M/s. Rakesh Engineering Works, Ghaziabad V. ITO, Ghaziabad

ITA 5333/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3726 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 07-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH F DELHI ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NO. 5333 (DEL) OF 2010 ASSESSMENT YEAR : 2005-06. M/S. RAKESH ENGINEERING WORKS, THE INCOME-TAX OFFICER, C/O. SHRI AKHILESH KUMAR, ADV.; VS. W A R D : 2 (2), 206 207, ANSAL SATYAM; G H A Z I A B A D. R D C RAJ NAGAR, GHAZIABAD. P A N / G I R NO. AAB FE 2740 X. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI AKHILESH KUMAR, ADV.; DEPARTMENT BY : MS. SRUJANI MOHANTY, SR. D. R .; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 05-06 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS), GHAZIABAD. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. BECAUSE, THE ORDER OF LD. LOWER AUTHORITY IS B AD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE I S UNSUSTAINABLE; 2. BECAUSE, THE LD. CIT (APPEALS) HAS FAILE D TO APPRECIATE THE FACT THAT PROVISIONS OF SECTION 145(3) / 144(1) OF I. T. ACT, 1961 DUE TO NON-COMPLIANCE OF 2 I. T. APPEAL NO. 5333 (DEL) OF 2010 CERTAIN QUERIES MAINLY DIFF. OF SALES AND NOT FILIN G OF ANNEX. 1 TO REPORT ARE WRONGLY INVOKED, AS ASSESSEE APPEARED WITH ALL SUCH DETAILS WITH BOOKS OF ACCOUNTS ON 25/12/2008 BEFORE ASSESSING OFFICER AND SO MUCH SO BOOK OF ACCOUNTS ETC. ARE ALSO AGAIN PRODUCED DURING THE COURSE OF A PPELLATE PROCEEDINGS BUT LOWER AUTHORITY WAS NOT READY TO GIVE RECOURSE TO THE AFO RESAID FACTS, HENCE ORDER IS INHERENTLY ILLEGAL AND ARBITRARY; 3. BECAUSE, THE LD. CIT (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.50,400/- & OF RS.1,99,584/-, BEING SALARY / INTE REST TO PARTNERS DEBITED TO P & L ACCOUNT UNDER SECTION 185(5), SPECIALLY IN THE AF ORESAID CIRCUMSTANCES AND WITHOUT APPRECIATING THE TRUE SPIRIT OF THE SAID PR OVISION; 4. BECAUSE, THE LD. CIT (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.2,87,838/- TOWARDS TRADING RESULTS DUE TO NO REP LY OF SOME QUERIES, SPECIALLY IN THE AFORESAID CIRCUMSTANCES AND IN TOTAL DISREGARD OF FACTS ON THE RECORD IN AS MUCH AS THAT EVEN TRADING RESULTS ARE ACCEPTED BY T RADE TAX AUTHORITIES DETAILS OF WHICH IS COLLECTED BY AO DIRECTLY BUT BEHIND THE BA CK OF THE ASSESSEE; 5. BECAUSE, THE LD. CIT (APPEALS) HAS ERRED IN SUST AINING THE ADDITION OF RS.38, 223/-, BEING PAYMENT OF CST, AGAINST THE LIA BILITY ARISEN / DETERMINED IN THE CURRENT YEAR; 6. BECAUSE, THE LD. CIT (APPEALS) HAS ERRED IN SUST AINING THE ADDITION OF RS.4,850/-, BEING PAYMENT OF ESI / PF OF EMPLOYEES CONTRIBUTION DEPOSITED LATE, DESPITE THE FACT THAT THE SAME WAS DEPOSITED BEFORE THE DUE DATE OF THE FILING THE RETURN. 3.1 THE FIRST ISSUE FOR OUR CONSIDERATION RELATES T O COMPLETION OF ASSESSMENT UNDER SECTION 144 AFTER REJECTING BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFF ICER ISSUED NOTICE UNDER SECTION 143(2) ON VARIOUS DATES. OUT OF TEN DATES FIXED FOR HEARING, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE 3 I. T. APPEAL NO. 5333 (DEL) OF 2010 ATTENDED ON THREE OCCASIONS. THE DETAILS OF FIXING THE CASE FOR HEARING AND COMPLIANCE MADE BY THE ASSESSEE ARE AS UNDER :- SL. NOTICE U/S. DATE OF DA TE OF N A T U R E O F C O M P L I A N C E D A T E O F NO . 142(1)/143(2) N O T I C E . FIXTURE/HEARING ADJOURNMENT. 1. 142(1)/143(2) 18/09/2006 28/09/2006 NONE ATTENDED. ---- 2. 142(1)/143(2) 17/05/2007 05/06/2007 SHRI KISHAN AND SHRI SANJAY KAMAT ATTENDED 12/06/2007 AND SOUGHT TIME. 3. 12/06/2007 NONE ATTENDED. ---- 4. 142(1) 17/07/2007 03/08/ 2007 NONE ATTENDED. ---- 5. 142(1) 01/10/2007 15/10/ 2007 SHRI SUBHASH JAIN ATTENDED AND FILED PART DETAILS. ---- 6. 18/10/2007 PART DE TAILS FURNISHED AGAIN & QUERIES GIVEN. ---- 7. 25/10/2007 NONE ATTENDED. ---- 8. 142(1) 01/11/2007 07/11 /2007 NONE ATTENDED. ---- 9. 142(1)/271(1)(B) 13/11/2007 21/11/2007 NONE ATTENDED. ---- 10. 144(1) / 142(1) 03/12/2007 07/12/2007 NONE ATTENDED. ---- 3.2 SINCE THE ASSESSEE ATTENDED ASSESSMENT PROCEEDI NGS ONLY ON THREE DAYS, THE LD. ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE WA S AVOIDING ENQUIRIES. THE ASSESSEE DID NOT FURNISH THE ADDRESSES OF CREDITORS AND DEBTORS. TH E ASSESSING OFFICER ALSO NOTED THAT THE AUDIT REPORT FILED BY THE ASSESSEE WAS IN COMPLETE INASMU CH AS THE STATEMENT-I MENTIONED IN THE REPORT DETAILING DEVIATION FROM METHOD OF VALUATION PRESCR IBED UNDER SECTION 145(1) OF THE I. T. ACT, 1961 WAS NOT FURNISHED WITH THE RETURN OF INCOME. EVEN ON SPECIFIC REQUISITION MADE VIDE ORDER SHEET ENTRY DATED 18/10/2007 THE ASSESSEE DID NOT F ILE STATEMENT-I TO AUDIT REPORT. THE AO ISSUED NOTICE UNDER SECTION 144(1) OF THE ACT CLEARLY MENT IONING THAT THE ASSESSMENT PROCEEDINGS COULD NOT BE PROLONGED TILL UN-LIMITED TIME AS THE SAME W OULD BE BARRED BY LIMITATION ON 31 ST DECEMBER, 2007. THE ASSESSEE PREFERRED TO MAKE NON -COMPLIANCE FOR THE REASONS BEST KNOWN TO HIM. SINCE THE ASSESSEE HAD NOT CO-OPERATED IN ASS ESSMENT PROCEEDINGS AND HAD FAILED TO MAKE COMPLIANCE TO THE REQUIREMENTS IN TERMS OF NOTICE U NDER SECTION 142(1) / 143(2) OF THE ACT, THE 4 I. T. APPEAL NO. 5333 (DEL) OF 2010 ASSESSING OFFICER PASSED ORDER UNDER SECTION 144 OF THE ACT. THE ASSESSING OFFICER ALSO REJECTED BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. 4. ON APPEAL IT WAS SUBMITTED THAT THE RETURN OF IN COME FOR ASSESSMENT YEAR 2005-06 WAS FILED DECLARING INCOME OF RS.1,41,203/- WHICH WAS D ULY SUPPORTED WITH AUDITED FINAL ACCOUNTS. THE QUERIES RAISED WERE REPLIED FROM TIME TO TIME, BUT AS THE REGULAR COUNSEL FAILED TO ATTEND, THE ASSESSEE ENGAGED SHRI YOGESH KANSAL, WHO CONTACTED THE AO ON 19/12/2007 AFTER NARRATING HIM THE WHOLE SITUATION ON 7/12/2007 AND ASSURED TO COM PLY WITH THE PENDING REQUIREMENTS. THE AO ALLOWED TO NOTE DOWN THE REQUIREMENTS AS PER ORDER SHEET WITH THE CONDITION TO COMPLY WITHIN A WEEK I.E. ON 26/12/2007 WITH A RIDER THAT IN CASE O F A FAILURE, THE AUTHORIZED REPRESENTATIVE SHALL DEEM THAT HE NEVER ATTENDED. ON 26/12/2007 SHRI KA NSAL DULY ATTENDED WITH ALL THE REPLIES AND BOOKS OF ACCOUNTS, BUT THE AO DID NOT ENTERTAIN HIM AND STATED THAT THE CASE WAS ALREADY FINALIZED. IT WAS ALSO SUBMITTED THAT THE AO HAD M ADE VARIOUS DISALLOWANCES WHILE COMPLETING ASSESSMENT UNDER SECTION 144 OF THE ACT. THE AO HA D FAILED TO ENTERTAIN THE ASSESSEE BEFORE MAKING THE ADDITIONS WHAT TO SAY ABOUT PROPER OPPOR TUNITY OF BEING HEARD OR SEEK EXPLANATION ON THE ISSUES ON WHICH ADDITIONS WERE MADE. NEITHER A NY SHOW CAUSE NOTICE SPECIFYING THE AMOUNT OF THE PROPOSED ADDITION NOR ANY JUSTIFICATION IN T HIS CONTEXT WAS EVER GIVEN. IT WAS ALSO SUBMITTED THAT THE EARLIER NON-COMPLIANCES WERE NOT ON ACCOUNT OF FAULT OF THE ASSESSEE, BUT DUE TO THE REASON OF THE COUNSEL OF THE ASSESSEE ON WHO M THE ASSESSEE WAS DEPENDENT FOR HANDLING THE CASE. AS SUCH, THE ASSESSEE WAS ONLY AN INNOCENT C ULPRIT FOR THE SAID DEFAULT, WHO TRIED HIS BEST TO SALVAGE THE DAMAGE AND ENGAGE NEW COUNSEL, SHRI YOG ESH KANSAL, TO HANDLE THE CASE. SINCE THE ASSESSEE HAD CO-OPERATED WITH THE ASSESSING OFFICER , IT WAS SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN COMPLETING THE ASSESSMENT UNDER SECTIO N 144 OF THE ACT. 4.1 THE LD. CIT (APPEALS) CONSIDERED THE SUBMISSIO NS OF THE ASSESSEE. HE OBSERVED THAT THE CLAIMS AND ASSERTIONS OF THE ASSESSEE FOR NOT PROVI DING PROPER OPPORTUNITY OF BEING HEARD WERE DEVOID OF ANY SUBSTANCE AND MERITS. THE AFFIDAVITS OF THE PARTNERS AND OF COUNSEL WERE WITHOUT ANY EVIDENCE. THE AFFIDAVITS WERE MERELY A CASE OF OWN VERSION, PUT ON LEGAL PAPER AND NOTHING ELSE. THE LD. CIT (APPEALS), THEREFORE, REJECTED TH E CONTENTION OF THE ASSESSEE THAT SHRI YOGESH 5 I. T. APPEAL NO. 5333 (DEL) OF 2010 KANSAL TALKED TO THE ASSESSING OFFICER OR ATTENDED THE OFFICE OF THE ASSESSING OFFICER. THE LD. CIT (APPEALS) FURTHER OBSERVED THAT EVEN IF SHRI KANSAL DID TALK AND DID VISIT THE AO; THAT WOULD NOT HELP THE ASSESSEE AT ALL. THE ASSESSEE WAS GIVEN O PPORTUNITY ON SEVERAL TIMES, BUT DID NOT RESPOND, EXCEPT TWO/THREE OCCASIONS. THE CHANGE OF COUNSEL AT THE FAG END COULD NOT BE GIVEN ANY CREDENCE OR ANY WEIGHTAGE AT ALL FOR RESPONDING AT SUCH LAST MOMENT. THE LD. CIT (A), THEREFORE, CONCLUDED THAT THERE WAS NO DENIAL OF PR INCIPLES OF NATURAL JUSTICE. 5. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAD DEFAULTED IN ATTENDING THE OFFICE OF THE ASSESSING OFFICER BECAU SE OF HIS OLD COUNSEL. THE ASSESSEE CHANGED HIS COUNSEL, WHO ATTENDED THE OFFICE OF THE ASSESSING O FFICER. HOWEVER, THE AO REFUSED TO ENTERTAIN HIM. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD FI LED AFFIDAVIT IN SUPPORT OF HIS CONTENTION THAT THE TAX MATTERS OF THE FIRM WERE HANDLED BY SHRI SU BHASH JAIN, ADVOCATE. THE CASE WAS NOT REPRESENTED PROPERLY DUE TO HIS PERSONAL PROBLEMS. THE ASSESSEE, THEREFORE, ENGAGED SHRI YOGESH KANSAL, C.A. TO ATTEND THE PENDING INCOME-TA X MATTERS. THE ASSESSEE ALSO FILED AFFIDAVIT OF SHRI YOGESH KANSAL IN SUPPORT OF HIS CONTENTION THAT HE TALKED TO THE ITO ON TELEPHONE AND APPEARED BEFORE HIM ON 19/12/2007. HE ALSO VISITED THE AO ALONG WITH REPLY AND BOOKS OF ACCOUNTS, BUT THE ASSESSING OFFICER REFUSED TO ENTE RTAIN HIM BY STATING THAT THE CASE WAS ALREADY FINALIZED. THE LD. AR OF THE ASSESSEE, THEREFORE, SUBMITTED THAT PROPER OPPORTUNITY OF BEING HEARD WAS NOT GIVEN. 6. ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THAT THE ASSESSEE HAD NOT ATTENDED THE ASSESSMENT PROCEEDINGS ON SEVEN OCCASIONS DELIBERAT ELY. THE AFFIDAVITS FILED ARE AN AFTER- THOUGHT. THEREFORE, THERE IS NO FORCE IN THE CONTE NTION OF THE ASSESSEE THAT PROPER OPPORTUNITY OF BEING HEARD HAS NOT BEEN GIVEN. HENCE, THE ASSESSI NG OFFICER HAS CORRECTLY MADE ASSESSMENT UNDER SECTION 144 OF THE ACT. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE DETAILS GIVEN ABOVE, IT IS EVIDENT THAT THE ASS ESSING OFFICER HAD PROVIDED OPPORTUNITY OF BEING HEARD ON TEN DATES, OUT OF WHICH THERE WAS NO COMPL IANCE ON SEVEN OCCASIONS. ON 5/06/2007, 6 I. T. APPEAL NO. 5333 (DEL) OF 2010 SHRI SRI KISHAN AND SHRI SANJAY KAMAT ATTENDED AND SOUGHT TIME. ON OTHER TWO OCCASIONS, PART DETAILS WERE FURNISHED. AS PER THE DETAILS GIVEN T HE AO ISSUED NOTICE UNDER SECTION 144(1)/142(1) OF THE ACT ON 3 RD DECEMBER, 2007 GIVING DATE OF HEARING ON 7/12/2007 . FROM THE DETAILS IT IS EVIDENT THAT THE ASSESSEE WAS NOT ATT ENDING THE ASSESSMENT PROCEEDINGS DELIBERATELY. IT IS NOT THE CASE OF THE ASSESSEE THAT NOTICE UNDE R SECTION 142(1) / 143(2) WERE NOT SERVED ON IT. THE ASSESSING OFFICER HAD ISSUED NOTICE ON EIGHT OC CASIONS. IF SHRI SUBHASH JAIN WAS NOT ABLE TO ATTEND THE ASSESSMENT PROCEEDINGS, BECAUSE OF HIS P ERSONAL DIFFICULTIES, WHEN NEXT NOTICE WAS ISSUED, THE ASSESSEE WOULD HAVE ASKED THE REASONS F ROM HIS ADVOCATE, SHRI SUBHASH JAIN AS TO WHY HE HAD NOT ATTENDED AND UNDER WHAT CIRCUMSTANCE S FRESH NOTICES HAVE BEEN ISSUED. BUT NO SUCH QUESTIONS WERE PUT BY THE ASSESSEE TO HIS COUN SEL. NON-ATTENDANCE ON VARIOUS DATES DESPITE RECEIPT OF NOTICES UNDER SECTION 142(1) / 143(2) OF THE ACT CANNOT BE SOLELY ATTRIBUTED TO THE NEGLIGENCE OF HIS ADVOCATE, SHRI SUBHASH JAIN. THE ASSESSEE TOO HAD BEEN NEGLIGENT AND HAD IGNORED THE NOTICES DELIBERATELY. THE CONTENTION O F THE ASSESSEE IN HIS AFFIDAVIT THAT SHRI SUBHASH JAIN COULD NOT ATTEND THE ASSESSMENT PROCEEDINGS DU E TO HIS PERSONAL PROBLEMS IS NOT SUPPORTED BY ANY EVIDENCE. IN THE ABSENCE OF ANY DOCUMENTAR Y EVIDENCE SUPPORTING THE CONTENTS OF THE AFFIDAVIT IT IS MERE IPSE DIXIT OF THE ASSESSEE. F URTHER AS PER THE DETAILS THE AO ISSUED LAST NOTICE UNDER SECTION 144(1)/142(1) FIXING THE CASE FOR HEA RING ON 7/12/2007. SHRI YOGESH KANSAL IN HIS AFFIDAVIT HAS STATED THAT HE TALKED TO THE ASSESSIN G OFFICER ON TELEPHONE AND APPEARED BEFORE HIM ON 19/12/2007 ALONG WITH POWER OF ATTORNEY. IT IS NOT UNDERSTOOD AS TO UNDER WHAT CIRCUMSTANCES WHEN THE CASE WAS FIXED FOR HEARING ON 7/12/2007, T HE ASSESSEE AUTHORIZED ANOTHER PERSON ON 19/12/2007 TO REPRESENT HIS CASE. SHRI YOGESH KANS AL HAS ALSO NOT FILED ANY EVIDENCE SUPPORTING THE CONTENTS OF HIS AFFIDAVIT. THEREFORE, WHATEVER HAS BEEN STATED IN THE AFFIDAVIT IS MERE IPSE DIXIT OF SHRI YOGESH KANSAL. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE HAD NOT ATTENDED THE ASSESSMENT PROCEEDINGS DELIBERATELY AND THE CON DUCT OF THE ASSESSEE HAS BEEN NEGLIGENT. THE LD. AR OF THE ASSESSEE HAS NOT BEEN ABLE TO MAKE OU T THE CASE OF LACK OF PROPER OPPORTUNITY. THE FAULT OF EARLIER COUNSEL HAS NOT BEEN ESTABLISHED B Y EVIDENCE. HOWEVER, THE ASSESSING OFFICER HAS ASSESSED THE INCOME AT RS.9,22,200/- AS AGAINST RET URNED INCOME OF RS.1,41,203/- AND THE ASSESSEE HAS BEEN BURDENED WITH TAX DEMAND, WHICH I N OUR CONSIDERED OPINION, DOES NOT COMMENSURATE WITH THE ACT OF NEGLIGENCE OF THE ASSE SSEE NOT APPEARING BEFORE THE ASSESSING OFFICER. THOUGH IN SUCH TYPE OF CASES THE ASSESSEE S DO NOT DESERVE ANY SYMPATHY, HOWEVER, SINCE THE ASSESSEE HAD BEEN BURDENED WITH HEAVY TAX DEMAN D WE FEEL IT PROPER TO SET ASIDE THE MATTER TO 7 I. T. APPEAL NO. 5333 (DEL) OF 2010 THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO NS TO FRAME ASSESSMENT DE NOVO AFTER GIVING THE ASSESSEE OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS DIRECTED TO APPEAR BEFORE THE ASSESSING OFFICER WITH THE BOOKS OF ACCOUNTS AND RELEVANT DOC UMENTS. IN CASE IF THE ASSESSEE DOES NOT CO- OPERATE WITH THE ASSESSING OFFICER, HE WILL BE JUST IFIED IN COMPLETING THE ASSESSMENT ON MERITS, AS PER PROVISIONS OF LAW, ON THE BASIS OF MATERIAL AVA ILABLE ON RECORD. WE MAY LIKE TO CLARIFY THAT OUR ABOVE OBSERVATIONS WILL NOT PREJUDICE THE CASE OF ASSESSEE IN ANY MANNER. WE ORDER ACCORDINGLY. 8. SINCE WE HAVE SET ASIDE THE ASSESSMENT TO BE FR AMED DE NOVO, THE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE BECOME INFRUCTUOUS AND ARE D ISMISSED AS SUCH. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 10 TH JUNE, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10 TH JUNE, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.