ITO, New Delhi V. Sh. Naresh Kumar Garg, New Delhi

ITA 3975/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90895 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJHA
• Assessee Lawyers: SM MATHUR
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA, VICE , VICE , VICE , VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI T.S. KAPOOR T.S. KAPOOR T.S. KAPOOR T.S. KAPOOR, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 4115/DEL/2011 4115/DEL/2011 4115/DEL/2011 4115/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007 - -- - 08 0808 08 SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, A AA A- -- -8/29, GROUND FLOOR, 8/29, GROUND FLOOR, 8/29, GROUND FLOOR, 8/29, GROUND FLOOR, SECTOR SECTOR SECTOR SECTOR- -- -15, R 15, R 15, R 15, ROHINI, OHINI, OHINI, OHINI, DELHI DELHI DELHI DELHI 110 085. 110 085. 110 085. 110 085. PAN : AIRPK8586E. PAN : AIRPK8586E. PAN : AIRPK8586E. PAN : AIRPK8586E. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -21(1), 21(1), 21(1), 21(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NO .3975/DEL/2011 .3975/DEL/2011 .3975/DEL/2011 .3975/DEL/2011 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007 - -- - 08 0808 08 INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -21(1), 21(1), 21(1), 21(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, A AA A- -- -8/29, GROUND FLOOR, 8/29, GROUND FLOOR, 8/29, GROUND FLOOR, 8/29, GROUND FLOOR, SECTOR SECTOR SECTOR SECTOR- -- -15, ROHINI, 15, ROHINI, 15, ROHINI, 15, ROHINI, DELHI DELHI DELHI DELHI 110 085. 110 085. 110 085. 110 085. PAN : AIRPK8586E. PAN : AIRPK8586E. PAN : AIRPK8586E. PAN : AIRPK8586E. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.M. MATHUR, CA. REVENUE BY : SHRI P. DAM KANUNJHA, SR.DR. DATE OF HEARING : 17.03.2015 17.03.2015 17.03.2015 17.03.2015 DATE OF PRONOUNCEMENT : 01.04.2015 01.04.2015 01.04.2015 01.04.2015 ORDER ORDER ORDER ORDER PER G.C. GUPTA PER G.C. GUPTA PER G.C. GUPTA PER G.C. GUPTA, VP , VP , VP , VP : :: : THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENU E FOR THE AY 2007-08 ARE DIRECTED AGAINST THE ORDER OF LEARNED C IT(A)-XXII, NEW DELHI DATED 30 TH JUNE, 2011. THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA-4115 & 3975/D/2011 2 ITA NO.4115/DEL/2011 ITA NO.4115/DEL/2011 ITA NO.4115/DEL/2011 ITA NO.4115/DEL/2011 ASSESSEES APPEAL : ASSESSEES APPEAL : ASSESSEES APPEAL : ASSESSEES APPEAL :- -- - 2. THE EFFECTIVE GROUNDS OF APPEAL OF THE ASSESSEE ARE AS UNDER:- 1. THAT THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AS MUCH AS ON THE FACTS OF THE CASE BY SUSTAINING THE TRADING ADDITION TO THE EXTENT OF RS.26,68,936/- AS AGAINST THE TRADING ADD ITION OF RS.42,52,038/- MADE BY THE LEARNED ASSESSING OFF ICER IN THE ASSESSMENT OF THE APPELLANT FOR THE YEAR UND ER APPEAL. 2. THAT THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) WHILE CONFIRMING THE AFORESAID TRADING ADDITION HAS ERRED IN LAW AS MUCH AS ON THE FACTS O F THE CASE IN APPLYING THE GROSS MARGIN OF PROFIT @ 10% O N UNRECORDED SALES OF RS.2,66,89,358/- AS AGAINST THE DECLARED MARGIN OF PROFIT OF 2.56% ON SUCH SALE OF RS.2,62,05,311/-. THE HONBLE COMMISSIONER OF INCO ME TAX (APPEALS) HAS ARBITRARILY DISBELIEVED THE COMPARABLE CASE WHICH WAS FILED BY THE APPELLANT DURING THE COURSE OF HEARING OF THE APPEAL IN ORDER TO JUSTIFY THE DECLARED MARGIN OF PROFIT OF 2.56% AND WITHOUT PLACING ANY OTHER COMPARABLE CASE TO JUSTIF Y HER FINDINGS FOR ESTIMATION OF GROSS PROFIT RATE @ 1 0%. THE ESTIMATION OF G.P. RATE @ 10% ON UNDISCLOSED SAL ES WAS ON SUSPICIOUS AND SURMISES WHICH IS NOT ONLY BA D IN LAW BUT AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS REGARDING T HE TRADING ADDITION SUSTAINED BY THE LEARNED CIT(A) AT `26.68 LAKHS AS AGAINST TRADING ADDITION OF `42.52 LAKHS MADE BY THE ASSESSING OFFI CER. HE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF X-RAY AND M RI FILMS AND HAS FILED RETURN OF INCOME DECLARING INCOME OF `1,49,000/- ON LY. HE SUBMITTED THAT THE ASSESSEE HAS DECLARED GROSS PROFIT RATE OF 2.56% IN THE REVISED ACCOUNTS ON THE SO-CALLED UNRECORDED TRANSACTIONS O F SALES. HE ITA-4115 & 3975/D/2011 3 SUBMITTED THAT COMPLETE DETAILS OF INCOME AND EXPEN SES CLAIMED ON THE UNRECORDED TRANSACTIONS WERE FILED IN THE REVIS ED ACCOUNTS FILED BY THE ASSESSEE. HE SUBMITTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER HIMS ELF HAS ACCEPTED THE GP RATE OF 6.4% IN SCRUTINY ASSESSMENT FRAMED U NDER SECTION 143(3) OF THE ACT. HE SUBMITTED THAT IT IS PERTINE NT TO POINT OUT THAT THE ASSESSMENT FOR THE EARLIER ASSESSMENT YEAR 2006 -07 WAS COMPLETED SUBSEQUENT TO THE ORDER OF THE CIT(A) WAS PASSED FOR THE RELEVANT ASSESSMENT YEAR 2007-08. HE SUBMITTED THA T THERE WAS NO EVIDENCE BEFORE THE CIT(A) TO APPLY A NET PROFIT RA TE OF 10% ON THE UNDISCLOSED SALES OF `2.66 CRORES AND MAKING AN ADD ITION OF `26,68,936/- AS AGAINST ADDITION OF `42,52,038/- MA DE BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ADDITION SUSTAINED IS VERY HIGH AND SHOULD BE SUBSTANTIALLY REDUCED, IF NOT DELETED IN FULL. 4. LEARNED DR HAS OPPOSED THE SUBMISSIONS OF THE LE ARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT IT IS A CASE O F TRANSACTION OF SALES MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT A ND, THEREFORE, THERE IS A DIFFERENCE IN THE FACTS OF THE CASE OF T HE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR 2007-08 WHEN COMPARED TO T HE FACTS OF THE CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEA R 2006-07. HE REFERRED TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND A LSO THE COPIES OF AVAILABLE DOCUMENTS FILED IN THE COMPILATION BEFORE US. WE FIND THAT THERE WERE DEFECTS IN THE BOOKS OF ACCOUNT OF THE A SSESSEE AND, THEREFORE, THEY WERE RIGHTLY REJECTED BY THE ASSESS ING OFFICER. IT IS ITA-4115 & 3975/D/2011 4 WELL-SETTLED THAT THE ENTIRE AMOUNT OF UNRECORDED T RANSACTIONS COULD NOT BE TREATED AS INCOME IN THE HANDS OF THE ASSESS EE. HOWEVER, A REASONABLE PERCENTAGE OF PROFIT HAS TO BE ESTIMATED ON THE UNRECORDED TRANSACTIONS AND ADDED AS INCOME IN THE HANDS OF TH E ASSESSEE. IN THIS CASE, WE FIND THAT THE GROSS PROFIT RATE OF 2.56% O FFERED BY THE ASSESSEE IN THE REVISED ACCOUNTS ON THE UNRECORDED TRANSACTIONS OF SALES IS CLEARLY ON THE LOWER SIDE. THE ASSESSEE H IMSELF HAS DECLARED A RATE OF 6.4% IN THE IMMEDIATELY PRECEDING ASSESSMEN T YEAR 2006-07 AND THE SAME WAS ACCEPTED BY THE DEPARTMENT IN SCRU TINY ASSESSMENT OF THE ASSESSEE. THE SCRUTINY ASSESSMENT OF THE AS SESSEE FOR THE AY 2006-07 WAS AFTER THE COMPLETION OF ASSESSMENT PROC EEDINGS FOR THE RELEVANT AY 2007-08. IN THESE FACTS OF THE CASE, W E ARE OF THE VIEW THAT CONSIDERING THE TOTALITY OF THE FACTS AND CIRC UMSTANCES OF THE CASE, THE ENDS OF JUSTICE SHALL BE MET IF THE NET PROFIT RATE OF 7% IS APPLIED BY WAY OF ESTIMATE ON THE TRANSACTIONS OF `2,66,89,358 /- AS AGAINST THE ADDITION OF `26,68,936/- CONFIRMED BY THE CIT(A). ACCORDINGLY, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWE D. ITA NO.3975/DEL/2011 ITA NO.3975/DEL/2011 ITA NO.3975/DEL/2011 ITA NO.3975/DEL/2011 REVENUES APPEAL : REVENUES APPEAL : REVENUES APPEAL : REVENUES APPEAL :- -- - 6. THE GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDE R:- 1. THE CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ACCEPTING ADDITIONAL EVIDENCES UNDER RULE 46A(3) OF INCOME TAX RULES, 1962. 2. THE CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ACCEPTING THE ASSESSEE S REVISED DISCLOSURE OF UNRECORDED SALES OF RS.2,66,89,358/- IN THE APPELLATE PROCEEDINGS AND INCOME FROM UNDISCLOSED SALES OF RS.28,07,872/- THA T WAS SUBMITTED BEFORE THE ASSESSING OFFICER DURING T HE ASSESSMENT PROCEEDINGS. ITA-4115 & 3975/D/2011 5 3. THE CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ACCEPTING REVISED TURN OVER/TOTAL SALES OF RS.2,78,78,432/- AND IN ACCEPTI NG REVISED ACCOUNTS PREPARED AT THE TIME OF APPELLATE PROCEEDINGS INSTEAD OF TURNOVER OF RS.11,89,074/- ORIGINALLY DISCLOSED AT RS.11,89,074/- IN THE RETUR N OF INCOME FILED BY THE ASSESSEE, THE DIFFERENCE OF SAL ES CERTAINLY ATTRACTED PENALTY PROVISIONS U/S 271(1)(C ) ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF HIS INCOME IN THE ORIGINAL RETURN OF INCOME U/S 139(1). 4. THE CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ESTIMATING AND CALCULA TING THE PROFIT OF THE ASSESSEE AT 10% OF UNDISCLOSED SA LES OF RS.2,66,89,358/- INSTEAD OF RS.42,52,038/-, THE ADD ITION MADE BY THE A.O. U/S 69A OF INCOME TAX ACT, 1961 ON ACCOUNT OF UNEXPLAINED CASH DEPOSIT, THUS DELETING AN ADDITION OF RS.15,83,102/- OUT OF ASSESSED INCOME O F THE ASSESSEE. 7. LEARNED DR COULD NOT POINT OUT ANY SPECIFIC VIOL ATION OF RULE 46A(3) OF THE INCOME-TAX RULES, 1962 AND, ACCORDING LY, WE FIND THAT THERE IS NO MERIT IN THE GROUND OF APPEAL NO.1 OF T HE REVENUES APPEAL. 8. WITH REGARD TO OTHER GROUNDS OF APPEAL NO.2 TO 4 , THE ISSUE IN THESE GROUNDS IS COVERED WITH OUR DECISION IN THE F OREGOING PARAGRAPHS OF THIS ORDER WHILE DISPOSING OF THE ASSESSEES APP EAL FOR THE RELEVANT ASSESSMENT YEAR 2007-08 IN ITA NO.4115/DEL/2011 AND , FOR THE REASONS RECORDED THEREIN, WE HOLD THAT THERE IS NO MERIT IN THESE GROUNDS OF APPEAL OF THE REVENUE. LEARNED CIT(A) WAS PERFECTL Y JUSTIFIED IN LAW IN APPLYING THE RATE OF NET PROFIT ON THE UNDISCLOSED TRANSACTIONS OF SALES AND IN NOT ADDING THE ENTIRE VALUE OF THE UNRECORDE D TRANSACTIONS. WE HAVE ALREADY DIRECTED TO ADOPT THE NET PROFIT RATE OF 7% ON THE UNDISCLOSED TRANSACTIONS OF `2,66,89,358/- WHILE DI SPOSING OF THE ASSESSEES APPEAL AND, ACCORDINGLY, WE HOLD THAT TH ERE IS NO MERIT IN ITA-4115 & 3975/D/2011 6 GROUND NOS.2 TO 4 OF THE REVENUES APPEAL, WHICH AR E ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 1 ST APRIL, 2015. SD/- SD/- ( (( ( T.S. KAPOOR T.S. KAPOOR T.S. KAPOOR T.S. KAPOOR ) )) ) (G. (G. (G. (G. C. GUPTA C. GUPTA C. GUPTA C. GUPTA ) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. ASSESSEE : SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, SHRI NARESH KUMAR GARG, A AA A- -- -8/29, GROUND FLOOR, SECTO 8/29, GROUND FLOOR, SECTO 8/29, GROUND FLOOR, SECTO 8/29, GROUND FLOOR, SECTOR RR R- -- -15, ROHINI, 15, ROHINI, 15, ROHINI, 15, ROHINI, DELHI DELHI DELHI DELHI 110 085. 110 085. 110 085. 110 085. 2. REVENUE : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -21(1), NEW DELHI. 21(1), NEW DELHI. 21(1), NEW DELHI. 21(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR