The ACIT, Circle-6, Surat V. Sonal D.Nanavati, Surat

ITA 374/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5915 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Gross profit estimation; Opportunity of being heard; Set aside
• Section: 144; 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MUKUL SHRAWAT, JM AND D.C.AGRAWAL, AM ASSTT. CIT, CIR.6, SURAT. VS . SMT. SONAL D. NANAVATI, PROP. M/S KADODARA TYRES SALES & SERVICES, KADODARA, SURAT. (APPELLANT) .. (RESPONDENT) AND ASSTT. CIT, CIR.6, SURAT. VS . SMT. HEENABEN H. NANAVATI, PROP. SURAT TYRES SALES & SERVICES, KADODARA, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANTS BY :- SHRI K. MADHUSUDAN, SR. DR RESPONDENT BY:- SHRI J. P. SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE ASSESSEES OF TH E SAME GROUP RAISING SIMILAR GROUNDS AND HENCE THEY ARE BEING DI SPOSED OF TOGETHER FOR THE SAKE OF CONVENIENCE. ITA NO.374/AHD/2008 ASST. YEAR: 2004-05 ITA NO.376/AHD/2008 ASST. YEAR: 2004-05 2 ITA NO.374/AHD/2008 2. THE GROUNDS RAISED IN THIS APPEAL ARE AS UNDER : - (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF GROSS PROFIT AT 0.04% AMOUNTING TO RS.16,408/- MADE BY THE AO. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15, 45,421/- MADE U/S 68 OF THE ACT MADE BY THE AO. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCH ASE AND SALE OF TYRES, TUBES AND OIL. THE AO SERVED SEVERAL NOTICES ON THE ASSESSEE SUCH AS ON 22.03.2005, 13.06.2006, 17.07.2006, 28.08.200 6 AND 05.12.2006. LAST NOTICE WAS SERVED ON 11.12.2006. THE AO REQUIR ED THE ASSESSEE TO FURNISH DETAILS OF CREDITS APPEARING IN THE BALANCE SHEET. HOWEVER, NO REPLY SEEMS TO HAVE BEEN FURNISHED BEFORE HIM. BOOK S OF ACCOUNT AND OTHER REGISTERS WERE NOT PRODUCED EVEN THOUGH THE C .A. OF THE ASSESSEE, SHRI ERESH DALAL APPEARED BEFORE HIM AND EXPLAINED THAT THE BOOKS ARE LOST AND DESTROYED IN THE FLOODS. THE AO WAS NOT SA TISFIED AND HE PROCEEDED TO FRAME THE ASSESSMENT UNDER SECTION 144 . THE AO MADE AN ADDITION OF RS.16,408/- ON ACCOUNT OF LOW GP BY EST IMATING THE GP RATE AT 2.54%. FURTHER THE AO ENQUIRED INTO THE CREDITORS A PPEARING IN THE BALANCE SHEET. HE IDENTIFIED 60 PARTIES AND FINDING NO EXPLANATION, ADDED THE TOTAL SUM OF RS.15,45,421/- UNDER SECTION 68. T HE LD. CIT(A) DELETED THE ADDITION ON THE GROUND THAT FIRSTLY THEY ARE TR ADE-CREDITORS AND SECONDLY AO HAS INCLUDED THE TRUCK NUMBERS ALSO AS CREDIT. 4. THE LD. DR SUBMITTED THAT LD. CIT(A) HAS HASTILY DECIDED IN FAVOUR OF THE ASSESSEE. SOME BALANCES RELATE TO WORK DONE BY THE OWNERS OF THE 3 TRUCKS WHOSE NUMBERS ARE WRITTEN. IN FACT TRUCK NUM BERS ARE WRITTEN AGAINST THE NAME AND NOT AS AMOUNT. FURTHER SECTION 68 WOULD BE APPLICABLE IN RESPECT OF BOTH THE LOAN CREDITS AS W ELL AS TRADE CREDITS. NO SUCH DISTINCTION CAN BE MADE. HE SUBMITTED THAT LD. CIT(A) HAS DELETED THE ADDITION WITHOUT GIVING OPPORTUNITY TO THE AO. 5. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE AO DID NOT ISSUE ANY SPECIFIC NOTICE IN RESPECT OF ADDITION MADE, THE AS SESSEE COULD NOT COMPLY WITH DUE TO LOSS OF BOOKS IN FLOODS. THE ASSESSEE H AS MADE SUBMISSIONS TO THE EXTENT POSSIBLE. THE SUM TREATED AS CASH CREDIT S ARE IN FACT TRADE- CREDITS. THEY ARE GROUPED UNDER THE HEAD OTHER LIA BILITIES IN THE BALANCE SHEET. THEREFORE, THEY COULD NOT BE ADDED UNDER SEC TION 68. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT SEEMS THAT ASSESSEE DID NOT CO-OPERAT E WITH THE AO DURING THE ASSESSMENT PROCEEDINGS. EVEN CONFIRMATIONS WERE NOT FILED BEFORE HIM. THE FACT THAT BOOKS ARE LOST, SHOULD HAVE BEEN BROUGHT ON RECORD BY FILING FIR; OR SOME OTHER EVIDENCE TO THIS EFFECT S HOULD HAVE BEEN SUBMITTED BEFORE THE AO. AT LEAST CONFIRMATIONS SHO ULD HAVE BEEN FILED BEFORE HIM FROM THE CREDITORS. WE REJECT THE FINDIN G OF THE LD. CIT(A) THAT SECTION 68 WOULD BE APPLICABLE IN RESPECT OF LOAN C REDITS ONLY AND NOT IN RESPECT OF TRADE CREDITS. NO SUCH DISTINCTION CAN B E MADE UNDER SECTION 68. SECTION 68 IS APPLICABLE TO BOTH LOAN CREDITS A S WELL AS TRADE CREDITS. WE DERIVE SUPPORT FROM THE FOLLOWING DECISIONS :- (I) DAVINDER SINGH VS. ACIT (2007) 290 ITR (AT) 306 (AM RIT) (II) GUMANI RAM SRI RAM VS. CIT (1975) 98 ITR 337 (P & H ) (III) PIYARELAL & CO. VS. CIT (2005) 276 ITR 540 (ALL) (IV) V.I.S.P. (P) LTD. VS. CIT (2004) 265 ITR 202 (M.P.) 4 IN VIEW OF THIS, WE SET ASIDE THE ORDER OF LD. CIT( A) AND RESTORE THE MATTER TO THE FILE OF AO FOR GIVING FRESH OPPORTUNITY TO T HE ASSESSEE WHO WILL FILE AT LEAST CONFIRMATIONS AND DETAILS OF THE PARTIES S TANDING AS CREDITORS IN HIS BALANCE SHEET. IF PRIMARY EVIDENCE OF GIVING CONFIR MATIONS AND IDENTITY OF CREDITORS IS GIVEN THEN ONUS LYING ON HIM IS TAKEN AS DISCHARGE. UNLESS THERE IS CONTRARY MATERIAL ON RECORD, AO WILL ACCEP T CREDITS IF PRIMARY ONUS IS DISCHARGED. THE APPEAL FILED BY THE REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ITA NO.376/AHD/2008 7. IN THIS APPEAL FOLLOWING GROUNDS ARE RAISED :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF GR OSS PROFIT AT 00.50% AMOUNTING TO RS.3,08,602/- MADE BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .13,66,051/- MADE U/S 68 OF THE ACT MADE BY THE AO. 8. SINCE THE FACTS AND CIRCUMSTANCES OF THIS CASE A RE SIMILAR TO THE ABOVE CASE, THE ARGUMENTS OF THE PARTIES ARE ALSO S IMILAR, THEREFORE, FOLLOWING OUR DECISION AS IN THE ABOVE CASE, WE RES TORE THE MATTER TO THE FILE OF AO FOR DECIDING THE ISSUES AFRESH AFTER GIV ING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS APPEAL IS ALSO ALLOWED BUT FOR STATISTICAL PURPOSES. 5 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 18/06/2010 SD/- SD/- (MUKUL SHRAWAT) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED :18/06/2010 MAHATA/- 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