Hari Om Kumar Tayal (HUF), New Delhi V. ITO, Ward-19(2), New Delhi

ITA 2478/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5342 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Business expenditure
• Section: 43B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.2478/DEL/2018 ASSESSMENT YEAR: 2008-09 HARI OM KUMAR TAYAL, F-105, ASHOK VIHAR, PHASE-I, NEW DELHI. V. ITO-WARD-19(2), NEW DELHI TAN/PAN: AAAHH 2711M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJAY GUPTA, CA. RESPONDENT BY: SHRI S.L. ANURAGI, SR.D.R. DATE OF HEARING: 12 11 2018 DATE OF PRONOUNCEMENT: 28 01 2019 O R D E R THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 31.01.2018, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXV, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.144 OF THE IT ACT, FOR THE ASSESSMENT YEAR 2008-09. IN THE GROUNDS OF APPE AL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: - THAT THE LD. COMMISSIONER OF INCOME TAX APPEALS H AS ERRED BOTH IN LAW AND FACTS OF THE CASE IN NOT APPRECIATING THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IGNORED THE BASICS, I .E., 1. THAT THE ORDER U/S 144 IS NULL AND VOID. 2. THAT HIS PREDECESSOR HAD THOROUGHLY EXAMINED THE B OOKS OF ACCOUNTS, INCLUDING PURCHASE AND SALES, AND EXPENSE S AND AFTER SATISFACTION THE REMAND REPORT WAS CALLED WITHIN LI MITED POINT FOR REASON OF EX-PARTE ASSESSMENT. 3. THAT THE FINDINGS OF THE LD. COMMISSIONER OF INCOM E TAX APPEAL IS AGAINST THE FACTS. I.T.A. NO.2478/DEL/2018 2 2. THE FACTS IN BRIEF ARE THAT, ASSESSEE IS ENGAGE D IN THE BUSINESS OF WHOLESALE TRADING OF METAL AND ALLOYS. THE RETURN OF INCOME WAS FILED ON 30.09.2008, DECLARING INCOME OF RS.1,10,000/-. THE ASSESSING OFFICER FROM THE BALAN CE-SHEET AND PROFIT AND LOSS ACCOUNT AS ON 31.3. 2018, NOTED THAT ACCOUNTS ARE NOT AUDITED EVEN WHEN THE ASSESSEES T URNOVER WAS RS.78,62,773/- I.E., ABOVE THE PRESCRIBED LIMIT UNDER SECTION 44AB OF THE IT ACT. ACCORDING TO HIM, SINCE NO EXPLANATION WAS OFFERED BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE, THEREFORE, HE INITIATED PENALTY PROCEEDINGS UNDER SECTION 271B. HE FURTHER NOTED THAT, DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS FAILED TO P RODUCE BOOKS OF ACCOUNT AND RELEVANT VOUCHERS IN SUPPORT O F ITS CLAIM FOR EXPENSES AND ACCORDINGLY, HE DISALLOWED S UM OF RUPEES 1,00,000/- OUT OF TOTAL EXPENSES CLAIMED OF RS.4,34,301/- ON ESTIMATE BASIS. HE FURTHER NOTED T HAT ASSESSEE HAD SHOWN SALES OF RS. 78,62,773/- ON WHIC H GROSS PROFIT OF RS.5,48,110/- WAS SHOWN GIVING GP OF 6.9% . FURTHER, HE HELD THAT IN ABSENCE OF ANY RECORD AND SUPPORTIN G PURCHASE AND SALES BILLS, THE GROSS PROFIT RATE WAS ENHANCED TO 10% AND THEREBY MADE AN ADDITION OF RS.2,43,167/ -. LASTLY, HE ALSO NOTED THAT THE ASSESSEE HAS REFLECT ED SUM OF RS.28,394/- TOWARDS VAT PAYABLE IN THE BALANCE-SHEE T AS ON 31.03.2008 FOR WHICH THE ASSESSEE HAS FAILED TO PRO DUCE COPY OF CHALLAN AND ACCORDINGLY, HE DISALLOWED THE SAME UNDER SECTION 43B OF THE IT ACT. I.T.A. NO.2478/DEL/2018 3 3. BEFORE THE LEARNED CIT(A), ASSESSEE SUBMITTED TH AT, BEFORE THE AO ASSESSEE HAS MADE VARIOUS COMPLIANCES AND ALSO FILED ALL THE DETAILS ALONG WITH LETTERS. IN S UPPORT, ASSESSEE REFERRED TO THE ORDER SHEET ENTRIES OF THE ASSESSMENT PROCEEDINGS WHICH HAS BEEN NOTED AT PAGE 3 OF THE I MPUGNED ORDER. FURTHER, BEFORE LD. CIT(A) ALSO IN RESPONSE TO VARIOUS QUERIES RAISED BY HIM, THE ASSESSEE HAS GIVEN POINT -WISE REPLY AND SUBMITTED THAT, ASSESSEE IS PURCHASING SCRAP OF METALS AND CONVERTING THEM INTO BAR/INGOT FOR WHICH ASSESS EE WAS THOUGH NOT MAINTAINING ANY MANUFACTURING ACCOUNT BU T ENTIRE QUANTITATIVE DETAILS WAS FILED BEFORE HIM. I T WAS FURTHER SUBMITTED THAT BUSINESS STARTED DURING THE PREVIOUS YEAR AND SAME WAS STOPPED AS ON 23.03.2008 AND ENTIRE STOCK WAS SOLD AND THERE IS NO BUSINESS IN THE SUBSEQUENT YEA R AS ASSESSEE HAS LEFT DELHI WITH HIS SON TO SETTLE AT R ANCHI. AS SPECIFICALLY REQUIRED BY LD. CIT(A), ASSESSEE HAD F ILED CONFIRMATION FROM M/S. JAI AMBEY ALLOYS (P) LTD. AL ONG WITH BANK STATEMENT. REGARDING CASH CREDITORS ALSO ASSES SEE POINTED OUT THAT ASSESSEE WAS DEALERS IN FERROUS AN D NON- FERROUS METAL AND SOME OF THE MATERIAL AND LOAN WAS TAKEN FOR TEMPORARY PERIOD AND WAS RETURNED BACK IN 2 MON THS. FURTHER, THE ENTIRE STOCK WAS SOLD DURING THE YEAR AS ASSESSEE HAD TO WIND UP HIS BUSINESS. IN ORDER TO EXPLAIN TH E TRADING ACCOUNT AND PROFIT, ASSESSEE HAS ALSO FILED THE DET AILS FROM THE TRADING ACCOUNT, LIKE OPENING STOCK, PURCHASES, SAL E, SHORTAGES, ETC., ALONGWITH THE QUANTITATIVE DETAILS WHICH WERE AS UNDER: I.T.A. NO.2478/DEL/2018 4 OPENING STOCK 2885 KGS ADD: PURCHASE UPTO 08/02/2008 26175 KGS LESS: SALE OF SCRAP 11720 KGS 14455 KGS. LESS : SALE OF BAR 14020 KGS BALANCE I.E. SHORTAGE 435 KGS PERCENTAGE 3.1% PURCHASE OF SCRAP ON 19.03.2008 2040 KGS LESS: SOLD 1950 KGS SHORTAGE 90 KGS PERCENTAGE 4.4 3.1 FURTHER, ASSESSEE ALSO EXPLAINED REASONS FOR SH ORTAGE WHICH WAS DUE TO WASTAGE AND ALSO GAVE THE DETAILS OF OPENING STOCK AND ITS VALUATION WHICH WAS RS.305 PER KG AND FURTHER SUBMITTED THAT THERE WAS NO CLOSING STOCK AT ALL. T HE ASSESSEE ALSO JUSTIFIED THE TURNOVER, EXPENSES, GROSS PROFIT AND POINTED OUT THE RATE OF GP RATE COMES TO 7.52% AND ENTIRE T RADING RESULTS ARE SUPPORTED WITH DAY TO DAY STOCK REGISTE R, PURCHASE AND SALES VOUCHERS. ANOTHER IMPORTANT THING WHICH W AS BROUGHT ON RECORD THAT THE ASSESSEES TRADING RESUL TS AS SHOWN IN THE BOOKS OF ACCOUNT WAS SUBJECTED TO AUDI T AND THE AUDITORS HAVE DULY CERTIFIED THE CORRECTNESS OF THE TRADING AND P&L ACCOUNT IN FORM 3CB. LASTLY, REGARDING VAT ALSO , ASSESSEE SUBMITTED THE PROOF OF PAYMENT OF VAT. 4. LD. CIT(A) WITHOUT EVEN LOOKING INTO THE FAC TS AND MATERIAL PLACED BEFORE HIM AND ALSO THE COPY OF REM AND REPORT I.T.A. NO.2478/DEL/2018 5 SUBMITTED BY THE AO HAS DISMISSED THE ASSESSEE'S AP PEAL IN A VERY FLIMSY MANNER AFTER OBSERVING AND HOLDING AS U NDER: THE ASSESSEE FILED BALANCE SHEET AND P & L A/C AS ON 31.3.08 WHICH WERE NOT AUDITED. THOUGH THE APPELLANT WAS RE QUIRED BY LAW TO GET ITS ACCOUNTS AUDITED U/S 44AB AS THE TUR NOVER OF THE APPELLANT WAS RS. 78,62,773/- I.E. ABOVE THE LIMIT PRESCRIBED 44AB OF THE IT ACT. THE APPELLANT HAS NOT OFFERED A NY EXPLANATION FOR THE SAME. THE APPELLANT HAS ONLY CO NTENDED THAT THE ACTION OF THE AO WAS AD HOC. THE APPELLANT HAS FURNISHED SOME EXPLANATIONS, BUT THE SAME ARE NOT SATISFACTOR ILY EXPLAINING THE BUSINESS EXPENSES NOR THE REASON FOR NOT GETTIN G THE AUDIT DONE. ACCORDINGLY, I DON'T FIND THE CONTENTIONS OF THE APPELLANT CONVINCING IN VIEW OF THE CONDUCT OF THE APPELLANT WHEREBY THE DUE PROCESS WAS NOT FOLLOWED IN GETTING THE BOOKS O F ACCOUNTS AUDITED. THE APPELLANT HAS SHOWN A DEVIANT CONDUCT IN NOT FOLLOWING THE REQUIREMENTS OF LAW. THE APPEAL IS NO T TENABLE DUE TO FUNDAMENTAL FLAWS IN THE APPELLANT CONDUCT. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ENTIRE PREMISE OF THE AUTHORITIES BELOW THAT TH E ASSESSEE HAS NOT FILED AUDIT REPORT OR AUDITED BALANCE SHEET IS ABSOLUTELY INCORRECT, BECAUSE ASSESSEE HAD FILED TH E AUDITED BALANCE SHEET AND AUDIT REPORT BEFORE THE ASSESSING OFFICER BY WAY OF A LETTER WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGE 1, WHICH CLEARLY MENTIONS THE DETAILS OF OPENI NG STOCK AND CLOSING STOCK AS WELL AS FURNISHING OF AUDITED BALANCE SHEET AND AUDIT REPORT FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSING OFFICER HAD ALSO ISSUED A NOTICE TO THE A UDITOR/CA I.T.A. NO.2478/DEL/2018 6 M/S BIRENDER PRATAP & CO. AND ALSO SOUGHT INFORMATI ON FOR COPIES OF AUDITED FINANCIAL STATEMENTS FOR THE FINA NCIAL YEARS 2006-07 AND 2007-08. IN RESPONSE, THE SAID INFORMAT ION WAS DULY PROVIDED BY THE AUDITORS. NOT ONLY THAT, IN TH E PENALTY PROCEEDINGS U/S. 2711B, THIS TRIBUNAL HAS DELETED T HE PENALTY AFTER NOTING DOWN THAT THE ASSESSEE HAS FILED REPLY FROM TIME TO TIME IN RESPONSE TO VARIOUS NOTICES. THUS, NO SU CH ADHOC ADDITION COULD HAVE BEEN MADE. 5. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED UP ON THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(A). 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS MATERIAL REFERRED TO AT THE TIME OF HEARING . THE ENTIRE CASE OF THE ASSESSING OFFICER AND THE LD. CIT(A) IS THAT NO AUDITED ACCOUNT OR AUDIT REPORT HAS BEEN FURNISHED. FROM THE PERUSAL OF THE LETTER FILED BEFORE THE ASSESSING OF FICER, I FIND THAT ASSESSEE HAS FILED THE AUDIT REPORT IN RESPONS E TO A NOTICE ISSUED BY THE ASSESSING OFFICER AND SAID AUDIT REPO RT IS ALSO APPEARING AT PAGES 11 TO 16 OF THE PAPER BOOK, WHER EIN AUDITORS HAVE DULY CERTIFIED THE BOOKS OF ACCOUNT A ND THE TRADING RESULT IN FORM 3CB. NOT ONLY THAT, A NOTICE WAS ALSO SENT BY THE ASSESSING OFFICER TO CA AND DESPITE ALL THESE MATERIAL FACTS PLACED ON RECORD, THE ENTIRE ADDITIO NS HAVE BEEN MADE ON THE GROUND THAT ENTRIES IN THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET HAVE NOT BEEN AUDITED. TH E ENTIRE BASIS AND PREMISE FOR MAKING AN ADHOC ADDITION GETS VITIATED I.T.A. NO.2478/DEL/2018 7 IN THE LIGHT OF THE FACT THAT AUDITED ACCOUNTS AND THE ENTIRE AUDIT REPORT WAS FILED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT(A), WHICH FACT STANDS ESTABLISHE D BY THE TRIBUNAL IN THE PENALTY PROCEEDINGS U/S 271B. APART FROM THAT, I FIND THAT ASSESSEE HAS GIVEN THE ENTIRE DET AILS RELATING TO TRADING ACCOUNT AND PROFIT AND LOSS ACCOUNT AND BALANCE SHEET INCLUDING DETAILS OF OPENING STOCK, PURCHASES AND THE SALES MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) WH ICH WAS ALSO SENT TO THE AO TO SUBMIT HIS REMAND REPORT. HO WEVER, THE ASSESSING OFFICER IN THE REMAND REPORT HAS NOT EVEN COMMENTED UPON THESE DETAILS. ONCE ASSESSEE HAS FIL ED ALL THE DETAILS AND THE AUDIT REPORT AND HAS GIVEN EXPLANAT ION WITH REGARD TO EACH AND EVERY ENTRY OF THE TRADING ACCOU NT INCLUDING EXPENSES INCURRED WITH EVIDENCES, THEN NO ADHOC ESTIMATION OF INCOME OR DISALLOWANCE OF EXPENSES CA N BE MADE. ACCORDINGLY, ENTIRE ADDITION MADE BY THE ASSE SSING OFFICER AND SUSTAINED BY THE LD. CIT(A) STANDS DELE TED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY, 2019. SD/- [AMIT SHUKLA] JUDICIAL MEMBER DATED: 28 TH JANUARY, 2019 PKK