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

ITA 3331/AHD/2009

• Counselvise Citation: 333120514 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI
• Assessee Lawyers: S N SOPARKAR
• Section: 143(3); 142(1); 68; 144

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AAHMEDABAD BEFORE S/SHRI G. D. AGRAWAL, V.P. AND D. K. TYAGI, J.M. ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 FEMINA FASHION DESIGNER (P) LTD., C/O POONAM DYEING & PRINTING MILLS PRIVATE LTD. 286, GIDC, PANDESARA, SURAT-394 230. VS. INCOME-TAX OFFICER, WARD 1(2), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. N. SOPARKAR, SR.ADVOCATE RESPONDENT BY:- DR. JAYANT JHAVERI, SR.DR DATE OF HEARING : 7/10/2011 DATE OF PRONOUNCEMENT :31.10.2011. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 23.09.2009 FOR ASST. YEAR 2006-07. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- (1) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S IN CONFIRMING ADDITION OF RS.32,19,206/- AS UNEXPLAINED CASH CRED IT UNDER SECTION 68 IN RESPECT OF UNSECURED LOANS. ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 2 (2) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S, IN CONFIRMING ADDITION OF RS.21,52,070/- BEING SUNDRY CREDITORS W HICH REMAINED UNVERIFIABLE. (3) THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S, IN CONFIRMING DISALLOWANCE OF EXPENSES OF RS.73,24,462/- UNDER TH E HEAD OTHER DIRECT EXPENSES AND RS.17,76,609/- UNDER THE HEAD ADMINISTRATIVE EXPENSES. 2. THE BRIEF FACTS OF THE CASE ARE THAT RETURN DECL ARING INCOME 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 THE SERV ICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 UPON THE ASSESSE E ON 27.09.2007. HOWEVER, NONE ATTENDED IN RESPONSE TO THE SAID NOTI CE NOR ANY SUBMISSIONS WERE FILED. ANOTHER NOTICE DATED 28..11 .2008 U/S 142(1) OF THE ACT FOR HEARING ON 11.12.2008 SENT BY SPEED POS T WAS RETURNED 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 NON-COMPLIA NCE OF THE AFORESAID NOTICES WHEN NO BOOKS OF ACCOUNT, BILLS OR VOUCHERS ETC. WERE PRODUCED FOR SCRUTINY AND VERIFICATION, THE AO COMPLETED THE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 OF THE ACT AND AD DED 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 SUNDRY CREDI TORS FOR EXPENSES RS.13,63,996/- RESULTING IN DISALLOWANCE OF RS.21,5 2,070/-. APART FROM THESE, 10% OF THE OTHER DIRECT EXPENSES OF RS.73,24 ,462/- & ADMINISTRATIVE EXPENSES OF RS.17,76,609 I.E. RS.7,3 2,446/- + RS.1,77,660/- = RS.9,10,106 WERE ALSO DISALLOWED. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY BUT DURING THE APPELLATE PROCEEDINGS NO SUBMISSIONS WER E MADE BY THE ASSESSEE DESPITE SEVERAL REMINDERS GIVEN BY THE LD. CIT(A). THE LD. ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 3 CIT(A) AFTER TAKING INTO CONSIDERATION THE FACTS OF THE CASE CONFIRMED THE ADDITION OF RS.32,19,206/- MADE BY THE AO UNDER SEC TION 68 OF THE ACT AND ALSO CONFIRMED THE DISALLOWANCE OF EXPENSES OF RS.73,24,462/- UNDER THE HEAD OTHER DIRECT EXPENSES AND RS.17,76,609/- UNDER THE HEAD ADMINISTRATIVE EXPENSES. HOWEVER, IN RESPECT OF A DDITION OF RS.21,52,070/- BEING SUNDRY CREDITORS WHICH REMAINE D UNVERIFIABLE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSE E BY OBSERVING THAT DISALLOWANCE CAN ONLY BE MADE OF FRESH CREDITORS AN D NOT ON THE OLD CREDITORS. THE AO WAS, THEREFORE, DIRECTED TO RESTR ICT THE ADDITION ON TOTAL FRESH CREDITORS DURING THE YEAR. 4. FURTHER AGGRIEVE, NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, AT THE OUTSET THE LD. CO UNSEL OF THE ASSESSEE SUBMITTED THAT ON THE ISSUE OF ADDITION OF RS.21,52 ,070/- IN WHICH LD. CIT(A) HAD GIVEN PART RELIEF TO THE ASSESSEE, REVEN UE HAD FILED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS RESTORED T HE ISSUE BACK TO THE FILE OF LD. CIT(A). THEREFORE, GROUND NO.2 TAKEN BY THE ASSESSEE IN THIS APPEAL ON THE SAME ISSUE MAY ALSO KINDLY BE RESTORED BACK TO THE FILE OF LD. CIT(A) FOR NECESSARY ACTION. HE FURTHER SUBMITTED T HAT IT WILL ALSO BE IN THE FITNESS OF THINGS IF THE REMAINING TWO GROUNDS ARE ALSO RESTORED BACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION AS BEFORE LD. CIT(A) THE ASSESSEE COULD NOT MAKE HIS SUBMISSIONS DURING THE APPELLATE PROCEEDINGS. THE LD. DR DID NOT OBJECT TO THIS PRAY ER OF THE LD. COUNSEL OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN RESPECT OF ADD ITION OF RS.21,52,070/- WHEREIN THE LD. CIT(A) HAD GIVEN PART RELIEF TO THE ASSESSEE AND AGAINST WHICH THE REVENUE HAD FILED AN APPEAL BEFORE THE TR IBUNAL, THE TRIBUNAL ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 4 RESTORED THE ISSUE BACK TO THE FILE OF LD. CIT(A) F OR FRESH DECISION BY OBSERVING AS UNDER :- 6. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS NARRATED IN THE IMPUGNED ORDER, THE ASSESSEE NEITHER APPEARED BEFORE THE AO NOR EVE N BEFORE THE LD. CIT(A), RESULTING IN COMPLETION OF ASSESSMENT U/S 1 44 READ WITH SECTION 143(3) OF THE ACT AND DISPOSAL OF APPEAL EX PARTE. EVEN BEFORE US NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF THE NOTICE OF HEARING UPON THE ASSESSEE ON 18.05.2011 BY THE ITO, WARD 1( 2), SURAT. THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE ASSESSE E PREFERRED APPEAL AGAINST THE FINDINGS OF THE LD. CIT(A). THE REVENUE IN THEIR AFORESAID GROUND NO.1 DISPUTED THE FINDINGS OF THE LD. CIT(A) SO FAR AS HE RESTRICTED THE DISALLOWANCE ONLY TO FRESH CREDITORS OUT OF DIS ALLOWANCE OF 25% OF THE TOTAL CREDITORS FOR GOODS AND EXPENSES. WE FIND THA T 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 FACT T HAT PURCHASE OF GOODS AND GENUINENESS OF EXPENSES HAS NOT BEEN DOUBTED NO R THE LD. CIT(A) ATTEMPTED EVEN TO ASCERTAIN FACTS FROM THE AUDITORS , WHO AUDITED THE ACCOUNTS. WE ARE OF THE OPINION THAT UNDER THE SCHE ME OF S.144 OF THE ACT ITSELF AND ON THE STATUTORY IMPERATIVE THAT EVEN AN ASSESSMENT UNDER S.144 MUST BE DONE ONLY TO THE BEST OF THE OFFICERS JUDG MENT AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIALS WHICH HAD 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 MATERIALS ON THE BASIS OF WHICH THE ESTIMATE HAD BEEN MADE. IF THE LD. CIT (A) FOUND THAT ANY OF THOSE SO CALLED MATERIALS IN THE ASSESSMENT ORDER W ERE NOT IN FACT SUPPORTED BY ANY EVIDENCE, IT WOULD BE HIS DUTY TO FIND OUT TO WHAT EXTENT THE ESTIMATE ALREADY MADE BY THE AO WOULD BE AFFECT ED THEREBY. EVEN ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 5 OTHERWISE THE LD. CIT(A) DID NOT ALLOW ANY OPPORTUN ITY TO THE AO BEFORE REDUCING THE DISALLOWANCE. THERE IS NOTHING TO SUGG EST THAT THE LD. CIT(A) UNDERTOOK ANY INDEPENDENT ENQUIRIES OR EVEN CALLED FOR ANY REPORT FROM THE AO IN THE LIGHT OF HIS FINDINGS IN THE ASSESSME NT ORDER, EVEN WHILE BEING FULLY AWARE THAT ASSESSMENT HAD BEEN COMPLETE D U/S 144 OF THE ACT. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE LD. CIT (A) HAVE NOT ASCERTAINED THE COMPLETE FACTS NOR RECORDED HIS SPE CIFIC FINDINGS ON THE RELEVANCY OF MATERIAL GATHERED BY THE AO WHILE MAKI NG DISALLOWANCE OUT OF SUNDRY CREDITORS FOR GOODS AND EXPENSES EVEN WHE N NOT A WHISPER HAS BEEN MADE REGARDING GENUINENESS OF PURCHASES AND EX PENSES AND NOR EVEN PASSED A SPEAKING ORDER ON THE ISSUE OF DISALL OWANCE OUT OF SUNDRY CREDITORS FOR GOODS AND EXPENSES, WE ARE OF THE OPI NION THAT ISSUE RAISED IN GROUND NO.1 IN THE APPEAL BEFORE US REQUIRES REC ONSIDERATION 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 MANDATES THAT THE ORDER OF THE LD. CIT(A) WHILE DISPOSING OF THE APPE AL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATION, THE D ECISION THEREON AND THE REASON FOR THE DECISION. AS IS APPARENT FROM THE IM PUGNED ORDER, IN OUR OPINION, THE ORDER PASSED BY THE LD. CIT(A) IS CRYP TIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATU RAL JUSTICE, NAMELY THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST P ASS REASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CON CERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. THE REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDURE AND SAFEGUARD TO ENSU RE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARITY, CHECKS THE INTR ODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINE SS IN THE DECISION- MAKING PROCESS. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE R EASONS FORMING BASIS FOR ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 6 THE CONCLUSION [MUKHTIAR SINGH VS. STATE OF PUNJAB (1995) 1SCC 760 (SC)]. IN VIEW OF THE FOREGOING, WE CONSIDER IT FAI R AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE I SSUE RAISED IN GROUND NO.1 OF THE APPEAL TO HIS FILE FOR DECIDING THE MAT TER AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL TH E LD. 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, GROUND NO.1 IS DISPOSED OF. IN VIEW OF THE ABOVE, WE FEEL IT PROPER THAT GROUND NO.2 WHICH IS ON THE SAME ISSUE REQUIRES TO BE RESTORED BACK TO THE FILE OF LD. CIT(A). SO THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. 7. AS REGARDS THE OTHER TWO GROUNDS, WE ARE OF THE CONSIDERED OPINION THAT THESE ALSO REQUIRE FRESH ADJUDICATION BY THE L D. CIT(A) SO THAT THE ASSESSEE GET OPPORTUNITY TO SUBSTANTIATE ITS CLAIM BEFORE LD. CIT(A) AS HE COULD NOT DO SO IN THE EARLIER APPELLATE PROCEEDING S. 8. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31.10 .2011. SD/- SD/- (G. D. AGRAWAL) (D. K. TYAGI) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD, MAHATA/- ITA NO.3331/AHD/2009 ASST. YEAR 2006-07 7 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 7/10/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 10/10/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..