Kesar Singh Shekhawat, JODHPUR V. ITO, BHILWARA

ITA 215/JODH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9633 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 24-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: GAUTAM BAID
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER ITA NO.215/JODH/2016 ASSESSMENT YEAR:2011 - 12 KESAR SINGH SHEKHAWAT VS. THE ITO C/O. M/S. MANISH SUKHANI & CO.(CA) WARD - 3 B - 104, ANCHAL COMPLEX, D - ROAD BHILWARA SARDARPURA, JODHPUR PAN NO. ACUPS6143A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. GAUTAM BAID RESPONDENT BY : SH. S.K. MEENA DATE OF HEARING : 27/02/2017 DATE OF PRONOUNCEMENT : 02/03/2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILING THE CORRECTNESS OF THE ORDER DT. 01/03/2016 OF LD.CIT(A), AJMER PERTAINING TO 2011 - 12 ASSESSMENT YEAR ON VARIOUS GROUNDS WHICH IN SUM TOTAL CHALLENGING THE ADDITION S MADE BY THE ASSESSING OFFICER WHICH HAVE BEEN SUSTAINED IN APPEAL BY THE CIT(A). 2. APART FROM THE FOUR SPECIFIC GROUNDS RAISED ORIGINALLY THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND IN THE PRESENT PROCEEDINGS. H OWEVER CONSIDERING THE FACT THAT THE IMPUGNED ORDER WAS AN EXPARTE O RDER THE LD. AR WAS REQUIRED TO ADDRESS WHY THE ASSESSEE WAS NOT PRESENT BEFORE THE CIT(A) . THE LD. AR IN REPLY SUBMITTED THAT HE IS NOT AG G R I E V ED BY THE LACK OF OPPORTUNITY . H IS GRIEVANCE IT WAS SUBMITTED IS THAT CONSIDERING THE SUBMISSIONS MADE IN WRITING THE CIT(A) SHOULD HAVE DELETED THE ADDITION S. THE FOLLOWING CONCLUSION WAS 2 STATED TO BE INCORRECT AS NO SPECIFIC NOTICE WAS ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE TO INDICATE THAT ASSESSING OFFICER WAS GOING TO REJECT THE BOOK RESULTS UNDE R SECTION 145(3). THE SAID PARA IS REPRODUCED HEREUNDER : 4.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUDS OF APPEAL , WRITTEN SUBMISSION, REMAND REPORT AND REJOINDER CAREFULLY. IT IS SEEN THAT THE ASSESSEE HAD NOT MAINTAINED ANY STOCK REGISTER AND THE EXPENSES DEBITED UNDER THE HEAD LABOUR EXPENSES AND SALARY EXPENSES ARE NOT FULLY VOUCHED. THE VALUATION OF THE CLOSING STOCK MADE BY THE APPELLANT IS ALSO NOT VERIFIABLE WITH THE HELP OF ANY DOCUMENTARY EVIDENCES. KEEPING IN VI EW THE DEFECTS POINTED OUT BY THE AO IN THE ASSESSMENT ORDER, I AM OF THE CONSIDERED VIEW THAT THE AO IN THE ASSESSMENT ORDER, I AM OF THE CONSIDERED VIEW THAT THE AO WAS FULLY JUSTIFIED IN REJECTING THE BOOK RESULTS U/S 145(3). THE REATE OF GROSS PROFIT H AS FALLEN TO 12.3% FROM 18.76% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE TURNOVER DECLARED BY THE APPELLANT IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS RS. 3,09,58,694/ - . AS THERE IS FALL OF 6.4% IN GP RATE AT THE TURNOVER OF RS. 3,09,58 ,694/ - , THEREFORE THE ADDITION OF RS. 4 LAC MADE BY THE AO APPEARS TO BE QUITE REASONABLE. ACCORDINGLY, THE ADDITION MADE BY THE AO IS HEREBY CONFIRMED. 2.1 READING THE ABOVE IT WAS SUBMITTED THAT ASSESSING OFFICER WITHOUT AFFORDING AN OPPORTUNITY PROCEE DED TO MAKE AN ESTIMATED ADDITION . T HE LD. AR WAS REQUIRED TO POINT OUT FROM THE SUBMISSION S ALLEGEDLY MADE IN WRITING AS TO WHERE THE SAID OBJECTION , WAS RAISED BEFORE THE CIT(A) . IN REPLY IT WAS SUBMITTED THAT HE COULD NOT ADDRESS IT AS HE DID NOT REPRESENT THE ASSESSEE BEFORE THE CIT(A). 2. 2 IT WAS ALSO HIS SUBMISSION THAT THE FINDINGS OF THE LD. CIT(A) EVEN IN RE GA RD TO THE COMPUTATION OF SHORT TERM CAPITAL GAIN IN PARA 6.3 IS ARBITRARY AND INCORRECT. F OR READY REFERENCE THE SAME IS ALSO REPRODUCED HEREUNDER : 6.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL, WRITTEN SUBMISSION, REMAND REPORT AND REJOINDER CAREFULLY. IT IS SEEN THAT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY SATISFACTORY DOCUMENTARY E VIDENCE TO SHOW THAT HE HAS INCURRED EXPENSES OF RS. 8,50,196/ - ON MAKING FURNITURE ETC. FROM THE COPY OF REGISTERED SALE DEED FILED BY THE APPELLANT, IT IS SEEN THAT HE ASSESSEE HAS NOT SOLD ANY FURNITURE. THE VALUATION MADE BY THE STAMP AUTHORITY IS ALSO ONLY IN RESPECT OF RESIDENTIAL HOUSE. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF THE APPELLANT FOR DEDUCTION OF RS. 8,50,196/ - IN THE FORM OF COST OF IMPROVEMENT. HENCE, THE SHORT TERM CAPITAL GAIN DETERMINED BY THE AO ON SALE OF THE HOUSE AT 432 - B, SHASTRI NAGAR IS HELD TO BE IN ACCORDANCE WITH PROVISIONS OF LAW. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 2. 3 ON READING FROM THE ABOVE THE LD. AR WAS REQUIRED TO SHOW AS TO HOW THE AFORESAID FINDINGS CAN B E SAID TO BE AN ARBITRARY FINDING. INSTEAD OF 3 ADDRESSING THE SAID QUERY THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE CASE OF THE ASSESSE WAS PICKED UP FOR A LIMITED SCRUTINY AND THE ASSESSING OFFICER INST EAD PROCEEDED TO MAKE ADDITION S ON ISSUES WHICH WERE NOT OPEN TO HIM. HENCE HIS ACTION WAS N OT IN ACCORDANCE WITH LAW. SINCE THE SAID GRIEVANCE WAS NOT RAISED BY THE LD. CIT(A) ALSO OPPORTUNITY OF HEARING WAS FINALLY REQUESTED. 3 . THE LD. SR. DR IN REPLY SUBMITTED THAT THE IMPUGNED ORDER ON THE B ASIS OF THE MATERIAL AVAILABLE O N RECORD IS A CORRECT ORDER AND IT HAS NOT BEEN SHOWN BY THE ASSESSEE, HOW IT CAN BE SAID TO BE A N ARBITRARY ORDER. IT WA S ALSO HIS SUBMISSION THAT THE ARGUMENT THAT THE CASE WAS SELECTED ONLY FOR A LIMITED SCRUTINY HAD NOT BEEN R A ISED BEFORE THE TAX AUTHORIT IES AND HENCE , HAS NOT BEEN CONSIDERED BY THE CIT(A) . A CCORDINGLY THE ISSUES MAY AT BEST BE REMANDED. IT WAS ALSO HIS STAND THAT NO SPECIFIC NOTICE WAS ISSUED TO THE ASSESSEE IN REGARD TO REJECTION OF BOOKS OF ACCOUNTS, WAS ALSO NOT AN ISSUE RAISED BEFORE THE LD. CIT(A) AND TH US IT HAS NOT BEEN CONSIDERED BY HIM. 4. IN REPLY THE AR CONSIDERING THE MATERIAL AVAILABLE ON RECORD REQUESTED THAT THE ISSUES MAY BE REMAND ED THE LD. CIT(A) IN ORDER TO OBTAIN AN OPPORTU NITY OF BEING HEARD . 5 . I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE RECORD SHOWS THAT THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY THROUGH CAS S WHEREIN HIS RETURNED INCOME OF RS. 13,50,490/ - WAS ASSESSED AT AN INCO ME RS. 30,47,580/ - THE ASSESSEE CARRIED THE ISSUES BEFORE THE LD CIT(A) AND THE IMPUGNED ORDER HAS BEEN PASSED WITHOUT HEARING THE ASSESSEE AND ONLY RELYING UPON WRITTEN SUBMISSIONS. I FIND FROM THE RECORD THAT THE ASSESSEE DID NOT WA IVE THE RIGHT TO BE HEARD . THE WRITTEN SUBMISSIONS ARE ALSO STATED TO BE NOT FULLY CONSIDERED. SINCE THE COUNSEL REPRESENTING THE ASSESSEE BEFORE THE LD. CIT(A) WAS SOMEONE ELSE THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE STATED THAT WHETHER ALL FACTUAL OB JECTIONS WERE BROUGHT TO THE NOTICE OF THE CIT(A) HE WAS NOT IN A POSITION TO ADDRESS . ACCORDINGLY CONSIDERING THE PECULIAR FACTS OF THE CASE WHEN THE FACTS ITSELF NEED TO BE THRASHED OUT IN ORDER TO 4 DECIDE THE ISSUES ARISING IN THE APPEAL THE LD. AR FINAL LY REQUESTED THAT THE IMPUGNED ORDER MAY BE SET ASIDE IN ORDER TO GRANT THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. THE SAID PRAYER WAS ALLOWED IN TERMS OF THE PRAYER MADE UNDER THE RESIDUARY GROUND NOS. 5 & 6 RAISED IN THE PRESENT APPEAL. IT CAN NOT BE OVER EMPHASIZED THAT RIGHT TO BE HEARD IS AN IMPORTANT RIGHT TO WHICH A PARTY WHO IS FACED WITH AN ADVERSE VIEW IS ENTITLED TO AUDI ALTERAM PARTEM IS ONE OF THE MOST FAMOUS AND CELEBRATED RULE OF NATURAL JUSTICE. THE PRINCIPLES OF NATURAL JUSTICE ARE THOSE WHICH HAVE BEEN LAID OUT BY THE COURTS AS BEING THE MINIMUM PROTECTION OF THE RIGHTS OF AN INDIVIDUAL AGAINST THE ARBITRARY PROCEDURE THAT MAY BE ADOPTED BY A JUDICIAL, QUASI - JUDICIAL AND ADMINISTRATIVE AUTHORITY WHILE MAKING AN ORDER AFFECTING T HOSE RIGHTS. A CAREFUL PERUSAL OF THE CONSISTENT JUDGEMENTS OF THE APEX COURT WOULD SHOW THAT IT HAS CONSISTENTLY BEEN HELD THAT THE RULES OF NATURAL JUSTICE ARE NOT EMBODIED RULES AND THE SAID PHRASE IS NOT AN CANNOT BE CAPABLE OF A PRECISE DEFINITION. T HE UNDERLYING PRINCIPLE OF NATURAL JUSTICE EVOLVED UNDER THE COMMON LAW IS TO CHECK ARBITRARY EXERCISE OF POWER BY THE STATE OR ITS FUNCTIONARIES. ACCORDINGLY, THE PRINCIPLE BY ITS VERY NATURE IMPLIES THE DUTY TO ACT FAIRLY I.E. FAIR PLAY IN ACTION MUST B E EVIDENT AT EVERY STAGE. FAIR PLAY DEMANDS THAT NOBODY SHALL BE CONDEMNED UNHEARD. IN THE CELEBRATED JUDGEMENT OF THE APEX COURT IN THE CASE OF A.K.KRAIPAK - VS - UNION OF INDIA (1969)2SCC 262, IT IS OBSERVED THAT THE AIM OF RULES OF NATURAL JUSTICE IS TO SEC URE JUSTICE OR TO PUT IT NEGATIVELY TO PREVENT MISCARRIAGE OF JUSTICE. THE SAID RULES ARE MEANS TO AN END AND NOT AN END IN THEMSELVES AND THOUGH IT IS NOT POSSIBLE TO MAKE AN EXHAUSTIVE CATALOGUE OF SUCH RULES HOWEVER IT CAN BE READILY SAID THAT THERE ARE TWO BASIC MAXIMS OF NATURAL JUSTICE NAMELY AUDI ALTERAM PARTEM AND NEMO JUDEX IN RE SUA . IN THE PRESENT FACTS OF THE CASE WE ARE CONCERNED WITH THE MAXIM AUDI ALTERM PARTEM WHICH AGAIN MAY HAVE MANY FACETS TWO OF THEM (A) NOTICE OF THE CASE TO BE ME T; AND (B) OPPORTUNITY TO EXPLAIN. THEIR LORDSHIPS HAVE CAUTIONED THAT THESE RULES CANNOT BE SACRIFICED AT THE ALTAR OF THE ADMINISTRATIVE CONVENIENCE OR CELEBRITY. THUS, CONSIDERING THE 5 AFORE - MENTIONED STATUTORY PROVISION AND THE PRINCIPLES OF NATURAL JUS TICE, THE ISSUE IS RESTORED BACK TO THE FILE OF THE CIT(A) WITH A DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. T HE OPPORTUNITY SO PROVIDED TO THE ASSESSEE IT IS HOPED IS USED FULLY AND FAIRLY BY MAKING PROPER COMPLIANCE BEFORE THE LD. CIT(A). IN THE EVENTUALITY OF AB USE IT IS MADE CLEAR THE LD. CIT(A) WOULD BE AT LIBERTY TO PASS AN ORDER ON THE BASIS OF MATERIAL AVAILABLE ON RECORD . THE ASSESSEE IN ITS OWN B EST INTERESTS IS ADV ISED TO MAKE A PROPER COMPLIANCE BEFORE THE LD. CIT(A). 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . THE ORDER IS PRONOUNCED ON 02/03/2017 IN THE OPEN COURT. SD/ - (DIVA SINGH) JUDICIAL MEMBER DATED : 02/03/2017 AG COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT, 4. THE CIT(A), 5. THE DR