M/S SPACE AGE POWER PVT. LTD , SRINAGAR V. ITO, WARD 3(3), SRINAGAR

ITA 258/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5763 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: A M ZARGAR
• Keywords: Business income; Opportunity of being heard; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.258(ASR)/2017 ASSESSMENT YEAR:2012-13 SPACE AGE POWER PVT. LTD. AUQAF BUILDING, OLD ZERO BRIDGE, SRINAGAR-KASHMIR PAN:AALCS-2676J VS. ITO WARD-3(3), SRINAGAR, KASHMIR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. A.M.ZARGAR (C.A ) RESPONDENT BY: SH. RAJEEV GUBGOTRA (D.R) DATE OF HEARING : 20.12.2017 DATE OF PRONOUNCEMENT: 23.01.20 18 ORDER PER SANJAY ARORA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU (CIT(A ) FOR SHORT) DATED 30.03.2017, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS' ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR ASSESSMENT YEAR (A.Y.) 2012-13 VIDE ORDER DATED 25/3/2015. 2. THE PRESENT APPEAL IS BY AN ASSESSEE, IN THE BUSINESS OF TRADING IN ELECTRICAL APPLIANCES, STATED TO BE TRANSFORMERS (UP TO 10 KVA ), AS WELL AS INSTALLATION THEREOF AS GOVT. CONTRACTORS (100KV AND ABOVE). IT WAS HIT BY THE FLOODS OF SEPTEMBER, 2014 IN SRINAGAR, PREVENTING IT FROM PRO DUCING ITS BOOKS OF ACCOUNT IN ASSESSMENT PROCEEDING, CALLED FOR BY THE ASSESSING OFFICER (AO) IN SUPPORT OF ITS RETURN OF INCOME FOR THE YEAR, FILED ON 29.09.2012 AT AN INCOME OF RS.14,18,230/- . ITA NO.258 (ASR)/2017(A.Y.2012-13) SPACE AGE POWER PVT. LTD. VS. ITO 2 THE AO OBSERVED THAT THE DISCLOSED INCOME WORKS TO 2.57% OF THE GROSS RECEIPT OF RS.550.94 LACS FOR THE YEAR. HE, ACCORDINGLY, MADE COMPARISON WITH THE RATIOS OBTAINING IN OTHER CASES, VIZ. SHIVAM CONSTRUCTION CO. (10%); CONSTRUCTION ENGINEERS, SRINAGAR, (6.5%); ABDUL JABBAR BHAT; AND MOHAN SINGH, DECIDED IN APPEAL/S, BY THE AMRITSAR AND CHANDIGARH BENCHES O F THE TRIBUNAL. HE, ACCORDINGLY, APPLIED A RATE OF 8% ON THE CONTRACT R ECEIPT (RS.480.13 LACS) AND 5% ON TRADING RECEIPT (AT RS.70.81 LACS), SUBJECT TO N O OTHER ALLOWANCE, AND ASSESSED THE ASSESSEES BUSINESS INCOME AT RS.41,95,073/- . IN APPEAL, THE ASSESSEE SOUGHT ADJOURNMENTS FOR TIME TO TIME; IN FACT, EVEN DISREG ARDING THE SEVERAL OPPORTUNITIES BY WAY OF DATES (8) TO WHICH THE HEARING WAS ADJOUR NED BY THE LD. CIT(A). THE APPEAL WAS ACCORDINGLY DISMISSED BY HIM IN LIMINE , FOR WANT OF PROSECUTION, SO THAT, AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MA TERIAL ON RECORD. THE APPELLATE RAISES THE FOLLOWING GROUNDS O F APPEAL. 1. ON THE LAW AND FACTS OF THE CASE, THE HONBLE CIT(A ) WAS NOT JUSTIFIED IN DISMISSING THE APPEAL WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. 2. THE HONBLE CIT(A) WAS NOT JUSTIFIED IN DISMIS SING THE APPEAL IN UTTER DISREGARD TO THE GROUNDS OF APPEAL PUT FORTH BY THE APPELLANT ASSESSEE. 3. AS A CONSEQUENCE OF DISMISSAL OF APPEAL, THE HONBL E CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ASSESSMENT MADE BY LD. AO AFTER APPLY ING A RATE OF 8% & 5% ON CONTRACT RECEIPTS & TRADING RECEIPTS RESPECTIVELY I N UTTER DISREGARD TO INSTRUCTIONS OF CBDT CONTAINED IN INSTRUCTION NO.F.NO.225/303/20 14/ITA-11 IN RESPECT OF FLOOD VICTIMS OF J&K. THE FIRST THING THAT WE OBSERVE IN THE MATTER IS TH AT THE IMPUGNED ORDER IS NOT SUSTAINABLE IN LAW IN-AS-MUCH AS THE FIRST APPELLAT E AUTHORITY OUGHT TO HAVE, IN VIEW OF THE CLEAR MANDATE OF SECTION 250(6) OF THE ACT, DISPOSED THE ASSESSEES APPEAL, PER A SPEAKING ORDER. NO DOUBT, THERE WAS NO REPRES ENTATION BY THE ASSESSEE BEFORE ITA NO.258 (ASR)/2017(A.Y.2012-13) SPACE AGE POWER PVT. LTD. VS. ITO 3 HIM, BUT THAT WOULD ONLY IMPLY THAT AN APPELLATE AU THORITY IS CONSTRAINED TO PASS AN ORDER ON MERITS ON THE BASIS OF THE MATERIAL ON REC ORD. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE COMPARABLE CASES CITED AND RELIED UPON BY THE AO ARE OF CIVIL CONTRACTORS AND, THUS, NOT COMPARABLE. WHY, THE ASSESSEE ITSELF CARRYING ON TWO DIFFERENT BUSIN ESSES, BOTH OF WHICH CANNOT BE COMPARED WITH EACH OTHER, EVEN AS THE ASSESSEE PROJ ECTS AND CANVASSES THE REASONABILITY OF A SINGLE PROFIT RATE (OF 2.57%). T HEN, AGAIN, THERE IS NO REFERENCE TO THE DISCLOSED RESULTS FOR THE PRECEDING YEARS, WHER EIN THE ASSESSEE IS STATED TO BE ENGAGED IN THE SAME BUSINESSES, OR EVEN, FOR THAT M ATTER, THE IMMEDIATELY SUCCEEDING YEAR. THOUGH, AS CLARIFIED BY THE LD. AU THORIZED REPRESENTATIVE (AR), THE ASSESSEE COUNSEL, UPON QUERY BY THE BENCH, THAT THERE WAS NO ASSESSMENT U/S. 143(3) FOR ANY OF THOSE YEARS, THE OPERATIVE RESULT S FOR THE SAME COULD WELL BE INDICATIVE. IN FACT, THE TRADING MARGIN (ON TRANSFO RMERS) ACROSS YEARS SHOULD BE EXAMINED WITH REFERENCE TO THE DISCLOSED RESULTS AS WELL AS THE PURCHASE AND SALES BILLS FOR THOSE YEARS, EVEN IF SUBSEQUENT, AS ARE A VAILABLE. SIMILARLY, THE GROSS MARGIN ON CONTRACTS COULD BE EXAMINED WITH REFERENC E TO THE COST COMPOSITION, COMPRISING, IN THE MAIN, OF BOUGHT OUT COST OF TRAN SFORMERS; TRANSPORTATION AND INSTALLATION COSTS, WHICH WOULD STAND EVIDENCED - A T LEAST FOR SOME YEARS, REVEALING THE SAID MARGIN, SO THAT THE QUESTION THAT NEEDS TO BE ANSWERED WOULD BE IF THE SAME COULD BE APPLIED OR INFERRED FOR THE CURRENT Y EAR AS WELL. WHY, THE VALUE ADDED TAX (VAT) RECORD, INCLUDING RETURNS (FILED WI TH THE SALE TAX DEPARTMENT), MAY ITSELF THROW LIGHT ON THE EXTENT ON THE VALUE A DDITION QUA THE ACTIVITIES BEING UNDERTAKEN BY THE ASSESSEE. FURTHER, THE ASSESSEE F OLLOWING THE DIFFERENT ACCOUNTING STANDARDS INCIDENT ON IT WITH REFERENCE TO ITS' ACTIVITIES. FURTHER STILL, SEC.145A OF THE ACT POSTULATES, OVERRIDING ANYTHING TO THE CONTRARY, VALUATION OF ALL PURCHASES, SALES AND INVENTORIES AT INCLUSIVE OF AL L LEVIES AND TAXES INCIDENT ON THE ITA NO.258 (ASR)/2017(A.Y.2012-13) SPACE AGE POWER PVT. LTD. VS. ITO 4 TRADED GOODS. THOUGH, THE LD. AR WOULD CLAIM THAT T HE RESULTS FOR THE PRECEDING YEARS WERE PLACED ON RECORD AND RELIED UPON BEFORE THE AO, THERE IS NOTHING ON RECORD TO EXHIBIT THE SAME. APART FROM THE INTERNAL COMPARISON AFORE-SAID, THE ASSESSEE COULD ALSO JUSTIFY ITS OPERATING RESULTS, SEPARATELY FOR BOTH BUSINES S, IS WITH COMPARABLE CASES. WE ARE, WHEN WE SAY SO, CONSCIOUS THAT THE AO COULD EM BARK ON THE ESTIMATION EXERCISE ONLY WHERE HE IS NOT SATISFIED WITH THE CO RRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR THE METHOD OF ACCOUNTIN G FOLLOWED BY IT IN AS-MUCH-AS THE SAME DOES NOT ENABLE COMPUTING THE INCOME IN AC CORDANCE WITH THE ACCOUNTING STANDARDS NOTIFIED U/S. 145(2). MERELY BECAUSE THE BOOKS OF ACCOUNT WERE NOT PRODUCED; THE GENUINENESS OF THE REASON FOR WHICH ( NON-PRODUCTION) BEING NOT DOUBT, MAY NOT BY ITSELF IMPLY THAT THE BOOKS OF AC COUNT AS MAINTAINED ARE/WERE NOT RELIABLE OR DID NOT BEAR THE TRUE ACCOUNT OF THE AS SESSEES BUSINESS(ES) AND/OR DISCLOSE CORRECT INCOME THERE-FROM. IT IS IN FACT I N THIS CONTEXT THAT THE EXAMINATION OF THE BOOKS OF ACCOUNT OR THE METHOD OF ACCOUNTING FOLLOWED FOR OTHER YEARS MAY BE RELEVANT IN-AS-MUCH AS THE ASSESSEE WOULD PRESUM ABLY BE OBSERVING THE SAME METHOD FROM YEAR TO YEAR. FURTHER, AN APPARENT LOW ER (WHICH IS BY ITSELF RELATIVE) REPORTING OF INCOME WOULD NOT BY ITSELF IMPLY THAT THE RESULTS ARE NOT CORRECT, THOUGH MAY DEFINITELY GIVE RISE TO A REASON TO INVE STIGATE FURTHER. IN THE PRESENT CASE, APART FROM THE NON-SPECIFICATION OF THE SEPAR ATE (PROFIT) RATES FOR THE TWO BUSINESSES, IT IS THE APPARENT LOWER RATE OF PROFIT COUPLED WITH NO SATISFACTORY EXPLANATION TO THE AOS OBSERVATIONS QUA THE ASSESSEES ACCOUNTS, MADE WITH REFERENCE TO ITS' FINAL ACCOUNTS (AT PARA 3 OF THE ASSESSMENT ORDER), THAT WOULD VALIDATE THE INVOCATION OF SEC.145(3) - WHICH IN FA CT IS NOT IN DISPUTE AND, ACCORDINGLY, HIS PROCEEDING TO ESTIMATE THE ASSESSE ES INCOME AS PROVIDED U/S. 144, I.E., TO THE BEST OF HIS JUDGMENT. AGAIN, AT THE CO ST OF REPETITION, IT IS PRECISELY FOR ITA NO.258 (ASR)/2017(A.Y.2012-13) SPACE AGE POWER PVT. LTD. VS. ITO 5 THESE REASONS THAT WE HAVE PLACED DUE EMPHASIS ON T HE ASSESSEES RESULTS FOR OTHER YEARS, EVEN THOUGH ADMITTEDLY THE SAME COULD VARY F ROM YEAR TO YEAR. THIS IS AGAIN SUBJECT TO THE SAME BEING FOUND VALID IN TERMS OF S EC.145(3). 4. IN THE CIRCUMSTANCES, WE ONLY CONSIDER IT PROPER TO, SUBJECT TO THE ASSESSEE- COMPANY PAYING A COST OF RS.10,000/- (INR TEN THOUS AND), RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR PROPER DETERMINATION OF I NCOME IN TERMS OF SEC.144. THE SAME, WE EMPHASIZE, OUGHT TO BE ON THE BASIS OF THE MATERIAL ON RECORD, AND NOT DE HORS THE SAME. IN OTHER WORDS, IN ACCORDANCE WITH LAW, BY ISSUING DEFINITE FINDINGS OF FACT. THE COST IMPOSED ON THE ASSESSEE IS ON ACC OUNT OF ITS DELINQUENT BEHAVIOR BEFORE THE FIRST APPELLATE AUTHORITY, FOR WHICH NO VALID EXPLANATION STANDS FURNISHED BEFORE US, AMOUNTING TO THUS AN ABUSE OF THE PROCES S OF LAW. THE SAME SHALL BE PAID, AS UNDERTAKEN BY THE LD. AR, BY THE END OF DE CEMBER, 2017, TO THE ACCOUNT OF THE CENTRAL GOVERNMENT, UNDER THE HEAD OTHERS, I. E., THE SAME HEAD UNDER WHICH APPEAL FEES TO THE TRIBUNAL IS PAID. THE ASSESSEE I S NOT TO BE ALLOWED CREDIT QUA THE SAME BY WAY OF TAX ON REGULAR ASSESSMENT, AS APPEAR S TO BE THE CASE IN RESPECT OF THE DEPOSIT OF THE APPEAL FEE (RS.10,000/-) FOR THE INSTANT APPEAL ON 02.5.2017. SUCH A CREDIT/S, IF ALLOWED TO THE ASSESSEE, WHIC H WOULD IN THAT CASE BE SYSTEM DRIVEN AND, THUS, AUTOMATIC, IS DIRECTED TO BE WITH DRAWN BY THE AO. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 23 , 2018 SD/- SD/- (N.K.CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 23.01.2018 /PK/ PS ITA NO.258 (ASR)/2017(A.Y.2012-13) SPACE AGE POWER PVT. LTD. VS. ITO 6 COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE M/S SPACE AGE POWER PVT. LTD. (2) THE ITO WARD-3 (3), SRINAGAR (3) THE CIT(A), JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T. TRUE COPY BY ORDER