSS TO UNDERSTAND THE LOGIC BEHIND SUC H AN ADDITION. THE AO HAS NOWHERE MENTIONED EVEN THE NAME OF THE SISTER CON CERN AND HAS NEVER GIVEN THE APPELLANT AN OPPORTUNITY TO REBUT THE FINDING S. EVEN THE BOOK RESULTS HAVE NOT BEEN REJECTED BY INVOKING THE PROVISIONS OF S ECTION 145 OF THE IT ACT. THIS KIND OF AN ADDITION IS NOT SUSTAINABLE, ESPECIALL Y IN VIEW OF THE FACT THAT THE SPECIAL AUDITOR APPOINTED BY THE DEPARTMENT TO MA KE AN AUDIT OF THE APPELLANT GROUP, (RATHI GROUP) BOOKS OF ACCOUNTS HAS NOT OF FERED ANY ADVERSE COMMENTS IN RESPECT OF THE REGULAR BOOKS. 7.1 IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CLEARLY MENTIONED THE NAME OF THE SISTER CONCERN. THE LD. L EARNED COMMISSIONER OF INCOME TAX(APPEALS) COMPLETELY IGNORED THAT BOOKS OF ACCOU NTS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS DECLARED G.P. @5.67% AS AGAINST G.P. DISCLOSED AT 7.06% IN THE IMMEDIATELY PRECEDIN G YEAR. WE ARE, THEREFORE, OF THE VIEW THAT 4 ITA NO. 2073-AHD-2008 THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) , IN THE IMPUGNED ORDER, CLEARLY IGNORED THAT THE ASSESSING OFFICER HAS MENTIONED THE NAME O F THE SISTER CONCERN. FOR THIS REASON, WE SET ASIDE THE ORDER OF THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DIRECT HIM TO CONFRONT THE ASSESSEE WITH THE RESULTS OF DHRU PRIN TS AND READJUDICATE THIS AFRESH, AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 7.2 WITH REGARD TO GROUND NOS. 2 AND 3, WE FIND A C ONSIDERABLE FORCE IN THE SUBMISSIONS MADE BY THE LD. D.R. IT APPEARS THAT CONFIRMATION OF THE DEPOSITORS WAS NOT FURNISHED BEFORE THE ASSESSING OFFICER. BEFORE ADMITTING THIS EVIDENCE, THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE GIVEN OPPORTUNITY TO THE ASSESSING OFFICER AS PROVIDED UNDER RULE 46A OF THE I.T. RULES, 1961. FOR THIS REASON, WE SE T ASIDE THE ORDER OF THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF B OTH THESE ADDITIONS AND DIRECT HIM TO CALL THE REMAND REPORT. THE ASSESSING OFFICER BE ASKED T O EXAMINE THE CONFIRMATION AND ALSO THE DEPOSITORS, IF REQUIRED, AND ON RECEIPT OF REMAND R EPORT, THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WILL CONFRONT THE SAME TO THE ASSESSEE AND RE-ADJUDICATE THE CONTROVERSY INVOLVED IN BOTH THE GROUNDS AFRESH, IN ACCORDANCE WITH LAW. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE REVENUE IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 11-02-2011. SD/- SD/- (A.N.PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11/ 02 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.