The ITO, Ward-1(2), Surat V. M/s. Femina Fashion Designer Pvt.Ltd., Surat

ITA 3184/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6413 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMARDR
• Keywords: Principle of natural justice
• Section: 143(3); 142(1); 144; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.3184/AHD/2009 (ASSESSMENT YEAR:-2006-07) INCOME-TAX OFFICER, WARD- 1(2),ROOM NO.112,AAYAKAR BHAVAN,MAJURA GATE, SURAT V/S M/S FEMINA FASHION DESIGNER PVT. LTD., 317-318, ABHINANDAN TEXTILE MARKET, RING ROAD, AHMEDABAD PAN: AAACF 5193 L [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI JAI RAJ KUMAR,DR ASSESSEE BY:- NONE O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATE D 23-09-2009 OF THE LD. CIT(APPEALS)-I, SURAT FOR THE ASSESSMENT YEAR 2006-07, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN RESTRICTION THE ADDITION MADE B Y AO OF RS.21,52,070/- ON ACCOUNT OF UNEXPLAINED SUNDRY CRE DITORS BEING 25% OF THE TOTAL OUTSTANDING CREDITS TO 25% OF THE CREDITS OF FRESH CREDITORS INTRODUCED / RAISED DURING THE YEAR UNDER CONSIDERATION. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF AO MAY BE RESTORED TO THE ABOVE EXTENT . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, EVEN AF TER SERVICE OF NOTICE OF HEARING UPON THE ASSESSEE ON 18-05-20 11 AS INFORMED BY THE ITO, WARD-1(2), SURAT IN THEIR LETTER DATED 16-05-2011, PLACED BEFORE US. CONSIDERING THE NATURE OF ISSUE INVOLV ED IN THIS APPEAL AND THEREBEING NOTHING TO SUGGEST AS TO WHETHER OR NOT ANY CROSS APPEAL HAS BEEN FILED BY THE ASSESSEE,WE, THEREFORE , DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LEARNED DEP ARTMENTAL REPRESENTATIVE. ITA NO.3184/AHD/2009 2 3. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, FA CTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INC OME OF RS.4,26,240/- FILED ON 26-9-2006 BY THE ASSESSEE-CO MPANY, TRADING IN ART SILK CLOTH, WAS SELECTED FOR SCRUTINY WITH T HE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 [HERE INAFTER REFERRED TO AS THE ACT] UPON THE ASSESSEE ON 27-09-2007. HOWE VER, NONE ATTENDED IN RESPONSE TO THE SAID NOTICE NOR ANY SU BMISSIONS WERE FILED. ANOTHER NOTICE DATED 28-11-2008 U/S. 142(1) OF THE ACT FOR HEARING ON 11.12.2008 SENT BY SPEED POST, WAS RETUR NED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARKS 'LEFT'. A FINAL NOTICE ISSUED ON 19-12-2008 FIXING THE HEARING ON 26-12-20 08 AT 11.30 A.M. ALSO WENT UNRESPONDED .IN VIEW OF PERSISTENT N ON COMPLIANCE OF THE AFORESAID NOTICES WHEN NO BOOKS OF ACCOUNTS, BI LLS OR VOUCHERS ETC. WERE PRODUCED FOR SCRUTINY AND VERIFICATION, T HE AO COMPLETED THE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 OF THE ACT AND ADDED AN AMOUNT OF RS.32,19,206/- U/S 68 OF THE ACT BESIDES ADDING 25 % OF THE SUNDRY CREDITORS FOR GOODS-RS.72,44,282/- AND SUNDR Y CREDITORS FOR EXPENSES- RS.13,63,996/-,RESULTING IN DISALLOWANCE RS.21,52,070/-. APART FROM THESE, 10% OF THE OTHER DIRECT EXPENSES- RS.73,24,462/- & ADMINISTRATIVE EXPENSES-RS.17,76,609/-I.E RS.7,32,4 46/- + 1,77,660/-= RS.9,10,106 WERE ALSO DISALLOWED. 4. ON APPEAL, IN RESPONSE TO A NOTICE FOR HEARING O N 25.2.2009, M/S SETHIA AND BOHRA ASSOCIATES, CAS SOUGHT ADJOURN MENT VIDE THEIR LETTER DATED 24.2.2009 FOR 15 DAYS. DESPITE ADJOURN MENT OF THE HEARING TO 17.3.2009 ,NONE APPEARED ON THE SAID DA TE NOR ANY REQUEST FOR ADJOURNMENT WAS RECEIVED. ANOTHER NOTIC E ISSUED ON 3.4.2009 FOR HEARING ON 16.4.2009 ALSO WENT UNRESPO NDED. IN RESPONSE TO NOTICE ISSUED ON 8.6.2009 FOR HEARING ON 23.6.2009, M/S SETHIA AND BOHRA ASSOCIATES, CAS AGAIN SOUGHT A DJOURNMENT VIDE THEIR LETTER DATED 23.6.2009 , SEEKING HEARING AFTER 30 DAYS. DESPITE ADJOURNMENT OF THE HEARING TO 27.7.2009 ,NO NE APPEARED ON ITA NO.3184/AHD/2009 3 THE SAID DATE NOR ANY REQUEST FOR ADJOURNMENT WAS R ECEIVED. CONSIDERING THE FACT THAT THE ASSESSMENT WAS COMPLE TED U/S 144 OF THE ACT WHILE THE ASSESSEE WAS NOT SERIOUS IN PURS UING THE APPEAL EVEN AFTER SEEKING A NUMBER OF ADJOURNMENTS, THE LD . CIT(A) PROCEEDED TO DISPOSE OF THE APPEAL EXPARTE. WHILE UPHOLDING ADDITION U/S 68 OF THE ACT AND DISALLOWANCE OF 10% OF THE EXPENSES, THE LEARNED CIT(A) RESTRICTED THE DISALLOWANCE OUT OF SUNDRY CREDITORS IN THE FOLLOWING TERMS:- 4.1 THIS IS REGARDING ADDITION OF RS.21,52,070/- B EING SUNDRY CREDITORS WHICH REMAINED UNVERIFIABLE. THE AO HAS STATED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF GOODS OF RS.72,44,282/- A ND SUNDRY CREDITORS FOR EXPENSES OF RS.13,63,996/- TOTALING TO RS.86,08,278 /-. THE AO FURTHER STATED THAT IN THE ABSENCE OF DETAILS AND CORRESPON DING CONFIRMATIONS THESE CREDITORS COULD NOT BE VERIFIED AND, THEREFOR E, HE DISALLOWED 25% OF THIS AMOUNT AS UNVERIFIABLE. 4.2 AS STATED ABOVE, THE APPELLANT HAS MADE NO SUB MISSION DURING THE APPELLATE PROCEEDINGS DESPITE SEVERAL REMINDERS. HO WEVER, THE DISALLOWANCE CAN ONLY BE MADE OF FRESH CREDITORS NO T OF THE OLD CREDITORS. THE AO IS, THEREFORE, DIRECTED TO RESTRICT THE ADDI TION ON TOTAL FRESH CREDITORS DURING THE YEAR. IN VIEW OF THIS, THIS GROUND OF AP PEAL IS PARTLY ALLOWED. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID ORDER OF THE LEARNED CIT(A). THE LEARNED DR WHILE S UPPORTING THE ORDER OF THE AO CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO TOTAL FRESH CREDITORS, WHEN THE ASSESSEE DID NOT APPEAR EVEN BEFORE HIM NOR PLACED ANY MATERIAL, JUSTIFYING REDUCTION . 6. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH TH E FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS NARRATED IN THE IMPUGNED ORDER, THE ASSESSEE NEITHER APPEARED BEFOR E THE AO NOR EVEN BEFORE THE LD. CIT(A),RESULTING IN COMPLETION OF ASSESSMENT U/S 144 READ WITH SECTION 143(3) OF THE ACT AND DISPOSA L OF APPEAL EXPARTE. EVEN BEFORE US NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF THE NOTICE OF HEARING UPON THE A SSESSEE ON 18-05- 2011 BY THE ITO, WARD-1(2), SURAT. THERE IS NOTHING TO SUGGEST AS TO ITA NO.3184/AHD/2009 4 WHETHER OR NOT THE ASSESSEE PREFERRED APPEAL AGAINS T THE FINDINGS OF THE LD. CIT(A). THE REVENUE IN THEIR AFORESAID GROU ND NO.1 DISPUTED THE FINDINGS OF THE LD. CIT(A) SO FAR AS HE RESTRIC TED THE DISALLOWANCE ONLY TO FRESH CREDITORS OUT OF DISALLOWANCE OF 25% OF THE TOTAL CREDITORS FOR GOODS AND EXPENSES. WE FIND THAT NOT ONLY THAT THE LD. CIT(A) COULD NOT IDENTIFY SUCH FRESH CREDITORS DUE TO NON-COOPERATION BY THE ASSESSEE, THE LD. CIT(A) IGNORED A VITAL FA CT THAT PURCHASE OF GOODS AND GENUINENESS OF EXPENSES HAS NOT BEEN DOUB TED NOR THE LD. CIT(A) ATTEMPTED EVEN TO ASCERTAIN FACTS FROM T HE AUDITORS, WHO AUDITED THE ACCOUNTS. WE ARE OF THE OPINION THAT U NDER THE SCHEME OF S. 144 OF THE ACT ITSELF AND ON THE STATUTORY IMPERATI VE THAT EVEN AN ASSESSMENT UNDER S. 144 MUST BE DONE ONLY TO THE BEST OF THE O FFICER'S JUDGMENT AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIALS WHICH HA D BEEN GATHERED . IN OUR JUDGMENT, THE PROPER THING FOR THE LD. CIT(A) TO HA VE DONE WOULD HAVE BEEN TO ASCERTAIN THE RELEVANCY AND VALIDITY OF THE MATERI ALS ON THE BASIS OF WHICH THE ESTIMATE HAD BEEN MADE. IF THE LD. CIT(A) FOUND TH AT ANY OF THOSE SO-CALLED MATERIALS IN THE ASSESSMENT ORDER WERE NOT IN FACT SUPPORTED BY ANY EVIDENCE, IT WOULD BE HIS DUTY TO FIND OUT TO WHAT EXTENT THE ES TIMATE ALREADY MADE BY THE AO WOULD BE AFFECTED THEREBY. EVEN OTHERWISE, THE LD. CIT(A) DID NOT ALLOW ANY OPPORTUNITY TO THE AO BEFORE REDUCING THE DISALLOWA NCE. THERE IS NOTHING TO SUGGEST THAT THE LD. CIT(A) UNDERTOOK ANY INDEPENDE NT ENQUIRIES OR EVEN CALLED FOR ANY REPORT FROM THE AO IN THE LIGH T OF HIS FINDINGS IN THE ASSESSMENT ORDER, EVEN WHILE BEING FULLY AWARE THAT ASSESSMENT HAD BEEN COMPLETED U/S 144 OF THE ACT. IN THESE CIR CUMSTANCES, ESPECIALLY WHEN THE LD. CIT(A) HAVE NOT ASCERTAINE D THE COMPLETE FACTS NOR RECORDED HIS SPECIFIC FINDINGS ON THE RELEVANCY OF MATERIAL GATHERED BY THE AO WHILE MAKING DISALLOWANCE OUT OF SUNDRY CREDITORS FOR GOODS AND EXPENSES EVEN WHEN NOT A WHISPER HAS BEEN MADE REGARDING GENUINEN ESS OF PURCHASES AND EXPENSES AND NOR EVEN PASSED A SPEAKING ORDER ON TH E ISSUE OF DISALLOWANCE OUT OF SUNDRY CREDITORS FOR GOODS AND EXPENSES , WE ARE OF THE OPINION THAT ISSUE RAISED IN GROUND NO.1 IN THE APPEAL BEFORE US REQUI RES RECONSIDERATION BY HIM. THE APPLICATION OF MIND TO THE MATERIAL FACTS AND T HE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE ACT MAND ATES THAT THE ORDER OF THE CIT(A) ITA NO.3184/AHD/2009 5 WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING A ND SHALL STATE THE POINTS FOR DETERMINATION, THE DECISION THEREON AND THE REASON FOR THE DECISION. AS IS APPARENT FROM THE IMPUGNED ORDER, IN OUR OPINION, T HE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. TH E REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDURE AND SAFEGUARD TO ENSURE O BSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF E XTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE D ECISION-MAKING PROCESS. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEA N THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB,(1995)1SCC 760(SC)]. IN VIEW OF THE FOREGOING, ,WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE O RDER OF THE LD. CIT(A) AND RESTORE THE ISSUE RAISED IN GROUND NO.1 OF THE APPEAL T O HIS FILE FOR DECIDING THE MATTER AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFI CIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE OBSERVATIONS, G ROUND NO. 1 IS DISPOSED OF. 7. GROUND NOS.2 AND 3 BEING MERE PRAYER NOR ANY SU BMISSIONS HAVING BEEN MADE BEFORE US ON THESE GROUNDS, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . 8. IN THE RESULT, APPEAL IS ALLOWED BUT FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 24-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 24-05-2011 ITA NO.3184/AHD/2009 6 COPY OF THE ORDER FORWARDED TO: 1. M/S FEMINA FASHION DESIGNER PVT. LTD., 317-318, ABHINANDAN TEXTILE MARKET, RING ROAD, SURAT 2. THE ITO, WARD-1(2), SURAT 3. CIT CONCERNED 4. CIT(A)-I, SURAT 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD