M/s Vogue Fabrics, Karnal V. ACIT, Panipat

ITA 5959/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97257 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 02-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Keywords: Depreciation; Opportunity of being heard
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA A PILLAI , JM ITA NO. 5959/DEL/2010 : ASSTT . YEAR : 2005-06 VOGUE FABRICS C/O. RAJESH BAHI, 2211, SECTOR-13, URBAN ESTATE KARNAL VS ACIT PANIPAT CIRCLE PANIPAT (APPELLANT) (RESPONDENT) ITA NO. 5654/DEL/2010 : ASSTT. YEAR : 2005-06 DCIT PANIPAT CIRCLE PANIPAT VS VOGUE FABRICS V & PO SEWAH, G.T. ROAD PANIPAT (APPELLANT) (RESPONDENT) PAN NO. AABFV1872E APPELLANT BY : SH. SANDEEP SAPRA, ADV. RESPONDENT BY : SH. J.P.CHANDREKAR, SR. DR DATE OF HEARING : 02.09.2015 DATE OF PRONOUNCEMENT : .09.2015 ORDER PER N.K. SAINI, A.M. THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPARTM ENT ARE DIRECTED AGAINST THE ORDER DATED 27.09.2010 OF THE CIT(A), KARNAL. ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 2 2. IN THE ASSESSEES APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THAT THE LD. CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN INCREASING THE G.P. TO 11% FROM 0.64 AGAINST 16.64% AS DETERMINED BY THE ASSESSING OFFICER. FURTHER HE HAS DETERMINED THE G.P. ON HISTORIC BASIS AND NOR ON ACTUAL BASIS. THIS IS VER Y EXCESSIVE AND ARBITRARY UNJUST AND ANY RATE WITHOUT PREJUDICE VERY EXCESSIVE. 2. THAT SIMILARLY THE ADDITIONAL OF RS. 48,03,475/- AS MADE BY THE ASSESSING OFFICER TOWARDS THE ASSESSABLE INCOME OF THE APPELLANT U/S 69 OF I.T. ACT ON ACCOUNT OF ALLEGED UNACCOUNTED PURCHASES IS ALSO WHOLLY ILLEGAL AND WITHOUT ANY BASIS WHICH HAS BEEN REJECTED BY THE C.I.T(APPEALS). AT ANY RATE, WITHOUT PREJUDICE, THE ADDITION AS MADE IS VERY EXCESSIVE. 3. THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE FOLLOWING ADDITIONS/DISALLOWANCES AS MADE BY THE ASSESSING OFFICER TOWARDS THE ASSESSABLE INCOME ARE ARBITRARY, UNJUST, ILLEGAL AND AT ANY RATE, WITHOUT PREJUDICE, VERY EXCESSIVE AND THE LD. C.I.T. (APPEALS) HAS WITHOUT ANY JUDICIOUS APPLICATION OF MIND CONFIRMED THE SAME. (A) RS. 1,21,845/- OUT OF EXPORT PROMOTION (FOREIGN TRAVEL) EXPENSES. (B) RS. 1,73,761/- OUT OF DEVELOPMENT CHARGES. (C) RS. 15,000/- OUT OF FESTIVAL EXPENSES. ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 3 (D) RS. 41,205/- OUT OF TELEPHONE AND FAX EXPENSES FOR ALLEGED PERSONAL USE OF THE PARTNERS BY DISALLOWING THE SAME @ 1/10 TH . (E) RS. 1,07,518/- BEING 1/8 TH OF CAR REPAIR AND MAINTENANCE AND DEPRECIATION FOR ALLEGED PERSONAL USE. 4. THAT THE APPELLANT CRAVES TO ADD, AMEND OR DELETE ANY GROUNDS OF APPEALS BEFORE OR DURING THE HEARING OF APPEAL. 3. THE ONLY GROUND RAISED IN THE DEPARTMENTAL APPEA L READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING TO APPLY A G.P. RATE OF 11% TO THE SALES FOR WORKING OUT GROSS PROFIT WITHOUT APPRECIATING THAT THE ASSESSEE HAD ITSELF DECLARED A G.P. RATE OF 16.64% IN THE ASSTT. YEAR 2004-05 AND THERE WERE NO EXCEPTIONAL CIRCUMSTANCES JUSTIFYING THE G.P. RA TE OF 0.64 SHOWN IN THE YEAR UNDER CONSIDERATION AND BOOK S OF ACCOUNTS SUFFERED FROM DEFECTS SO AS TO WARRANT INV OKING OF SECTION 145(3) OF THE I.T. ACT. 4. THE MAIN ISSUE IN THESE APPEALS REVOLVES AROUND THE SUSTENANCE/DELETION OF THE TRADING ADDITION MADE BY THE AO ON ACCOUNT OF GROSS PROFIT. THE ASSESSEE HAS ALSO CHAL LENGED SUSTENANCE OF THE DISALLOWANCES OUT OF EXPENSES MADE BY THE AO ON ESTIMATE BASIS. ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 4 5. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED THE RETURN OF INCOME ON 27.10.2015 DECLARING A LOSS OF RS. 1,2 6,85,980/- WHICH WAS PROCESSED U/S 143(1) OF THE IT ACT, 1961 ON 30. 10.2005. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. TH E AO FRAMED THE ASSESSMENT AT NIL INCOME AFTER ADJUSTING BROUGHT FO RWARD DEPRECIATION TO THE EXTENT OF RS. 23,88,057/-. THE AO MADE THE A DDITIONS OF RS. 1,49,71665/-. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO ALLOWED PART RELIEF TO THE ASSESSEE AND SUSTAIN ED THE ADDITIONS PARTLY. NOW THE ASSESSEE IS IN APPEAL AGAINST THE S USTENANCE OF THE ADDITIONS WHILE THE DEPARTMENT IS IN APPEAL AGAINST THE RELIEF ALLOWED TO THE ASSESSEE. 7. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THE AO AS WELL AS THE L D. CIT(A) HAVE NOT ALLOWED PROPER OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. HE DREW OUR ATTENTION TOWARDS PAGE NO. 1 OF THE ASESSEES P APER BOOK WHICH IS THE COPY OF THE ORDER SHEET ENTRIES AND SUBMITTED T HAT THE AO ASKED THE ASSESSEE TO EXPLAIN HOW THE SALES OF RS. 2,17,9 3,298/- WAS MADE WHEN THE TOTAL OPENING STOCK OF RAW MATERIAL WAS RS . 1,69,89,820/-. IT WAS STATED THAT THE AO PASSED THE ASSESSMENT ORD ER ON THE SAME DATE I.E. 28.12.2007 WITHOUT ALLOWING TIME TO THE A SSESSEE FOR GIVING THE EXPLANATION. IT WAS FURTHER STATED THAT THE LD. CIT(A) ALSO DID NOT ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 5 ALLOW PROPER OPPORTUNITY OF BEING HEARD AND DECIDED THE CASE EX- PARTE WHEN THE ASSESSEE ASKED FOR ADJOURNMENT ON 24.09.2 010 AND PASSED THE ORDER ON 27.09.2010, A REFERENCE WAS MAD E TO PARA 1.00 OF THE IMPUGNED ORDER. 8. IN HIS RIVAL SUBMISSIONS, THE LD. DR SUPPORTED T HE ORDER OF THE AO AND FURTHER SUBMITTED THAT AMPLE OPPORTUNITIES O F BEING HEARD WERE GIVEN BY THE AO TO THE ASSESSEE AND THEREAFTER THE ASSESSMENT ORDER WAS PASSED AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE LD. CIT(A) ALSO ALLOW ED OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND PASSED THE ORDER AF TER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND THE A SSESSMENT ORDER PASSED BY THE AO. IT WAS ALSO SUBMITTED THAT THE LD . CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE RELIEF TO THE ASSESSEE BY REDUCING THE GROSS PROFIT RATE TO 11% AS AGAINST 16.64% DECLARED BY T HE ASSESSEE IN THE PRECEDING YEAR AND IN DELETING THE ADDITIONS MADE B Y THE AO BY CONSIDERING THE MERIT OF THE CASE. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE IT IS NOTICED FROM THE ENTRIES IN THE ORDER SHEET, COPY OF WHICH IS PLACED AT PAGE NO. 1 OF THE ASSESSEES PAP ER BOOK THAT THE AO ASKED THE ASSESSEE ON 28.12.2007 TO EXPLAIN HOW THE SALES OF RS. 2.18 CRORE WAS MADE WHEN THE TOTAL OPENING STOCK OF RAW MATERIAL ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 6 WAS RS. 1.70 CRORE AND HIMSELF MENTIONED THAT THE R EPLY REGARDING DISPROPORTIONATE SALES AND PURCHASES WAS FILED ON T HE SAME DATE. IN THE PRESENT CASE, THE AO PASSED THE ASSESSMENT ORDE R ON 28.12.2007, SO IT IS DIFFICULT TO BELIEVE THAT ON THE SAME DAY THE ASSESSEE FURNISHED ALL THE DETAILS WHICH WERE ASKED BY THE AO AND THOS E WERE PROPERLY CONSIDERED WHILE PASSING THE ASSESSMENT ORDER, THER EFORE, IN OUR OPINION, PROPER OPPORTUNITY OF BEING HEARD WAS NOT PROVIDED BY THE AO TO THE ASSESSEE BEFORE PASSING THE ASSESSMENT OR DER DATED 28.12.2007. IT IS ALSO NOTICED THAT THE LD. CIT(A) ALSO PASSED THE IMPUGNED ORDER WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHICH IS CLEAR FROM THE OBSERVATIONS M ADE IN PARA 1.00 OF THE IMPUGNED ORDER WHICH READ AS UNDER :- THE APPEAL PROCEEDINGS FOR THIS YEAR WAS TAKEN UP PER THIS OFFICE NOTICE DATED 12.05.2008 AND THE PROCEED INGS WERE FIXED FOR 30.05.2008. NONE ATTENDED ON THAT DA TE. NEXT OPPORTUNITY WAS ALLOWED AND THE PROCEEDINGS WERE FI XED FOR 26.06.2008 PER THIS OFFICE NOTICE DATED 30.05.2008. CA RAJESH BAHL, COUNSEL OF THE APPELLANT ATTENDED THE PROCEEDINGS ON THAT DATE AND ON HIS REQUEST THE SAM E WAS ADJOURNED TO 26.07.2008, 12.08.2008, 26.08.2008, 02.09.2008, 17.09.2008. NONE ATTENDED ON THAT DATE. FRESH OPPORTUNITY WAS ALLOWED AND THE PROCEEDINGS WERE FI XED FOR 15.10.2008 PER THIS OFFICE NOTICE DATED 25.09.2008. CA RAJESH BAHL, ATTENDED THE PROCEEDINGS ON THAT DATE AND ON HIS REQUEST THE SAME WAS ADJOURNED TO 20.10.2008, 05.11.2008, 27.11.2008 ON WHICH DATE NONE ATTENDED. FRESH OPPORTUNITY WAS ALLOWED AND THE PROCEEDINGS WERE FI XED FOR 17.12.2008. CA RAJESH BAHL ATTENDED THE PROCEEDINGS ON ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 7 THAT DATE AND ON HIS REQUEST THE SAME WAS ADJOURNED TO 07.01.2009, 27.01.2009, 10.02.2009, ON WHICH DATE N ONE ATTENDED. PROCEEDINGS WERE AGAIN TAKEN UP PER THIS OFFICE NOTICE DATED 16.03.2009 AND THE SAME WERE FIXED FOR 26.03.2009. AGAIN THE SAME WERE ADJOURNED TO 29.04. 2009 ON THE REQUEST OF THE COUNSEL OF THE APPELLANT CA R AJESH BAHL. THE SAME WAS ADJOURNED TO 21.05.2009, ON WHIC H DATE CA RAJESH BAHL, COUNSEL OF THE APPELLANT FILED WRIT TEN SUBMISSIONS AND THE PROCEEDINGS WERE ADJOURNED TO 16.06.2009. AGAIN, THE SAME WAS ADJOURNED TO 07.07. 2009 ON THE REQUEST OF THE COUNSEL OF THE APPELLANT. NON E ATTENDED ON THAT DATE. THE CIT(A), KARNAL REQUESTED THE ASSE SSEE TO PRODUCE BOOKS OF ACCOUNTS ALONGWITH RELATED DOCUMEN TS AND VOUCHERS AND THE PROCEEDINGS WERE FIXED ON 28.07.20 09 AND THEN TO 20.08.2009. SH. ANIL GOEL, ACCOUNTANT OF TH E APPELLANT FIRM ATTENDED THE PROCEEDINGS ON 20.08.20 09 AND ON HIS REQUEST THE SAME WAS ADJOURNED TO 31.08.2009 , 22.09.2009 AND THEN TO 5.10.2009. FRESH OPPORTUNITY WAS ALLOWED AFTER JOINING THE UNDERSIGNED, PER THIS OFF ICE NOTICE DATED 30.08.2010 AND THE PROCEEDINGS WERE FIXED FOR 24.09.2010. SH. ANIL GOEL ACCOUNTANT ATTENDED THE PROCEEDINGS ON THAT DATE AND AGAIN REQUESTED FOR ADJOURNMENT. THE REQUEST OF THE APPELLANT TO FURTHE R ALLOW THE TIME WAS REJECTED PER ORDER SHEET ENTRY OF THAT DATE, WHICH IS REPRODUCED BELOW: PRESENT SH. ANIL GOEL ACCOUNTANT AND REQUESTED FO R ADJOURNMENT ON THE GROUND OF PRE OCCUPATION OF THE COUNSEL. ON THE PERUSAL OF THE RECORD, IT IS NOTED THAT THE APPEAL PROCEEDINGS ARE GOING ON SINCE MAY 08 AND APPELLANT HAS ALSO MADE WRITTEN SUBMISSIONS AND HENCE THERE IS NO JUSTIFICATION TO FURTHER ADJOURN THE PROCEEDINGS. T HE REQUEST OF THE APPELLANT TO FURTHER ALLOW TIME IS, THEREFOR E, REJECTED AND THE APPEAL WILL BE DECIDED ON THE BASIS OF WRIT TEN SUBMISSIONS ALREADY FILED. ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 8 FROM THE ABOVE OBSERVATIONS, IT IS CLEAR TH AT THE CASE WAS FIXED FOR HEARING ON 24.09.2010 AFTER ABOUT ONE YEAR WHEN THE CASE WAS EARLIER FIXED ON 5.10.2009. THE LD. CIT(A) MENTIONE D THAT THE ACCOUNTANT OF THE ASSESSEE ATTENDED THE PROCEEDING AND REQUESTED FOR ADJOURNMENT. THE SAID REQUEST WAS REJECTED BY MENTI ONING THAT THE APPELLATE PROCEEDINGS WERE GOING ON SINCE MAY, 2008 , NO OTHER REASONS HAS BEEN GIVEN FROM THE NOTING OF THE LD. C IT(A), IT IS CLEAR THAT THE CASE WAS FIXED FOR HEARING IN THE YEAR 201 0 ONLY ONCE ON 24.09.2010 AND ON THE SAID DATE THE ACCOUNTANT OF T HE ASSESSEE APPEARED AND A REQUEST WAS MADE FOR ADJOURNMENT. TH E LD. CIT(A) HAS NOT MENTIONED THE CONTENTS OF THAT REQUEST, THE RE MAY BE SOME COMPELLING REASONS FOR SEEKING THE ADJOURNMENT BUT NOTHING IS MENTIONED IN THE IMPUGNED ORDER. IT IS ALSO NOTICED THAT THE CASE WAS FIXED FOR HEARING BY THE LD. CIT(A) ON 24.09.2010 A ND BY REJECTING THE REQUEST OF THE ASSESSEE FOR ADJOURNMENT THE IMP UGNED ORDER WAS PASSED ON 27.09.2010. 10. IN OUR OPINION, THE LD. CIT(A) HAS NOT ALLO WED AN APPROPRIATE & PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . IT IS WELL SETTLED THAT NOBODY SHOULD BE CONDEMNED UNHEARD AS PER THE MAXIM AUDI ALTERAM PERTAM . WE, THEREFORE, BY CONSIDERING THE TOTALITY OF TH E FACTS AS DISCUSSED HEREINABOVE, DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER AND REMAND THE CASE BACK TO THE FILE OF THE AO TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW, AFTER PR OVIDING DUE AND ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 9 REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE AND NOT TO SEEK UNDU E OR UNWARRANTED ADJOURNMENTS. 11. IN THE RESULT BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 08 SEPTE MBER, 2015) SD/- SD/- (BEENA A PILLAI) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04/ 09/2015 *B.RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NOS.5959 & 5654/DEL/2010 VOGUE FABRICS 10 DATE INITIAL 1. DRAFT DICTATED ON 04.09.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 07.09.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.