DCIT, New Delhi V. M/s Koutons Retail India Pvt. Ltd., New Delhi

ITA 2145/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52944 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J MISHRA
• Keywords: Principle of natural justice; Additional evidence
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI D BENC H BEFORE SHRI C.L. SETHI, JM & SHRI A.N. PAHUJA, AM ITA NO.2145/DEL/2010 ITA NO.2145/DEL/2010 ITA NO.2145/DEL/2010 ITA NO.2145/DEL/2010 ASSESSMENT YEAR:2006-07 DEPUTY CIT, CENTRAL CIRCLE- 11,ROOM NO. 364,ARA CENTRE,E-2,JHANDEWALAN EXTENSION, NEW DELHI-110055 V VV V/S /S/S /S. M/S KOUTONS RETAIL INDIA PVT. LTD. (FORMERLY CHARLIE CREATIONS PVT. LTD.), T-60/1, NEW ROHTAK ROAD, KAROL BAGH, NEW DELHI-110005 [PAN:AABCC 3495 P] [PAN:AABCC 3495 P] [PAN:AABCC 3495 P] [PAN:AABCC 3495 P] (APPELLANT) (RESPONDENT) ASSESSEE BY NONE REVENUE BY SHRI J. MISHRA, DR DATE OF HEARING 27-09-2011 DATE OF PRONOUNCEMENT 30-09-2011 O R D E R O R D E R O R D E R O R D E R A.N.PAHUJA: A.N.PAHUJA: A.N.PAHUJA: A.N.PAHUJA:- -- - THIS APPEAL FILED ON 7.5.2010 BY THE REVENUE AGAIN ST AN ORDER DATED 19 TH FEBRUARY, 2010 OF THE LEARNED CIT(A)-I, NEW DELHI, RAISES THE FOLLOWING GROUNDS:- 1) THE ORDER OF THE LEARNED CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARN ED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN D ELETING THE ADDITION OF `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`20,38,53,964/- FILED ON 16 TH NOVEMBER, 2006 BY THE ASSESSEE, MANUFACTURING AND TRADING IN READYMADE GARMENTS, WAS S ELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), ISSUED ON 9 TH OCTOBER, 2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER (AO IN SHORT) ASKED THE ASSESSEE TO RECONCILE SALES DECLARED IN THE AUDITED ACCOUNTS WITH THE SALES SHOWN IN THE SALES-TAX RETURNS ALONG WITH COMP ARATIVE GP RATE OF PRECEDING THREE YEARS AND THE REASONS FOR DECLINE IN GP RATE IN THE YEAR UNDER CONSIDERATION. AFTER SEEKING A NUMBER OF ADJOUR NMENTS, THE ASSESSEE FURNISHED A RECONCILIATION STATEMENT AS ON 31 ST MARCH, 2006 ALONG WITH A COPY OF SALES-TAX RETURNS AS EXTRACTED ON PAGE NOS.2 & 3 OF THE ASSESSMENT ORDER ONLY ON 20.11.2008. ON PERUSAL OF THE SAID STATEMENT, THE AO OBSERVED THAT SALES AS PER SALES-TAX RETURN WERE ` 31,90,65,309/- ON ACCOUNT OF DIRECT SALE AND ` 3,02,05,85,269/- ON ACCOUNT OF CONSIGNMENT TRANSFER WH ILE SALES REFLECTED IN THE AUDITED ACCOUNTS WERE ONLY ` 1,58,34,40,924/-. TO A FURTHER QUERY BY THE AO, SEEKING DETAILS OF INTER BRANCH TRANSF ER, CONSIGNMENT AGENTS AND DETAILS OF DISCOUNT BESIDES A COPY OF LEDGER ACCO UNT OF SALES-TAX PAID/COLLECTED, THE ASSESSEE DID NOT FURNISH ANY DETAIL S EXCEPT TWO AGREEMENTS IN THE NAME OF M/S LEKH RAJ & COMPANY LUCK NOW, AND FASHION SHOPE, BARIELLY. ON FURTHER EXAMINATION , THE AO O BSERVED THAT AVERAGE DISCOUNT OFFERED ON MRP TO CUSTOMERS WAS ONLY 47.86% A ND WORKED OUT CONSIGNMENT SALE OF ` 2,79,84,72,292/- IN PARA 3.1.10 OF THE ASSESSMENT ORDER. ACCORDINGLY, THE AO ASKED THE ASSESSEE AS TO WH Y CLAIM FOR DEDUCTION ITA NO.2145 /DEL./2010 3 OF INTER BRANCH CONSIGNMENT TRANSFER OF `48,86,86,957/ - FROM CONSIGNMENT SALE ACCOUNT, SHOULD NOT BE REJECTED, BEING ONLY A CON TRA-ENTRY AND THE CLOSING STOCK OF CONSIGNMENT BEING ` 36,03,38,098/-. THE AO ALSO REFERRED TO THE CLAIM OF THE ASSESSEE THAT MRP OF THE G OODS WAS FIXED AND TRANSFER OF GOODS TOOK PLACE @50% OF MRP TO THEIR CONSI GNEE AGENT. HOWEVER, IN RESPONSE TO A SHOW CAUSE NOTICE, THE ASSES SEE CHANGED THEIR STAND AND STATED THAT THE TRANSFER OF GOODS TOOK PLACE @60% OF THE MRP TO THE CONSIGNEE AGENT. BESIDES, IN THE CALCULATION FILED ON 26 TH DECEMBER, 2008, THE ASSESSEE REFLECTED DISCOUNT OFFERED TO THE CUS TOMERS ON MRP DURING THE PERIOD 20 TH MARCH, 2006 TO 31 ST MARCH, 2006 @65% WHILE IN SUBMISSION DATED 15 TH DECEMBER, 2008, IT WAS MENTIONED THAT DURING THIS PERIOD ONLY FRESH SALES WAS MADE AND NO DISCOUNT WAS OFFERED TO CUSTOMERS. THE ASSESSEE FURTHER POINTED OUT THAT SALES WERE CORRECTL Y RECORDED IN THEIR BOOKS AND INTER BRANCH TRANSFERS COULD NOT BE CONSIDER ED AS SALES FOR INCOME TAX PURPOSE. AFTER CONSIDERING THE REPLY OF THE ASSESSE E, THE AO CONCLUDED AS UNDER:- '3.1.13 '3.1.13 '3.1.13 '3.1.13 I HAVE CAREFULLY CONSIDERED THE ARGUMENTS ADV ANCED BY THE ASSESSEE. HOWEVER, I AM NOT CONVINCED BY THE ARGUM ENTS, PRIMARILY BECAUSE OF FOLLOWING HEREWITH- (I) CONTRARY TO THE CLAIM MADE IN THE WRITTEN SUBMISSION , NO SUCH PASS BOOK WAS PRODUCED BEFORE ME. FIVE PHOTOCOPIES OF FORM VAT 03 W ERE PRODUCED. THESE HAVE BEEN PREPARED BY THE ASSESSEE AND DO NOT CARRY ANY ENDORSEMENT FROM HARYAN A VA T AUTHORITIES TO SHOW THAT THESE WERE ACTUALLY USED FOR CONS IGNING GOODS FROM HARYANA TO DELHI. FURTHER, THE CONSIGNOR'S NAME AS PER THESE FORMS IS CHARLIE CREATIONS PVT. LTD., SHOW RO OM, GURGOAN, WHICH MEANS THAT THESE WERE SENT, IF AT ALL, FR OM THE SHOW ROOM NOT FROM THE WAREHOUSE. IT IS ALSO NOTED THAT TH E FORM PROVIDES FOR WRITING NO. OF CASH MEMO/BILL OF S ALE/DELIVERY NOTE/TAX INVOICE ETC. IT IS NOT CLEAR THAT THESE FORMS ARE LINKED TO ANY SALE MEMO AND NOT MERELY TO A DELIVERY NOTE. FINALLY, IN THE COLUMN MEANT FOR SHOWING THE NATURE OF TRANSACTION AS 'S ALE' OR 'OTHER', THE CONSIGNOR HAS SHOWN IT AS 'OTHER', ALTHOUGH IF THE CONSIGNMENT IS TO BE SHOWN AS PER VAT PROVISIONS, IT S HOULD HAVE BEEN SHOWN AS SALE IN FORM VAT 03. (II) THE 'F' FORMS WERE NOT PRODUCED BEFORE ME. ONLY A LIST THEREOF WAS FILED, WHICH CANNOT BE ADMITTED AS AN EVIDE NCE. FURTHER, THE F FORMS ARE OBTAINED FOR ALL CONSIGNMENT TR ANSFERS. IT DOES NOT ESTABLISH THAT THESE GOODS WERE NOT SENT FOR SA LE. ITA NO.2145 /DEL./2010 4 (III) THE MONTH-WISE DETAILS OF BRANCH TRANSFERS AS FI LED BY ASSESSEE ON 30.12.2008 SHOW THAT TRANSFERS ARE SHOWN TO HAVE BEEN EFFECTED THROUGHOUT THE YEAR FROM DELHI BRANCH TO G URGOAN BRANCH AND GURGAON BRANCH TO DELHI BRANCH. THIS IS A GAINST THE EARLIER STAND OF THE ASSESSEE THAT THE BRANCH TRANSFERS W ERE MADE AFTER SHIFTING OF THE WAREHOUSE TO GURGOAN. THE AS SESSEE HAS NOW CONTENDED THAT THE DELHI WAREHOUSE WAS VACATED A FTER 31 ST MARCH, 2006. THIS IS ANOTHER INSTANCE OF CHANGE OF S TAND. (IV) THE ASSESSEE HAS SUBMITTED THAT THE INWARD AND OUTWA RD MOVEMENT OF INTER BRANCH TRANSFERS HAVE BEEN RECORDED IN THE STOCK BOOK AND CLAIMED TO HAVE FILED A SOFT COPY OF THE SAME AS AN EVIDENCE. HOWEVER, I FIND THAT ONLY A SAMPLE STOCK LEDGER FOR THE MONTH OF DEC., 2005 HAS BEEN FILED IN SOFT COPY. I T IS NOT ESTABLISHED THAT THE SAMPLE STOCK LEDGER IS TAKEN OUT OF S TOCK REGISTER MAINTAINED IN NORMAL COURSE OF BUSINESS. NO SUCH STOCK REGISTER WAS PRODUCED BEFORE ME. (V) THE SALES TAX RETURNS DO NOT EVIDENCE ANY SUCH IN TER BRANCH TRANSFERS. HOWEVER, THEY CONSTITUTE AN EVIDENCE TO ESTABLI SH THE EXTENT OF CONSIGNMENT TRANSFERS. (VI) DESPITE REPEATED REQUISITIONS, THE ASSESSEE DID NO T FURNISH THE BANK BOOK WITH NARRATION OF DEPOSITS IN BANK ACCOUN TS AND THEIR RECONCILIATION WITH THE ACTUAL SALE REALIZATIONS CL AIMED IN THE RETURN. 3.1.14 3.1.14 3.1.14 3.1.14 AFTER A CAREFUL CONSIDERATION OF ALL MATERIALS, EVIDENCES AND DOCUMENTS PRODUCED OR FILED BEFORE ME, I AM OF TH E OPINION THAT THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE TO DISCLOSE ITS TAXABLE SALES TO INCOME TAX AUTHORITIES IS N OT SUCH AS TO ENABLE THE INCOME TAX AUTHORITIES TO TRULY DETERMINE ITS TAXABLE PROFITS UNDER THE PROVISIONS OF INCOME TAX AC T, 1961. THE ARGUMENT OF THE ASSESSEE THAT THE BASIS TAKEN BY ME I N THE CALCULATIONS AS PER ANNEXURE I ARE IMAGINATIVE, DOES NOT HOLD WATER IN THE FACTS AND CIRCUMSTANCES OF THE CASE SINCE THE FIGURES SHOWN BY THE ASSESSEE ITSELF ARE SHROUDED IN MYSTERY, AND BY ITS OWN ADMISSION, THE FIGURES OF DISCOUNTS CLA IMED IN ITS P & L ACCOUNT ARE NOTIONAL FIGURES, TO MATCH THE DIFFERE NCE BETWEEN TRANSFER PRICE OF GOODS AND THE ACTUAL REALIZATIONS AGAINST THEM. THUS, IT IS ONLY A QUESTION OF SUBSTITUTING ONE ESTIMATE FOR ANOTHER, AND CALCULATING THE ACTUAL REALIZAB LE VALUE OF SALES BY CONVERTING ALL THE BASES TO MRP CAN BE A S OUND BASIS FOR THE SAME. 3.1.15 3.1.15 3.1.15 3.1.15 ACCORDINGLY, THE REALIZABLE VALUE OF SALES A GAINST THE CONSIGNMENT, TRANSFERS AT MRP HAVE BEEN CALCULATED IN ANNEXURES 2 AND 3 TO THIS ORDER. THE BASIS FOR ARRIVING AT THESE FIGURES ARE AS FOLLOWS: (I) THE MONTH-WISE CONSIGNMENT VALUES HAVE BEEN TAKE N FORM THE COPIES OF SALES TAX RETUNES FILED AT DELHI AND AT GURG AON, AS PER ITA NO.2145 /DEL./2010 5 DETAILS FURNISHED BY THE ASSESSEE DURING THE ASSESSMEN T PROCEEDINGS. (II) THE TOTAL MONTH-WISE CONSIGNMENT TRANSFERS HAVE B EEN WORKED OUT, BOTH FOR GURGOAN AND DELHI. (III) THE TOTAL CONSIGNMENT TRANSFERS SO WORKED OUT HAVE BEEN ADJUSTED TO MRP ON THE BASIS THAT THE CONSIGNMENTS UP TO SE PT., 2005 HAVE BEEN BOOKED AT MRP, WHEREAS THE CONSIGNMENTS THEREAFTER HAVE BEEN BOOKED AT 60% OF MRP. THE CONSIGN MENT VALUE THUS DETERMINED ON MRP HAS BEEN ADJUSTED FOR OPE NING STOCK AND CLOSING STOCK AT MRP AS SHOWN BY THE ASSESSEE , AND THE RESULTANT FIGURE OF CONSIGNMENT SALES HAS BEEN DETER MINED, WHICH WORKS OUT TO RS.386,08,81,780 AT MRP. (IV) THE CONSIGNMENT SALES SO DETERMINED HAVE BEEN AP PORTIONED MONTH-WISE AND DISCOUNT SCHEME PERIOD-WISE ON THE SAME BASIS AND IN THE SAME PROPORTION AS ADOPTED BY THE ASSESSEE I N ITS CALCULATION OF SALES RECONCILIATION FILED ON 26. 12.2 008. (V) THE CONSIGNMENT SALES THUS DETERMINED FOR SPECIFIC PERIODS OF DISCOUNT SCHEME, AS PER THE DOCUMENTS ON ADVERTISEMENTS FOR THE SAME FURNISHED BY THE ASSESSEE, HAVE BEEN ADJUSTED FOR THE DISCOUNTS ON MRP APPLICABLE FOR THESE PERIODS FOR THE RETAIL CUSTOMERS. (VI) THE RESULTANT FIGURE HAS BEEN ADJUSTED FOR THE SAL ES TAX PAID. 3.1 ACCORDINGLY, THE AO WORKED OUT NET SALE REALIZATION AT `1,76,91,80,406/- AS AGAINST `1,26,43,75,615/- SHOWN BY THE ASSESSEE, RESULTING IN UNDISCLOSED SALE REALIZATIONS OF `50,48, 04,791/-. APPLYING THE DISCLOSED GP RATE OF 42.42%, THE AO ADDED AN AMOUNT OF `21,41,38,192/- BY WAY OF PROFIT ON UNDISCLOSED SALE REALIZATIONS. 4. ON APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE SUB MISSIONS ON BEHALF OF THE ASSESSEE WITH REGARD TO FINDINGS OF THE AO IN PARA 3.1.13 TO 3.1.15 OF THE ASSESSMENT ORDER(EXTRACTED ABOVE) AND THE AO HAVING N OT SUBMITTED ANY REMAND REPORT , DELETED THE ADDITION IN THE FOLLOWING TER MS:- 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AND ALSO PURS UED THE ASSESSMENT ORDER AND RECORD OF THE CASE. IT IS NOTED THA T THE LEARNED AO WAS REQUIRED TO SEND REMAND REPORT WITH REG ARD TO THE POINT OF STOCK BUT THE SAME HAS NOT BEEN SENT BY THE IT O INSPITE OF FACT THAT ABOUT FOUR MONTHS HAD LAPSED AND HE HAS BEEN CONTACTED TELEPHONICALLY ALSO. THE A.O. HAD BEEN GIVEN OPPORTUNITY AS REQUIRED UNDER RULE-46A, THE A.O. HAS C HOSEN NOT ITA NO.2145 /DEL./2010 6 TO REPLY. AS SUCH APPEAL IS BEING TAKEN UP FOR DECISI ON ON MERIT. IT HAS BEEN SEEN FROM THE ASSESSMENT ORDER THAT AO HAD N OT MADE ANY ADDITION OF ON ACCOUNTS OF STOCK VARIATION. TH E ADDITION IN THE ASSESSMENT ORDER HAD ONLY BEEN MADE ON THE BASIS OF SALES DIFFERENCE ON A/C OF INTER BRANCH TRAN SFER AND DISCOUNTS DIFFERENCE. THE ISSUE OF STOCK HAS NOT BEEN INVOLVED IN THIS APPEAL; HENCE APPEAL IS BEING DECIDED ON THE GRO UNDS ON WHICH ADDITIONS HAD ONLY BEEN MADE. THE STAND OF THE A SSESSEE WITH REGARD TO VARIATION IN SALES AS REPORTED IN BALANC E SHEET AND REPORTED IN RETURNS FILED UNDER CENTRAL SALES TAX ACT FOR THE REASONS STATED IN PARA 8 ABOVE IS ACCEPTED, AS THE SAME IS FOUND CORRECT FROM RECORD. THE LD. AO. HAS NOT POINTED A SIN GLE REASON FOR NOT ACCEPTING THE STOCK TRANSFER (INTER BRANCH TRANSF ER) WHEREAS THE ASSESSEE BEFORE AO. AS WELL AS BEFORE ME HAD FILED EVIDENCE ABOUT SUCH INTER BRANCH TRANSFER I.E. ROAD PE RMITS, STATUTORY FORMS I.E. F-FORMS AS PRESCRIBED UNDER CENTRA L SALES TAX ACT, BESIDES THE MOVEMENT OF GOODS FROM PRINCIPLE PLACE OF BUSINESS TO OTHER BRANCHES IN VICE VERSA HAS ALREADY BEEN RECORDED BY THE ASSESSEE. THE AO. HAD FURTHER NOT BROU GHT ANY MATERIAL TO SHOW THAT INTER BRANCH TRANSFER IS SALE AS ES SENTIALS OF SALES I.E. SELLER, BUYER CONSIDERATION, CHANGE OF OWNERSHIP OF GOODS HAD NOT BEEN BROUGHT ON RECORD NOR THERE IS ANY WHISPER IN THE ASSESSMENT ORDER. THUS THE ADDITION MADE TO THE TUN E OF RS.50,48,40,791/AS UNDISCLOSED SALES OUT SIDE BOOK IS NOT CALLED FOR. THE BREAK UP OF THIS ADDITION IS REALIZED VALUE OF INTER BRANCH TRANSFER OF RS.48,86,86,957/- WHICH IS RS.38,29,89, 904/- AND DIFFERENCE ON A/CS OF DISCOUNTS OFFERED TO CUSTOMERS O F RS.12,18,18,887/-TOTAL (RS.38,29,89,904+12,18,18,887= 50,48,04,079/-). AFTER GOING THROUGH THE SUBMISSION OF AR. OF THE ASSESS EE AND THE DOCUMENTS FILED IN THE PAPER BOOKS FILED BY AS SESSEE I HAVE COME TO CONCLUSION THE CHART I.E. ANNEXURE 1, 2 & 3 AS PREPARED AND ANNEXED BY AO. ALONGWITH ASSESSMENT ORDE R ARE INCORRECT AND THE ADDITIONS MADE BASED THERE UPON ARE W RONG. THE RECONCILIATION CHART ANNEXURE A-1, PREPARED BY THE ASSESSEE SHOWING THE GLARING ERROR ON PART OF AO. ARE FACTUALLY CORRECT IS BEING MADE PART OF THIS ORDER AND IS MARKED AS ANNEXURE P-5(A) OF THIS APPEAL ORDER. THE STAND OF THE ASSESSEE THAT FOR CONSTITUTING SALES THERE MUST BE BUYER/SELLER AND CONSIDERATION/CHANGE OF OWNERSHIP IS CORRECT. WITH REG ARD TO INTER BRANCH TRANSFER OF RS.48,86,86,957/- THE AO. HAD NOT BROUGHT ON RECORD ANY EVIDENCE THAT THERE IS SALES NOR ANY NAME OF BUYER OR ANY CONSIDERATION HAD BEEN BROUGHT ON REC ORD. IN THE ABSENCE OF THESE, THE STAND TAKEN BY THE ASSESSEE THAT INTE R BRANCH TRANSFER CAN NOT BE TREATED AS SALES IS ACCEPTED AS THERE IS NO BUYER, NOR ANY CONSIDERATION HAD BEEN RECEIVED BY ITA NO.2145 /DEL./2010 7 ASSESSEE, NOR THERE IS CHANGE OF OWNERSHIP OF GOODS. AS SUCH THE DIFFERENCE OF RS.50,48,04,791/- CONSIDERED AS UN DISCLOSED SALES REALIZATION (OUT OF BOOKS) FOR THE RELEVANT PREVI OUS YEAR I.E. IN THE HANDS OF ASSESSEE IS HEREBY DELETED. AND AN AM OUNT OF RS.21,41,38,192/- @ DISCLOSED G.P. RATE OF 42.42% OF ABOVE DIFFERENCE I.E. RS.50,48,04,791/ADDED BACK TO THE IN COME OF ASSESSEE BEING PROFIT ON SUPPRESSED SALE PROCEEDS OU T OF BOOKS BY AO. IS ALSO DELETED . BESIDES THE ERROR POINTED OUT IN THE DISCOUNTS ON OLD & GOLD SCHEME AND LAST PERIOD BY ASSESSEE IS ALSO CORR ECT AND IS CERTIFIED FROM THE RECORD FROM NEWSPAPER CUTTING PLACED ON THIS OFFICE APPEAL FILE AND AO. RECORD. THERE IS THUS ERR OR COMMITTED BY AO. WHILE DETERMINING ADDITION ON ALCS OF DISCOUNT AND THE SAME IS ALSO DELETED AS ASSESSEE'S SUBMISSIONS ON THI S POINT IS CORRECT. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A). THE LEARNED DR WHILE SUBMITTING A COPY OF REMAND REPORT DATED 2 ND SEPTEMBER, 2009 OF THE ACIT, CIRCLE- 5 THROUGH THE ADD L. CIT, RANGE- 5, NEW DELHI, CONTENDED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN RECORDING HIS FINDINGS WITHOUT CONSIDERING THE SAID RE MAND REPORT AND WITHOUT ALLOWING SUFFICIENT OPPORTUNITY TO THE AO AND EVEN RECOR DING HIS REASONS FOR ADMISSION OF ADDITIONAL EVIDENCE ,ESPECIALLY WHEN THE ASSESSEE DID NOT PRODUCE THE STOCK REGISTER FOR THE WHOLE YEAR AND OTHE R DETAILS BEFORE THE AO DESPITE SUFFICIENT OPPORTUNITY ALLOWED BY HIM . 6. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE AFOR ESAID REMAND REPORT DATED 2.9.2009 CLAIMED TO HAVE BEEN SUBMITTED BE FORE THE LD. CIT(A). AS IS APPARENT FROM THE AFORESAID FACTS, THE AO ISSUED A QUESTIONNAIRE ON 11.2.2008, SEEKING CERTAIN DETAILS .HOWEVER, UNTIL 13 .10.2008, NO REPLY WAS SUBMITTED. THE AO AGAIN ISSUED A DETAILED QUESTIONNAIRE ON 13.10.2008 ALONG WITH A NOTICE U/S 142(1) OF THE ACT. AFTER SEEKING ADJOU RNMENTS, ONLY ON 20.11.2008 , THE LD. AR ON BEHALF OF THE ASSESSEE SUB MITTED FEW DETAILS BUT WITHOUT ANY REASONS FOR FALL IN GP RATE IN THE YEAR UN DER CONSIDERATION OR DESIRED AUDIT REPORTS ETC. INTER ALIA, FOR WANT OF RECO NCILIATION OF SALES AND OTHER DETAILS AS ALSO FAILURE ON THE PART OF THE ASSESSE E TO COMPLY WITH VARIOUS NOTICES ISSUED BY THE AO RIGHT SINCE 18.2.2008 , THE AO REJECTED THE BOOK RESULTS AND ADDED AN AMOUNT OF RS. 21,41,38,192/ -. ON APPEAL, EVEN ITA NO.2145 /DEL./2010 8 THOUGH THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO IN TERMS OF RULE 46A OF THE IT RULES, 1962, ACCORDING TO THE LD. CIT(A ),THE AO DID NOT REPLY . THEREAFTER, THE LD. CIT(A) WITHOUT EVEN IDENTIFYING THE R ELEVANT ADDITIONAL EVIDENCE OR RECORDING ANY REASONS FOR ADMISSION OF ADDITIONAL EVIDENCE, ACCEPTED THE SUBMISSIONS ON BEHALF OF THE ASSESSEE AND DELETED THE ADDITION, INTER ALIA, WITH THE FOLLOWING OBSERVATIONS . 8.. IT IS NOTED THAT THE LEARNED AO WAS REQUIRED TO S END REMAND REPORT WITH REGARD TO POINT OF STOCK BUT THE SAME HAS NOT BEEN SE NT BY THE ITO INSPITE OF FACT THAT ABOUT FOUR MONTHS HAD ELAPSED AND HE HAS BEEN CONTACTED TELEPHONICALLY ALSO. THE AO HAD BEEN GIVEN OPPORTUNITY AS REQUIRED UNDER RULE 46A, THE AO HAS CHOSEN NOT TO REPLY. AS SUCH APPE AL IS TAKEN UP FOR DECISION ON MERIT.. 6.1 AS ALREADY STATED ,NONE APPEARED ON BEHALF OF THE ASSESSEE BEFORE US .ON THE OTHER HAND, THE LD. DR WHILE SUBMITTING A COPY O F REMAND REPORT DATED 2.9.2009 OF THE AO, POINTED OUT THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DISPOSING OF THE APPEAL VIDE HIS ORDER DATED 19.2.201 0 WITHOUT ALLOWING SUFFICIENT OPPORTUNITY TO THE AO AND WITHOUT EVEN CONSIDER ING THE AFORESAID REMAND REPORT, KNOWING FULLY WELL THAT THE ASSESSEE DID NOT COMPLY WITH VARIOUS NOTICES ISSUED BY THE AO. CONSIDERING THE TOTALI TY OF FACTS AND CIRCUMSTANCES OF THE CASE, ESPECIALLY WHEN THE LD. CIT(A) REFERRED TO OPPORTUNITY UNDER RULE 46A OF THE IT RULES ,1962 WHILE THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT ANY REQUEST FOR ADMISSION O F ADDITIONAL EVIDENCE WAS MADE BEFORE THE LD. CIT(A) AND THIS IS NOT A CASE OF A MERE ROUTINE OR SIMPLE MATTER, WE ARE OF THE OPINION THAT THE APPROACH O F THE LD. CIT(A) IN DISPOSING OF THE APPEAL WITHOUT ALLOWING SUFFICIENT OPP ORTUNITY TO THE AO ,IS NOT IN ACCORDANCE WITH LAW , EVEN WHEN HE WAS FULLY AWARE THAT THE ASSESSEE DID NOT RESPOND TO VARIOUS NOTICES ISSUED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. . IN THIS CONTEXT W E MAY REFER TO THE FOLLOWING OBSERVATIONS OF THE HONBLE JUSTICE KRISH NA IYER J., AS HE THEN WAS, IN A. IBRAHIM KUNJU'S CASE, AIR 1970 KER. 65 AT PAGE 67: ITA NO.2145 /DEL./2010 9 '. . . . OPPORTUNITY SHOULD BE REAL AND NOT RITUALISTIC, EFFECTIVE AND NOT ILLUSORY AND MUST BE FOLLOWED BY A FAIR CONSIDERATION OF THE EX PLANATION OFFERED AND THE MATERIALS AVAILABLE, CULMINATING IN AN ORDER WHICH DISCLOSES REASONS FOR THE DECISION SUFFICIENT TO SHOW THAT THE MIND OF THE AUTHO RITY HAS BEEN APPLIED RELEVANTLY AND RATIONALLY AND WITHOUT RELIANCE ON FACTS NOT FURNISHED TO THE AFFECTED PARTY. NATURAL JUSTICE, I MUST WARN, CANNOT BE PERVERTED INTO AN YTHING UNNATURAL OR UNJUST AND CANNOT THEREFORE BE TREATED AS A SET OF DOGMATI C PRESCRIPTIONS APPLICABLE WITHOUT REFERENCE TO THE CIRCUMSTANCES OF THE CASE. THE QUESTION MERELY IS, IN ALL CONSCIENCE HAVE YOU BEEN FAIR IN DEALING WITH THAT MAN ? IF YOU HAVE BEEN ARBITRARY, ABSENT-MINDED, UNREASONABLE OR UNSPEAKING, YOU CANNOT DENY THAT THERE HAS BEEN NO ADMINISTRATIVE FAIR PL AY. ' 6.2. SINCE THE LD. CIT(A) MADE A REFERENCE TO RUL E 46A OF THE IT RULES,1962 , WE MAY HAVE A LOOK AT THE RELEVANT PR OVISIONS OF RULE 46A OF THE IT RULES 1962, WHICH READS AS UNDER : (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY B E, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HI M DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFI CER, EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO TH E APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE , THE COMMISSIONER (APPEALS) RECORDS IN WRITING THE REASO NS FOR ITS ADMISSION. (3)THE DEPUTY COMMISSIONER(APPEALS) OR, AS THE CA SE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCO UNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE INC OME-TAX OFFICER HAS BEEN ALLOWED A REASONABLE OPPORTUNITY ( A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-EXAMINE THE WI TNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT ITA NO.2145 /DEL./2010 10 (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY B E, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENA BLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENA LTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSIN G OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271.' 6.3 IT IS EVIDENT FROM THE AFORESAID PROVISIONS THAT THE LD. CIT(A) CAN TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-R. (1)(B) & (C) OF RULE 46A OF THE IT RULES, 1962 IF THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE .IN THE CASE UNDER C ONSIDERATION, APPARENTLY THE NECESSARY DETAILS/DOCUMENTS WERE NEV ER SUBMITTED BEFORE THE AO DESPITE VARIOUS NOTICES. TH OUGH THE LD. CIT(A) ALLOWED AN OPPORTUNITY TO THE AO IN TERMS OF AFORESAID RULE 46A AND THE AO APPEARS TO HAVE SUBMITTED HIS REPORT , THE LD. CIT(A) HAVE NOT RECODED ANY FINDINGS ON THE SAID RE PORT . MOREOVER, THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE LD. CIT(A) RECORDED ANY REASONS BEFORE ADMITTING THE AFORESAID DETAILS/DOCUMENTS BY WAY OF ADDITIONAL EVIDENCE. I N THIS CONNECTION, HONBLE GUJRAT HIGH COURT IN THEIR DECI SION IN THE CASE OF CIT VS. VALIMOHMED AHMEDBHAI,134 ITR 214(GU J) WHILE REFERRING TO PROVISIONS OF SEC. 46A OF THE IT RULES ,1962 OBSERVED THAT NOTICE OF APPEAL ISSUED BY AN AAC CANNOT BE EQUATED WITH NOTICE OF A FUTURE APPLICATION TO LEAD ADDITIONAL E VIDENCE WHICH NO ONE COULD HAVE ANTICIPATED OR REASONABLY FORESEE N. HONBLE HIGH COURT HELD THAT ORDINARILY, THE APPEAL WOULD B E DECIDED ON THE EVIDENCE RECORDED IN THE COURSE OF ASSESSMENT P ROCEEDINGS. SINCE IN THE CASE UNDER CONSIDERATION, THE LD. CIT( A) DISPOSED OF THE APPEAL WITHOUT ALLOWING SUFFICIENT OPPORTUNITY TO THE AO IN RELATION TO ADDITIONAL EVIDENCE/DOCUMENTS FILED BEF ORE THE LEARNED CIT(A) AND WITHOUT RECORDING ANY REASONS IN TERMS OF RULE 46A(2) OF THE IT RULES,1962, WE FIND MERIT IN THE CONTENTIONS OF THE LEARNED DR AND THEREFORE, IN THE INTEREST OF JU STICE AND FAIR PLAY, VACATE THE FINDINGS OF THE LD. CIT(A) AND RES TORE THE ISSUES ITA NO.2145 /DEL./2010 11 RAISED IN GROUND NOS.2 & 3 IN THIS APPEAL TO HIS F ILE, WITH THE DIRECTIONS TO FOLLOW THE MANDATE IN TERMS OF RULE 4 6A OF THE IT RULES, 1962 AS ALSO PRINCIPLES OF NATURAL JUSTICE A ND THEREAFTER, DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AFTER ALLOWING SUFFICIENT OP PORTUNITY TO BOTH THE PARTIES. WITH THESE DIRECTIONS, GROUND NO S. 2 & 3 RAISED IN THIS APPEAL ARE DISPOSED OF, AS INDICATED HEREI NBEFORE. 7. GROUND NO.1 IN THE APPEAL BEING GENERAL IN NATURE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROUND, DOES NOT R EQUIRE SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAS BEEN RAIS ED BEFORE US IN TERMS OF GROUND NO.4 IN THE APPEAL, ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 8. IN THE RESULT, APPEAL IS ALLOWED BUT FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (C.L. SETHI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. DY. CIT, CEN. CIRCLE -11, NEW DELHI 2. M/S KOUTONS RETAIL INDIA PVT. LTD., T-60/1, NEW ROHTAK ROAD, KAROL BAGH, NEW DELHI. 3. CIT(A)-I, NEW DELHI 4. CIT CONCERNED. 5. DR, ITAT,D BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY/ // /ASSTT.REGISTRAR ITAT, DELHI