ACIT, Meerut V. M/s. Samco Auto India (P) Ltd., Meerut

ITA 5129/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87167 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 24-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Keywords: Reopening of assessment; Principle of natural justice; Non passing of speaking order; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI) BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5129 /DEL/2013 ASSESSMENT YEAR : 2006-07 ACIT, CIRCLE 2, VS. M/S. SAMCO AUTO INDIA (P) LTD ., MEERUT DELHI ROAD, PARTAPUR, MEERUT GIR / PAN:AABCS9883P (APPELLANT) (RESPONDENT) APPELLANT BY : DR. BRR KUMAR, SR. DR RESPONDENT BY : NONE DATE OF HEARING : 24.03.2015 DATE OF PRONOUNCEMENT : 31.03.2015 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FIELD BY REVENUE AGAINST THE ORD ER OF LD. CIT(A) DATED 05.06.2013 FOR ASSESSMENT YEAR 2006-07 WRONGL Y MENTIONED IN THE APPELLATE ORDER AS 2008-09. THE GROUNDS OF APPEAL RAISED BY REVENUE ARE REPRODUCED BELOW: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW IN DELETING THE ADDIT ION OF RS.16,45,362/- WHILE ALLOWING THE ASSESSEE'S GROUND OF APPEAL AGAINST THE ADDITION MADE BY THE A.O. IN THE REASSESSMENT P ROCEEDINGS, BY APPLYING G.P RATE OF 14.97% ON THE SUPPRESSED RECEI PTS OF RS.1,00,40,147/-, IGNORING THE FACT THAT THE DIFFER ENCE IN RECEIPTS WAS NOTICED AS PER THE COPIES OF ACCOUNTS SUBMITTED BY THE ASSESSEE ITSELF WITH THE TRADE TAX DEPARTMENT FOR THE SAME A. Y IN QUESTION. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.16,45,362/- ITA NO.5129/DEL/2013 2 WITHOUT GIVING ANY EXPLICIT FINDINGS WHILE ACCEPTIN G THE ASSESSEE'S VERSION AND IN REACHING THE CONCLUSION OVER THE ISS UE OF ADDITION OF RS.16,45,362/- WHICH WAS MADE BY THE A.O. AFTER GIV ING PROPER AND SUFFICIENT OPPORTUNITIES OF BEING HEARD OVER THE IS SUE & THE TAX AUDITED ALES OF THE ASSESSEE DID NOT REFLECT NETTIN G OF SALES AFTER EXCLUDING EXCISE DUTY 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY A ND/OR DELETE ANY GROUND(S) OF APPEAL. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASI DE AND THAT OF THE A.O. RESTORED. 2. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE, HOWE VER, WITH THE HELP OF MATERIAL ON RECORD AND LD. D.R., WE WERE OF THE OPI NION THAT THE MATTER CAN BE DISPOSED OFF EVEN WITHOUT THE PRESENCE OF ASSESS EE / ITS A.R. 3. LD. D.R. INVITED OUR ATTENTION TO THE FINDINGS O F LD. CIT(A) AND FAIRLY ADMITTED THAT THE TURNOVER REFLECTED IN THE AUDITED P & L ACCOUNT WAS THE ACTUAL NET TURNOVER EXCLUSIVE OF EXCISE DUTY OF RS. 1,00,40,147/- AND, THEREFORE, HE FAIRLY CONCEDED THAT THE GP/NP CANNOT BE APPLIED TO SUCH PART OF TURNOVER REPRESENTED BY EXCISE DUTY. 4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING AND SALE OF ITEMS AND AUTOMOBILE PARTS AND THE ASSESSME NT WAS COMPLETED U/S 143(3) READ WITH SECTION 147 OF THE ACT. THE A.O. DURING ASSESSMENT PROCEEDINGS, ON THE BASIS OF ASSESSMENT ORDER OF TR ADE TAX DEPARTMENT, HELD THAT THE SALES OF THE ASSESSEE COMPANY WERE WORTH R S.7,44,66,277/- WHEREAS THE SALES DECLARED BY ASSESSEE WERE OF RS.6,43,26,1 30/-. THEREFORE, THE A.O. HELD THAT THE ASSESSEE HAD SUPPRESSED SALES BY RS.1 ,00,40,147/-. THEREFORE, A.O. APPLIED G.P. RATE OF 14.97% ON SUCH SALES. THE A.O. ALSO MADE ADDITION TO THE TUNE OF RS.1,42,352/- ON ACCOU NT OF PROVISIONS OF ITA NO.5129/DEL/2013 3 SECTION 40A(2B). DURING APPELLATE PROCEEDINGS, THE LD. CIT(A) AFTER GOING THROUGH THE COMPLETE FACTS AND CIRCUMSTANCES OF THE CASE, ALLOWED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 2.2 THE RELEVANT FACTS ARE THAT THE ORIGINAL ASSES SMENT FOR THE YEAR UNDER CONSIDERATION HAD BEEN COMPLETED UNDER SCRUTI NY UNDER SECTION 143(3) VIDE ORDER DATED 26.12.2008. THE ADDITION M ADE IN THIS ASSESSMENT ORDER WAS SUBSEQUENTLY DELETED AT THE FI RST APPELLATE STAGE. ON THE ISSUE OF NOTICE UNDER SECTION 148 AND IN COM PLIANCE THEREOF, THE ASSESSEE FILED RETURN OF INCOME 'UNDER PROTEST' SHOWING THE TOTAL INCOME AS DETERMINED AFTER GIVING EFFECT TO THE APP EAL ORDER. THE ASSESSEE ALSO ASKED FOR THE COPY OF THE REASONS REC ORDED FOR INITIATING REASSESSMENT PROCEEDINGS. A COPY OF THE REASONS WAS SUPPLIED TO THE ASSESSEE AND HAS BEEN ENCLOSED IN THE SUBMISSIONS M ADE DURING THE APPEAL PROCEEDINGS. IT IS OBSERVED THAT THE AO NOTE D THAT AS PER THE ASSESSMENT ORDER OF THE TRADE TAX DEPARTMENT, THE S ALES OF THE ASSESSEE COMPANY HAD BEEN ASSESSED AT RS.7,44,66,27 7 WHEREAS IN THE INCOME TAX, THE ASSESSEE HAD DECLARED SALES OF RS 6 ,44,26,130. THE AO CONCLUDED THAT THE ASSESSEE HAD SUPPRESSED THE S ALES AND THE RESULTANT INCOME. IT WAS ALSO NOTED BY THE AO THAT THE ASSESSEE HAD MADE PAYMENT OF INTEREST ON UNSECURED LOANS TO ITS 'FAMILY MEMBERS' IN EXCESS OVER THE MARKET RATE BY RS 1,42,352. THUS , THIS AMOUNT, WHICH WAS DISALLOWABLE UNDER SECTION 40A (2) (B) HA D ESCAPED ASSESSMENT. THE ASSESSEE FILED A LETTER SEEKING DET AILS AS TO HOW THE AMOUNT OF DISALLOWANCE UNDER SECTION 40A (2) (B) HA D BEEN WORKED OUT AS IT PROPOSED TO FILE OBJECTIONS TO THE ISSUE OF THE NOTICE UNDER SECTION 148. IN RESPONSE, THE AO ISSUED A LETTER DA TED 16.11.2010 WHICH MERELY REITERATED THE REASONS RECORDED FOR TH E REOPENING OF ASSESSMENT PROCEEDINGS AND FAILED TO ADDRESS THE SP ECIFIC QUERRY OF THE ASSESSEE. AN ELABORATE LETTER DATED 26.11.2010 WAS FILED BY THE ASSESSEE RAISING OBJECTIONS TO THE REASSESSMENT PRO CEEDINGS. APART FROM CONTESTING THE ISSUANCE OF THE REASSESSMENT NO TICE IN GENERAL TERMS, THE SPECIFIC GROUND IS TAKEN BY THE AO FOR R ESORTING TO THE REASSESSMENT PROCEEDINGS WERE DISCUSSED IN DETAIL. AS REGARDS SUPPRESSION OF SALES, IT WAS STATED THAT THE TURNOV ER REFLECTED IN THE AUDITED TRADING AND ORDER IS PASSED BY THE TRADE TA X AUTHORITIES HAD BEEN FILED ALONG WITH THE WRITTEN SUBMISSIONS DATED 31.10.2008 WHILE JUSTIFYING THE ACCEPTABILITY OF THE DECLARED TRADIN G RESULTS AND THE ACCOUNTS. IT WAS ALSO POINTED OUT THAT IN THE ORIGI NAL ASSESSMENT ITA NO.5129/DEL/2013 4 ORDER, THE AO HAD MADE A CATEGORICAL STATEMENT THAT THE MANUFACTURING AND TRADING ACCOUNT HAD BEEN ACCEPTED THAT SALES TAX AND EXCISE DUTY ARE CHARGED SEPARATELY IN EVERY SAL ES INVOICE. THE SALES UNDER EACH INVOICE ARE CREDITED TO SALES ACCO UNT, THE SALES TAX TO SALES TAX ACCOUNT AND THE EXCISE DUTY TO THEIR RESP ECTIVE SEPARATE ACCOUNTS. THE PAYMENTS MADE IN RESPECT OF SUCH STAT UTORY LIABILITIES ARE DEBITED TO THE RESPECTIVE ACCOUNTS. THE ASSESSE E SUBMITTED SAMPLES OF FIVE INVOICES ALONG WITH THE RELEVANT EN TRIES IN CASHBOOK/LEDGER ACCOUNTS OF THE PARTIES IN WHOSE NA MES THE INVOICES HAD BEEN RAISED, THE SALES TAX ACCOUNT, THE EXCISE DUTY ACCOUNT ETC. A RECONCILIATION OF THE SALE FIGURES REFLECTED IN THE PROFIT AND LOSS ACCOUNT WITH THE SALES ASSESSED BY THE TRADE TAX AU THORITIES WAS ALSO PROVIDED. THE BREAKUP OF THE DIFFERENCE BETWEEN THE TWO FIGURES WAS ALSO PROVIDED. FURTHER, AN OFFER WAS ALSO MADE TO T HE AO TO HAVE THE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION EXAMINED. AS REGARDS THE ALLEGED EXCESSIVE PAYMENT OF INTEREST, IT WAS POINTED OUT THAT THE DETAILS THEREOF SOUGHT EARLIER HAD NOT BEE N PROVIDED. IT WAS POINTED OUT THAT THE DISALLOWANCE OF RS 68,736 MADE UNDER SECTION 40A (2) (B) MADE IN THE ORIGINAL ASSESSMENT ORDER H AD SINCE BEEN DELETED BY THE CIT (APPEAL). IT WAS POINTED OUT THA T IN VIEW OF THE ABOVE, THE REASONS RECORDED AND THE ISSUANCE/SERVIC E OF NOTICE UNDER SECTION 148 WAS BAD IN LAW AND THAT PROCEEDINGS DES ERVE TO BE DROPPED. WITHOUT PREJUDICE, IT ';/AS STATED THAT TH ERE WAS NO CASE EITHER FOR ANY SUPPRESSION OF SALES OR FOR DISALLOW ANCE UNDER SECTION 40A (2) (B) OF THE ACT. IT HAS BEEN STATED THAT THE AO, IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, NOT CON TROVERTED AND THE OBJECTIONS RAISED IN THE LETTER DATED 26.11.2010, N OT EVEN MAKING A MENTION THEREOF PROCEEDED TO PASS AN ASSESSMENT ORD ER MAKING AGGREGATE ADDITION OF RS 16,45,362/-. EVEN ADOPTED THE INCOME ASSESSEE EARLIER AT RS 9,09,247 WITHOUT CONSIDERING THAT A RELIEF HAD BEEN GRANTED BY THE CIT (APPEAL) AND THE CORRECT FI GURE OUGHT TO HAVE BEEN RS 8,40,511/. ' 2.3 IT IS NOTED THAT IN THE ASSESSMENT ORDER, THE A O HAS ACKNOWLEDGED THE RECEIPT OF REPLY DATED 26.11.2010. THEREAFTER, THE A.O. OBSERVES THAT THERE WAS A CLEAR CUT SUPPRESSION OF SALES BY RS 1,00,40,147/-. OBVIOUSLY, THE A.O. DID NOT DEEM IT APPROPRIATE TO DISCUSS THE EXPLANATION GIVEN ON BEHALF OF THE ASSESSEE AND WHY SUCH EXPLANATION WAS NOT ACCEPTABLE TO HIM. THE AO HAS PROCEEDED TO PRONOUNCE HIS ITA NO.5129/DEL/2013 5 DECISION IN UTTER DISREGARD DECISION OF THE HONORAB LE SUPREME COURT IN THE CASE OF GLN DRIVESHAFT (INDIA) LTD. (259 ITR 19) WHICH STATES THAT WHERE A NOTICE OF THE ASSESSMENT HAD BEEN ISSU ED UNDER SECTION 148, THE PROPER COURSE OF ACTION FOR THE ASSESSEE W OULD BE TO FILE THE RETURN AND, IF HE SO DESIRES, TO SEEK REASONS FOR I SSUING THE NOTICE. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHI N A REASONABLE TIME. ON THE RECEIPT OF REASONS, THE ASSESSEE IS ENTITLED TO FILE OBJECTIONS TO THE ISSUANCE OF NOTICE AND THE AO IS BOUND TO DISPO SE THE SAME BY PASSING A SPEAKING ORDER. THE SAID DECISION HAS BEE N QUOTED SPECIFICALLY IN THE RESPONSE DATED 26.11.2010, WHIC H HAS BEEN ACKNOWLEDGED TO HAVE BEEN RECEIVED BY THE AO IN THE ASSESSMENT ORDER. FIRSTLY, IN RESPONSE TO THE REQUEST OF THE A SSESSEE TO PROVIDE DETAILS OF HOW THE ALLEGED VIOLATION OF SECTION 40A (2) (B) HAD BEEN WORKED OUT, THE AO IN HIS LETTER DATED 16.11.2010, HAS GIVEN A REPLY IN WHICH HE HAS OBFUSCATED THE ISSUE. EVEN IN THE ASSE SSMENT ORDER, THE AO HAS NOT THOUGHT IT NECESSARY TO PROVIDE ANY DETA ILS WITH REGARD TO THE DISALLOWANCE OF RS. 1,12,3521- AND WHY SECTION 40A(2)(B) IS APPLICABLE TO THE FACTS OF THE CASE. SECONDLY, THE AO HAS FAILED TO PASS ANY ORDER/ADDRESS \ ANY LETTER TO THE ASSESSEE REJE CTING THE OBJECTIONS TO THE ISSUE OF REASSESSMENT NOTICE THIRDLY, THE AO DID NOT FIND IT NECESSARY TO ADDRESS THE OBJECTIONS TO THE INITIATI ON OF REASSESSMENT PROCEEDING, EVEN IN THE ASSESSMENT ORDER. FINALLY, IN THE OPINION OF THE AO, THE CONTENTS OF OVER 50 PAGES OF REPLY (ALO NG WITH ANNEXURES) GIVEN IN THE LETTER DATED 26.11.2010 DID NOT MERIT MENTION IN THE ASSESSMENT ORDER. THE LOGICAL COROLLARY OF SUCH CON DUCT IS THAT THE AO HAD NO GROUNDS TO REBUT THE EXPLANATION GIVEN BY TH E ASSESSEE AND PROCEEDED WITH THE REASSESSMENT PROCEEDINGS (WITHOU T SPECIFYING AS TO WHY HE HAD REASONS TO BELIEVE THAT INCOME HAD ES CAPED ASSESSMENT) AND TO MAKE THE ADDITION WITHOUT ANY APPLICATION OF MIND AND IN A MECHANICAL MANNER. THE SHODDY MANNER IN WHICH ASSES SMENT HAS BEEN FRAMED IS FURTHER EVIDENT FROM THE FACT THAT T HERE IS NO REFERENCE TO THE DISALLOWANCE MADE IN THE ORIGINAL ORDER AND THE RELIEF GRANTED BY CIT (A), MEERUT AND ALSO THAT THE TOTAL INCOME F ROM WHICH THE AO HAS PROCEEDED IN THE COMPUTATION OF INCOME IN THE A SSESSMENT ORDER DOES NOT TAKE IN ACCOUNT THE AFORESAID APPEAL ORDER . 2.4 IN VIEW OF THE DISCUSSION ABOVE, WHILE THE INI TIATION OF REASSESSMENT PROCEEDINGS WITHOUT ADDRESSING THE OBJ ECTIONS OF THE ASSESSEE AND HAS PASSED A NON SPEAKING ORDER TOTALL Y AGAINST THE ITA NO.5129/DEL/2013 6 PRINCIPLES OF NATURAL JUSTICE, THE ADDITIONS MADE I N THE ORDER IS DIRECTED TO BE DELETED. SUBJECT TO THE ABOVE REMARK S, GROUND O. 1 IS DISMISSED AND GROUND NO.2 IS ALLOWED. THE AO IS DIR ECTED TO ADOPT THE TOTAL INCOME OF THE ASSESSEE AS IN THE ORIGINAL ORDER AS REDUCED BY THE APPEAL ORDER. 5. FROM THE ABOVE FINDINGS OF LD. CIT(A) WE OBSERVE THAT LD. CIT(A) HAS PASSED A WELL SPEAKING , ELABORATE AND REASONED ORDER WHEREIN HE HAS MADE CLEAR CUT FINDINGS AND HAS RIGHTLY HELD THAT E XCISE DUTY FORMING PART OF TURNOVER AS DECLARED BEFORE TRADE TAX AUTHORITIES, CANNOT BE SUBJECTED TO GROSS PROFIT. SIMILARLY, THE OTHER ADDITION MADE B Y A.O. U/S 40A(2)(B) HAS BEEN RIGHTLY DELETED AS IN ORIGINAL ASSESSMENT PROC EEDINGS ALSO, THE A.O. HAD MADE SIMILAR ADDITIONS AND LD. CIT(A) HAD ALREADY D ELETED THE SAME. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF LD. CIT(A). 6. IN VIEW OF ABOVE, APPEAL FILED BY REVENUE IS DIS MISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2015. SD./- SD./- ( DIVA SINGH) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 31.03.2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.5129/DEL/2013 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 23/3 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 24,25,26 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 31/3 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 31/3 SR. PS/PS 7 FILE SENT TO BENCH CLERK 31/3 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER