DCIT, CENTRAL CIRCLE, ALLAHABAD V. M/S. SUBHASH STONE PRODUCTS, SONEBHADRA

ITA 506/ALLD/2015

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8431 (ITAT-ALLAHABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE NOR ANY ADJOURNMENT APPLICATIONS WERE
• Keywords: Search and seizure; Opportunity of being heard; Principle of natural justice; Additional evidence; Set aside
• Section: 132; 144; 143(3); 142(1); 133A; 153A; 143(2); 145(3); 153C

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA. No. 506/Alld/2015 Assessment Year: 2007-08 The Assistant Commissioner of Income Tax ,Central Circle, Allahabad,U.P. v. M/s. Subhash Stone Product Bari Dalla, Sonebhadra, U.P. PAN:AAUFS3655B (Appellant) (Respondent) Appellant by: None Respondent by: Smt. Namita S. Pandey, CIT DR Date of hearing: 13.07.2022 Date of pronouncement: 11.08.2022 O R D E R PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed on behalf of Revenue , being ITA No. 506/Alld./2015 for ay: 2007-08 has arisen from appellate order dated 19.10.2015 passed by ld. CIT(A) in Appeal No. 267/750/DCIT/CC/Alld/ CIT-(A)-III/LKO/13-14 , which in turn has arisen from assessment order dated 30.03.2013 passed by AO u/s 153C read with Section 153A and 143(3) of the 1961 Act . This appeal was heard by ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 2 Division Bench of the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, U.P. (hereinafter called “the tribunal”) in Open Court Proceedings through physical hearing of the appeals. 2. When this appeal was called for hearing on 13 th July, 2022 before Division Bench(DB), none appeared for assessee nor any adjournment applications were filed on behalf of the assessee. This appeal came up for hearing before the Division Bench(DB) on as many as fourteen times earlier, and on as many as twelve times the assessee sought adjournment, and Bench was pleased to grant adjournment. On17th May, 2022 when this appeal came up for hearing before the DB, adjournment application was moved by the ld. Counsel for the assessee, and the DB granted adjournment on the condition that last and final opportunity is granted to the assessee to argue their case on next date of hearing viz. 08 th June, 2022. When this appeal came up for hearing on 08 th June , 2022 before DB, the assessee again moved adjournment application , and the Bench again took a lenient view and granted adjournment at the request of the assessee, fixing next date of hearing on 13 th July, 2022. When this appeal came up for hearing before DB on 13 th July, 2022, then none appeared on behalf of the assessee, nor any adjournment application was filed. This is an old appeal pending for disposal for last more than 7 years, and since 2016, the assessee is continuously seeking adjournments. On 13 th July, 2022, the DB decided to proceed to adjudicate this appeal on merit, after hearing ld. CIT-DR and after perusing the material on record. This appeal was heard along with appeal in ITA no. 502/Alld/2015 for ay: 2005-06, but later it was separated . 3. The Revenue has raised following grounds of appeal in its appeal in memo of appeal filed with the tribunal, in ITA no. 506/Alld./2015, for ay: 2007-08:- “1. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 1,72,94,050/- made by the Assessing officer on account of undisclosed ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 3 profit and applying N.P. rate @30% on the difference of Rs. 5,76,46,835 by rejecting the books of accounts as per provisions of Section 145(3) of the I.T. Act, 1961. 2. That the order of Ld. CIT(A) deserves to be set aside and the assessment order passed by the A.O. be restored. 3. That the appellant craves to add, modify, revise or amend any one or more of the grounds of the appeal as stated above as and when need for doing so may rise. 4. The brief facts of the case are that there was a search and seizure operations conducted by Revenue u/s 132 of the 1961 Act , on 3 rd February , 2011 at the residential and business premises belonging to the Vaish Group of cases. Along with the search and seizure operations conducted by Revenue u/s 132, certain business premises of the group were also surveyed by Revenue u/s 133A of the 1961 Act. The assessee is a partnership firm and is engaged in the mining of boulders , and manufacturing and trading of Grits. After going through the seized material and recording satisfaction, the AO issued notice dated 13 th August, 2012 under Section 153C of the 1961 Act, requiring assessee to furnish return of income within fifteen days of service of notice. The AO issued notice u/s 142(1) read with Section 153C of the 1961 Act, on 30.10.2012. The assessee did not file return of income till 06 th November , 2012.Show Cause Notice for initiation of penalty proceedings under Section 271F were issued by AO on 18.10.2012. None attended the proceedings before the AO nor any reply was filed. The AO levied penalty of Rs. 5000/ - against the assessee u/s 271F, on 6 th November, 2012 . The AO issued SCN to the assessee for initiation of prosecution under Section 276CC and Section 276D ,on 3 rd January, 2013. No one attended on the date fixed for hearing on behalf of the assessee. The AO again issued notice for initiation of penalty proceedings , fixing the date of hearing on 03.01.2013. The AO issued another SCN on 04 th January, 2013 for initiation of penalty proceedings and prosecution proceedings, as well for finalization of assessment u/s 144 of the 1961 Act. The assessee ultimately filed its return of income , on 28 th January, 2013 , with the ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 4 returned income of Rs. 19,790/- . The AO issued notices under Section 143(2) to the assessee on 28 th January, 2013 . The AO issued further SCN u/s 144 , dated 07 th February, 2013. Then, the assessee came forward and filed replies before the AO. 5. The assessee is partnership firm and is engaged in mining of boulders , and manufacturing and trading of Grits. The assessee was constituted as partnership firm, on 10.08.1996 with Mr. Subhash Chandra Agrahari, Mr. Ramji , Mr Suresh Chandra and Mr. Ajay Kumar, as its partners. The Assessing Officer observed that the firm was granted a mining lease of 10 years from 1 st February , 1997 to 31 st January, 2007 , and vide letter dated 13.12.2012, the DM, Sonebhadra confirmed to the AO that the mining lease was extended from 24 th December, 2007 to 14 th September, 2008. The Assessing Officer observed that there are following variations in the market value of boulders mined as per letter of DM dated 13.12.2012 and the sale proceeds as shown by assessee in its books of accounts, for the impugned assessment year , detailed as hereunder : Vide order sheet entry dated 14.02.2013 the following variations in respect of the AY’s concerned were observed: Assessment year Number of MM-11 issued Boulder mined as per letter of DM dated Boulder mined as per books of accounts Market value of boulder mined as per letter of DM Sales proceeds shown as per books of Amount of royalty deposit as per letter of DM Amount of royalty deposited as per books of ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 5 13.12.2012 (in cubic meter) today dated 13.12.2012 accounts (P&L account) produced today dated 13.12.2012 accounts produced today 2005-06 5700 57000 Because no stock register has been produced and only cash book and ledger has been produced this figure cannot be ascertained 9750000 11687549 1950000 1660350 From the books of accounts 2006-07 17200 210400 46620000 37041674 9324000 9718650 2007-08 32300 387600 87210000 29563165 17442000 17442000 2008-09 800 10400 2340000 -nil- -Nil- The assessee was asked by AO to explain the difference, but there was no reply by the assessee . The Assessing Officer was pleased to, inter-alia, made additions to the income of the assessee by computing the estimated income by applying net profit rate of 30% on differential of market value of boulders mined as per DM letter dated 13.12.2012 being Rs. 8,72,10,000/- and sales proceeds as is recorded by assessee in its books of accounts being Rs. 2,95,63,165/- , which led to additions to the income of the assessee being made by the AO to the tune of Rs. 1,72,94,050/- towards undisclosed profits, vide assessment order dated 30.03.2013 passed by AO u/s 153C read with Section 153A and 143(3) of the 1961 Act. 6. Aggrieved by assessment framed by AO, the assessee filed first appeal with ld. CIT(A) , who was pleased to delete the entire addition of Rs. 1,72,94,050/- as was made by the AO by estimating undisclosed profits, by holding as under: ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 6 “I have examined the facts and circumstances of the case. I have considered the findings of the Assessing Officer and I have also considered the submissions of the appellant. I find that the AO has estimated the profit @30% on the difference of Market value of boulder mined as per letter dated 13.12.2012 of the District Magistrate, Sonebhadra and the value of boulder mined as recorded in the books of accounts. I find that in comparing the value of the boulders mined the AO has failed to consider the quantity of boulders mined as reported by the District Magistrate, Sonebhadra and as recorded in the books of accounts. I find that vide letter dated 13.12.2012, the Distract Magistrate, Sonebhadra has reported the quantity of boulders mined at 3,87,600 which is same as recorded in the books of accounts as under- Opening Stock 11.14 Manufactured 3,87,600 Sales 3,87,611.14 Closing Stock NIL 4(5) There is therefore no difference in the quantity of boulders mined as per letter dated 13.12.2012 of the District Magistrate, Sonebhadra and as recorded in the books of accounts. The difference is therefore in respect of the rate assigned to the boulders in calculating the market value. I find that the appellant-firm is involved in the business of mining of boulders and manufacturing and trading of grits. The manufacturing process involves conversion of boulders to grits. It is only after the blocks of the stone have been cut to sizes that they become marketable. It was the process of crushing/breaking the stone boulders into small pieces that the same became marketable. The stone boulders cannot be used for the same purpose the stone grits and after the stone boulders have been cut into different size; the end products simultaneously cannot be used as a block. In other words the boulders are mined and thereafter converted to grits for being sold. The appellant has produced a certificate from Assistant Commissioner of Trade Tax to the affect that the rate of grits is three times the rate of boulders. It appears therefore that the District magistrate, Sonebhdra in his letter dated 13.12.2012 has calculated the market value of boulders by applying the rate applicable to the grits. The value recorded by ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 7 the appellant in its books of accounts at Rs. 2,95,63,165/- shall be more than that reported by the District Magistrate, Sonebhadra in case the value reported vide letter dated 13.12.2012 is taken at 1/3 rd i.e. Rs. 2,90,70,000/- (Rs. 8,72,10,000/3). In any case there is no difference in the quantity of boulders mined. 4(6) In the light of above facts and finding, more particularly when all the sales and purchase are fully vouched, quantitative details of opening stock, purchases, sales and closing stock are available and also as the quantity details are written in the ledger account itself, therefore, it could not be said that the true profits cannot be deduced. There is no difference in the quantity of boulders mined as per letter dated 13.12.2012 of the District Magistrate, Sonebhadra and as recorded in the books of accounts. Accordingly there was no case of the AO to have rejected the accounts by invoking the provisions of 145(3) of the Act; such action is without any cogent reasons. I, therefore, hold that the rejection of accounts made by the Assessing Officer is without proper appreciation of the correct facts of the case and has erred in rejection of the accounts as well as the estimation of income by estimating profit @30% which is found to be without any basis or material in his possession. I, therefore, direct the Assessing Officer to delete the trading addition of Rs. 1,72,94,050/- .” 7. Now it was the turn of Revenue to be aggrieved by the appellate order passed by ld. CIT(A), and that the Revenue has now come in appeal before the tribunal challenging the deletion of addition to the tune of Rs. 1,72,94,050/- as was made by AO by estimating profits. None appeared on behalf of the assessee when this appeal was called for hearing before the DB, while department is represented by ld. CIT-DR. . The Ld. CIT-DR brought our attention to Para 4(5) of the appellate order passed by ld. CIT(A) , and She submitted that Ld. CIT(A) has granted relief to the asseessee based upon certificate from Assistant Commissioner of Trade Tax, which certified that the rate of Grits is three times the rate of boulders , and hence the entire addition of Rs. 1,72,94,050/- was deleted by Ld. CIT(A) mainly on the basis of this certificate which was in the form of additional evidence filed for the first time by assessee before ld. CIT(A) . The Ld. CIT-DR submitted that ld. CIT(A) ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 8 did not forwarded this additional evidence to AO for his comments/rebuttal/remand report , and thus there is a violation of Rule 46A of the Income-tax Rules, 1962. It was submitted by ld. CIT-DR that the matter can be restored back to the file of ld. CIT(A) for fresh adjudication , after giving opportunity to the Assessing Officer in accordance with the Rule 46A of the 1962 Rules. 8. We have heard ld. CIT-DR and perused the material on record. None appeared on behalf of the assessee when this appeal was called for hearing before DB on 13 th July, 2022 , nor any adjournment application was moved. The DB proceeded to adjudicate this appeal on merits after hearing ld. CIT-DR and perusing the material on record. The assessee is a partnership firm , which was constituted on 10.08.1996, with Mr. Subhash Chandra Agrahari, Mr. Ramji , Mr Suresh Chandra and Mr. Ajay Kumar, as its partners . The assessee is engaged in mining of boulders and Manufacturing and trading of Grits. There was a search and seizure operations conducted by Revenue u/s 132 on 03 rd February, 2011, at the residential and business premises belonging to Vaish Group. Simultaneously, certain business premises of the group were surveyed by Revenue u/s 133A of the 1961 Act. The provisions of Section 153C were invoked by Revenue against the assessee, based on incriminating material found and seized during aforesaid search operations and satisfaction recorded. The proceedings initiated by Revenue against the assessee u/s 153C, culminated into an assessment order dated 30.03.2013 passed by AO u/s 153C read with Section 153A and 143(3) of the 1961 Act. The Assessing Officer observed that there are following variations in the market value of boulders mined as per letter of DM dated 13.12.2012 and the sale proceeds as shown by assessee in its books of accounts for the impugned assessment year , detailed as hereunder : ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 9 Vide order sheet entry dated 14.02.2013 the following variations in respect of the AY’s concerned were observed: Assessment year Number of MM-11 issued Boulder mined as per letter of DM dated 13.12.2012 (in cubic meter) Boulder mined as per books of accounts today Market value of boulder mined as per letter of DM dated 13.12.2012 Sales proceeds shown as per books of accounts (P&L account) produced today Amount of royalty deposit as per letter of DM dated 13.12.2012 Amount of royalty deposited as per books of accounts produced today 2005-06 5700 57000 Because no stock register has been produced and only cash book and ledger has been produced this figure cannot be ascertained 9750000 11687549 1950000 1660350 From the books of accounts 2006-07 17200 210400 46620000 37041674 9324000 9718650 2007-08 32300 387600 87210000 29563165 17442000 17442000 2008-09 800 10400 2340000 -nil- -Nil- ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 10 The assessee was asked by AO to explain the difference, but there was no reply filed by the assessee . The Assessing Officer was pleased to, inter-alia, made additions to the income of the assessee by computing estimated income by applying net profit rate of 30% on differential of market value of boulders mined as per DM letter dated 13.12.2012 being Rs. 8,72,10,000/- and sales proceeds as is recorded by assessee in its books of accounts being Rs. 2,95,63,165/- , which led to additions to the income of the assessee being made by the AO to the tune of Rs. 1,72,94,050/- towards undisclosed profits ( 30% of Rs. 57646835), vide assessment order dated 30.03.2013 passed by AO u/s 153C read with Section 153A and 143(3) of the 1961 Act. The assessee filed first appeal with ld. CIT(A) who deleted the entire addition of Rs. 1,72,94,050/- mainly based on the certificate issued by Assistant Commercial of Trade Tax , wherein it was stated that the rates of grit are three time of the rate of boulder. Based on this certificate, the ld. CIT(A) came to conclusion that there is no suppression of value recorded of sales, while DM in its letter dated 13.12.2012 has clearly stated that the market value of Boulder mined by the assessee was to the tune of Rs. 8,72,10,000/- , and the assessee on its part has reported sales of Rs. 2,95,63,165/-, while led to suppressed sales of Rs. 5,74,46,835/- on which the AO estimated undisclosed profits of Rs. 1,72,94,050/-( being 30% of suppressed sales) which stood added in the hands of the assessee. In any case, ld. CIT(A) simply accepted the certificate issued by Assistant Commercial of Trade Tax , which was in the form of additional evidence being produced by assessee for the first time before ld. CIT(A), without calling for remand report from the AO which is in violation/infringement of Rule 46A of the 1962 Rules as comments/rebuttal from AO was never called for by the ld. CIT(A), which makes appellate order passed by ld. CIT(A) as unsustainable in the eyes of law, and we direct setting aside of ld. CIT(A) appellate order dated 19.10.2015 and restored the matter back to the file of the ld. CIT(A) for fresh adjudication , after complying with Rule 46A of the 1962 Rules. Needless to say ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 11 that ld. CIT(A) shall give proper and adequate opportunity of being heard to both the assessee as well as AO , in accordance with principles of natural justice in accordance with law. The appeal of the Revenue is allowed for statistical purposes. We order accordingly. 9. In the result appeal in ITA no. 506/Alld/2015 for ay: 2007-08 , filed by Revenue is allowed for statistical purposes. 10. This order is pronounced in accordance with Rule 34(4) of Income Tax (Appellate Tribunal) Rules, 1963 on 11/8/22 at Allahabad, U.P. Sd/-Sd/- S- Sd/-Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11/08/2022 KD. Azmi Copy forwarded to: 1. Appellant –The Asst. Commissioner of Income Tax ,Central Circle, Aayakar Bhawan, 38, M G Road , Allahabad, U.P. 2. Respondent –M/s. Subhash Stone Product, Bari Dalla, Sonebhadra, U.P.(also at Hotel Ravisha Continental , 57-A, P.D. Tandon Marg, Civil Lines, Allahabad , U.P. 3. CIT(A) – Aayakar Bhawan, 38, M G Road, Allahabad, U.P. 4. CIT, Aayakar Bhawan, 38, M G Marg, Civil Lines, Allahabad, U.P. 5. The CIT-DR (ITAT), Aayakar Bhawan, 38, M G Marg, Civil Lines, Allahabad, U.P. By order ITA No. 506/ALLD/2015 M/s. Subhash Stone Products ,Sonebhadra U.P. Assessment Year: 2007-08 12 Assistant Registrar