RAM BABU GUPTA, Jaipur V. ACIT, Jaipur

ITA 555/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5582 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 11-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 143(3)

Judgement Text

ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 555/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI RAM BABU GUPTA S-2, CHAMELI WALA MARKET, M.I. ROAD, JAIPUR CUKE VS. ACIT, CENTRAL CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACPPG 7427A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI S.L. PODDAR, ADV. JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.11.2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13 /01/ 2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) CENTRAL, JAIPUR DATED 10.07.2014 WHEREIN THE ASSESS EE HAS TAKEN THE FOLLOWING GROUND OF APPEAL: ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 2 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ENHANCING AND SUSTAINING THE TRADING ADDITION OF RS. 2,00,000/- TO RS. 4,74,645/- (RS. 8187/- IN GOLD MOUNTAIN AND RS. 4,6 6,548/- IN SILVER MOUNTAIN ) WITHOUT PROVIDING OPPORTUNITY U/S 251(2) OF THE INCOME TAX ACT, 1961. 2. THE RELEVANT FACTS FOR THE ISSUE UNDER CONSIDERA TION ARE AS UNDER:- THE ASSESSEE IS AN INDIVIDUAL RUNNING HIS BUSINES S IN THE NAME AND STYLE OF TWO CONCERNS NAMELY M/S SILVER MOUNTAIN AN D GOLD MOUNTAIN WHICH IS ENGAGED IN BUSINESS OF MANUFACTURING AND TRADING OF SILVER AND GOLD ITEMS. DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE FILED ITS RETURN OF INCOME WHICH WAS SELECTED FOR SCRUTIN Y AND ORDER U/S 143(3) OF THE ACT WAS PASSED AT A TOTAL INCOME OF RS. 57,6 2,530/- AS AGAINST RS. 52,27,850/- REPORTED IN THE RETURN OF INCOME. ONE OF THE ITEMS WHICH WAS ADDED TO THE INCOME BY THE AO RELATES TO TRADIN G ADDITION OF RS. 2,00,000/-AFTER REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. AS PER THE AO THERE IS FALL IN THE G.P. DURING THE YEA R AND THE ASSESSEE HAS NOT GIVEN ANY SPECIFIC REASONS FOR THE LOW GP AND SECONDLY, THE ASSESSEE HAS NOT MAINTAINED THE STOCK REGISTER. AS PER THE AO, THE TRADING RESULTS DECLARED BY THE ASSESSEE WERE NOT R ELIABLE, BOOKS OF ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 3 ACCOUNTS WERE, THUS, REJECTED AND LUMPSUM ADDITION OF RS. 2,00,000/- WAS MADE IN THE HANDS OF THE ASSESSEE. 2.1 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAS ENHANCED THE TRADING ADDITION FROM R S. 2,00,000/- TO RS. 4,74,645/-. THE LD. CIT(A) AFTER CONSIDERING T HE SUBMISSION OF THE LD. AR HAS CONFIRMED THE REJECTION OF BOOKS OF ACCO UNTS AND CONSIDERING THE FALL IN THE TURNOVER OF THE GP RATE ESTIMATED 1 0% FOR GOLD MOUNTAIN AS AGAINST 9.72% OFFERED BY THE ASSESSEE AND 16% FO R SILVER MOUNTAIN AS AGAINST 15% OFFERED BY THE ASSESSEE. THE SAME HAS RESULTED IN ADDITION OF RS. 4,74,645/- AS AGAINST RS. 2,00,000/- ADDITI ON DONE BY THE AO. 3. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO OPPORTUNITY HAS BEEN PROVIDED BY THE LD. CIT(A) WHILE ENHANCING THE ADDITION FROM RS. 2,00,000/- TO RS. 4 ,74.645/- AND HAS DRAWN ATTENTION OF THE BENCH TO THE ORDER OF THE LD . CIT(A) AS WELL AS THE PROVISIONS OF SECTION 251(2) OF THE ACT. AS PER THE LD. AR, IT WAS A MANDATORY REQUIREMENTS TO BE FOLLOWED BY THE LD. CI T(A) FOR ISSUING A SHOW CAUSE BEFORE MAKING AN ENHANCEMENT. IN THE CASE OF THE ASSESSEE NO OPPORTUNITY WAS PROVIDED AND NO SHOW CAUSE NOTIC E WAS ISSUED BY ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 4 THE LD. CIT(A) BEFORE MAKING AN ENHANCEMENT. IN VI EW OF THIS THE LD. AR SUBMITTED THAT THE ENHANCEMENT MADE BY THE LD. C IT(A) VITIATED AND THE ADDITIONS SO MADE DESERVES TO BE DELETED. THE LD. AR FURTHER SUBMITTED THAT LOW GP IN ITSELF CANNOT BE A GROUND FOR MAKING ADDITION BY THE AO AND NO COMPARABLE CASES HAVE BEEN CITED BY THE LD. CIT(A) WHILE ESTIMATING HIGHER GP RATE IN THE HANDS OF TH E ASSESSEE AND SUBMITTED THAT THE ADHOC ADDITION OF RS. 2,00,000/ - MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS ARBITRARY WHICH CA NNOT BE SUSTAINED IN THE EYE OF LAW. 4. THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY REGARDING THE POWER OF THE LD. CIT(A) IT IS A SETTLED LAW THAT CIT(A) HAS POWERS WHICH ARE CO-TER MINUS WITH THE POWERS OF AO. WHAT THE AO CAN DO, THE SAME CAN BE EQUALLY DONE BY THE CIT(A). AT THE SAME TIME, THE POWERS TO ENH ANCE AN ASSESSMENT OR TO REDUCE THE AMOUNT OF REFUND ARE PROVIDED TO T HE LD. CIT(A) SUBJECT TO THE CONDITIONS THAT THE APPELLANT HAS BEEN PROVI DED A REASONABLE ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 5 OPPORTUNITY TO PRESENT HIS CASE AGAINST SUCH ENHAN CE OR REDUCTION. THE RELEVANT PROVISIONS ARE CONTAINED IN SECTION 251(2 ) OF THE ACT WHICH READS AS UNDER: SECTION 251(2): THE COMMISSIONER (APPEALS) SHALL NOT ENHANCE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE APPELLANT HAS BAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEMENT OR REDUCTION. IN THE INSTANT CASE, IT HAS BEEN BROUGHT TO OUR NOT ICE THAT THE LD. CIT(A) HAS ENHANCED THE ASSESSMENT BY AN AMOUNT OF RS. 2,7 4,645/- AND THE SAME HAS BEEN DONE WITHOUT PROVIDING AN OPPORTUNITY TO THE ASSESSEE U/S 251(2) OF THE ACT. WE HAVE PERUSED THE ORDER OF TH E LD. CIT(A) AS WELL AS THE SUBMISSIONS OF THE AR AND THE LD. DR, IT APP EARS THAT THE LD. CIT(A) HAS FAILED TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE BY ISSUING A SPECIFIC SHOW CAUSE FOR ENHANCEMENT OF INCOME. IT IS THEREFORE A CASE WHERE THE ASSESSEE HAS BEEN DENIED HIS RIGHTS OF N ATURAL JUSTICE FOR WANT OF AN OPPORTUNITY TO REPRESENT ITS MATTER AND FOR WHICH IT HAS BEEN PENALIZED IN ABSENTIA. WE ARE THEREFORE OF THE VIE W THAT THE ENHANCEMENT OF INCOME DONE BY THE LD. CIT(A) CANNOT BE SUSTAIN ED IN THE EYE OF LAW. ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 6 6. REGARDING TRADING ADDITION OF RS. 2,00,000/- DO NE BY THE AO, IT IS NOT IN DISPUTE THAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED U/S 145(3) OF THE ACT AND THE SAME HAS BEEN ACCEPTED AND NOT BEEN CONTESTED BY THE AR. IT IS ONLY NATURAL THAT ONCE THE BOOKS OF ACC OUNT HAVE BEEN REJECTED, THE AO IS WITHIN HIS POWERS TO ESTIMATE THE INCOME BASED ON MATERIAL AVAILABLE ON RECORD. IT IS ALSO SETTLED L AW THAT THE ESTIMATION OF INCOME DONE BY THE AO SHOULD NOT BE ARBITRARY, ADH OC OR WITHOUT ANY REASONABLE BASIS. IN THE INSTANT CASE THE AO HAS N OT GIVEN ANY BASIS FOR MAKING THE ADHOC ADDITION OF RS.2,00,000/-IN THE H ANDS OF THE ASSESSEE. IN OUR VIEW IT IS CLEARLY A CASE OF ARBITRARY ADDI TION WHICH CANNOT BE SUSTAINED IN THE EYE OF LAW. 7. IN LIGHT OF ABOVE, THE ADHOC ADDITION MADE BY THE AO OF RS. 2,00,000/- AND SUBSEQUENT ENHANCEMENT BY LD. CIT(A) RS. 4,74,645/- IS HEREBY DELETED. HENCE THE GROUND TAKEN BY THE ASSE SSEE IS ALLOWED. ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 7 IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 13 /01/ 2016 SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 13/ 01 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI RAM BABU GUPTA 2. THE RESPONDENT- THE ACIT, CENTRAL CIRCLE-2, JAIP UR 3. THE CIT(A), CENTRAL, JAIPUR 4. THE CIT, CENTRAL, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 555/JP/14 VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 8 DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER ITA NO. 555/JP/14 SHRI RAM BABU GUPTA VS. ACIT, CENTRAL CIRCLE-2, JAI PUR 9