INCOME TAX OFFICER, WARD-1, BEAWAR V. SHRI LALARAM GURJAR, JAIPUR

ITA 645/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1711 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Keywords: Set aside
• Section: 44AD; 133(6); 148; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 645 & 646/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 & 2010-11 THE ITO WARD- 1 BEAWAR CUKE VS. SHRI LALA RAM GURJAR S/O SHRI MEWA RAM GURJAR, VILL: DEVPURA, SHIKWANA, BIJAINAGAR, AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: APRPG 3369 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA, CIT- DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02/12/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 05 /12/2019 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF THE LD. CIT(A), AJMER BOTH DAT ED 27-02-2019 FOR THE ASSESSMENT YEAR 2009-10 AND 2010-11 RESPECTIVELY. 2.1 THE REVENUE HAS RAISED THE COMMON GROUNDS IN TH ESE APPEALS EXCEPT THE QUANTUM OF ADDITION DELETED BY THE LD. C IT(A). THE GROUND RAISED FOR THE ASSESSMENT YEAR 2009-10 IS REPRODUCE D AS UNDER:- ITA NO.645/JP/2019 ITO, WARD- 1, BEAWAR VS SHRI LALA RAM GUR JAR, BIJAINAGAR (AJMER) 2 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 4,78,35,186/- BY ESTIMATING THE NET PROFIT @ 0.20% ON THE TURNOVER OF RS. 53,64,67,051/- INSTEAD OF RS. 61,13 ,51,505/- BY ACCEPTING THE VERSION OF THE ASSESSEE THAT HE WA S ENGAGED IN DIAMOND BUSINESS ON COMMISSION BASIS BUT NOT APPRECIATED THE FACTS MENTIONED BY THE AO DURING RE MAND PROCEEDINGS. 2.2 NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN TH ESE APPEALS WERE CALLED FOR HEARING. IT TRANSPIRES FROM THE RECORD T HAT EVEN ON EARLIER OCCASIONS, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE REPEATED NOTICES WERE SENT THROUGH RPAD AND IT WAS ALSO DIRE CTED TO SEND THE NOTICE TO SERVE UPON THE ASSESSEE THROUGH E-MAIL AN D AO. DESPITE ALL THE EFFORTS MADE TO SERVE THE NOTICE THROUGH RPAD AND E-MAIL TO THE E-MAIL-ID MENTIONED ON THE FORM NO. 35, THE ASSESSE E HAS NOT RESPONDED TILL DATE. THE AO HAS ALSO FILED THE REPORT DATED 1 7-09-2019 AND EXPLAINED THAT NOTICE SENT THROUGH PROCESS SERVER OF THE DEPA RTMENT WAS ALSO NOT RECEIVED BY THE ASSESSEE. THUS IN THESE CIRCUMSTANC ES, WE ARE SATISFIED THAT THE ASSESSEE IS AVOIDING HIS APPEARANCE TO DE FEND THE IMPUGNED ORDERS OF THE LD. CIT(A) IN THESE CASES. HENCE, THE SE TWO APPEALS ARE PROPOSED TO BE HEARD AND DISPOSED OFF EX-PARTE. 2.3 DURING THE COURSE OF HEARING, THE LD. DR HAS SU BMITTED THAT EVEN BEFORE THE AO, THE ASSESSEE HAS NOT RESPONDED TO TH E NOTICES ISSUED AND ITA NO.645/JP/2019 ITO, WARD- 1, BEAWAR VS SHRI LALA RAM GUR JAR, BIJAINAGAR (AJMER) 3 CONSEQUENTLY THE AO PASSED THE EX-PARTE ORDER WHERE BY THE AMOUNTS DEPOSITED AND WITHDRAWALS MADE IN THE BANK ACCOUNT OF THE ASSESSEE WERE TREATED AS TRADING TRANSACTIONS OF THE ASSESSEE. TH E AO CONSEQUENTLY ESTIMATED THE INCOME OF THE ASSESSEE AFTER OBTAININ G THE INFORMATION U/S 133(6) OF THE ACT FROM AXIS BANK WHEREIN ALL THE TR ANSACTIONS OF THE DEPOSITS AND WITHDRAWALS WERE FOUND TO BE CARRIED O UT BY THE ASSESSEE AND THEN THE AO APPLIED THE N.P.@ 8%. THE LD. DR THUS C ONTENDED THAT THE AO HAS APPLIED THE REASONABLE RATE OF NET PROFIT BY TAKING THE GUIDANCE OF SECTION 44AD OF THE ACT. HOWEVER, THE LD. CIT(A) HA S RESTRICTED THE ESTIMATION OF THE INCOME OF THE ASSESSEE BY APPLYIN G NET PROFIT @ 0.20% FROM THE ACTIVITY OF TRADING IN DIAMOND. THE LD. DR HAS FURTHER CONTENDED THAT THE ESTIMATION OF THE N.P. @ 0.20% B Y THE LD. CIT(A) IS BASED ON THE SELECTED CASES AS FILED BY THE ASSESSE E AND NOT BASED ON THE PROFIT PREVAILING IN THIS LINE OF BUSINESS OF TRADI NG IN DIAMOND. THEREFORE, THE LD. CIT(A) HAS CONSIDERED ONLY THE CASES WHERE RESULTS WERE SHOWN IN NEGATIVE AND IT IS NOT A FAIR SELECTION OF COMPARAB LE CASES TO BE APPLIED FOR ESTIMATION OF NET PROFIT. THUS THE LD. DR HAS SUBMI TTED THAT WITHOUT GIVING OPPORTUNITY OF HEARING TO THE AO TO BRING ON RECORD THE COMPARABLE CASES SHOWING THE NET PROFIT PREVAILING IN THE TRADE, THE ITA NO.645/JP/2019 ITO, WARD- 1, BEAWAR VS SHRI LALA RAM GUR JAR, BIJAINAGAR (AJMER) 4 ADOPTION OF NET PROFIT BY THE LD. CIT(A) IS NOT BAS ED ON THE CORRECT FACTS. THE LD. DR RELIED ON THE ORDER OF THE AO. 2.4 WE HAVE CONSIDERED THE ARGUMENTS OF THE LD. DR AND CAREFULLY PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELO W. THERE IS NO DISPUTE THAT THE ASSESSMENT WAS REOPENED BY THE AO BY ISSUI NG NOTICE U/S 148 OF THE ACT DATED 31-03-2016 BASED ON THE INFORMATION R ECEIVED FROM DIT (INV.), MUMBAI REGARDING THE EXTRAORDINARY AMOUNT O F DEPOSITS AND WITHDRAWALS MADE IN THE BANK ACCOUNT OF THE ASSESSE E WITH AXIS BANK. IN RESPONSE TO THE NOTICE, NEITHER THE ASSESSEE HAS FU RNISHED ANY RETURN OF INCOME NOR APPEARED BEFORE THE AO. THE AO ALSO CONS IDERED THE INFORMATION RECEIVED U/S 133(6) OF THE ACT REGARDIN G THE TRANSACTIONS IN THE BANK ACCOUNT OF THE ASSESSEE. SINCE THE ASSESSE E HAS NOT FILED ANY RETURN OF INCOME NOR RESPONDED TO THE NOTICES ISSUE D BY THE AO, THEREFORE, THE AO PROPOSED TO FRAME THE ASSESSMENT U/S 144 OF THE ACT BASED ON THE BEST JUDGEMENT BY ISSUING A SHOW CAUSE NOTICE DATED 3-08- 2016. THEREAFTER THE AO ALSO ISSUED REMINDERS TO TH E ASSESSEE. DESPITE ALL THESE SHOW CAUSE NOTICES AND REMINDERS, THE ASSESSE E DID NOT RESPOND NOR APPEARED BEFORE THE AO AND CONSEQUENTLY, THE AO EST IMATED THE INCOME OF THE ASSESSEE BY APPLYING NET PROFIT @ 8% OF THE TURNOVER BEING THE ITA NO.645/JP/2019 ITO, WARD- 1, BEAWAR VS SHRI LALA RAM GUR JAR, BIJAINAGAR (AJMER) 5 DEPOSITS MADE IN THE BANK ACCOUNT. THE ASSESSEE CHA LLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND CONTENDED THAT THE NET PROFIT APPLIED BY THE AO IS VERY HIGH AND UNREALISTIC IN THE TRADE OF THE ASSESSEE. THE ASSESSEE HAS ACCEPTED THE TRANSACTIONS OF THE DEPOS ITS IN THE BANK ACCOUNT WHICH REPRESENTS THE TURNOVER OF THE TRADING IN DIA MOND. THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO. IN THE RE MAND REPORT, THE AO HAS REITERATED HIS ACTION OF ESTIMATING THE INCOME @ 8% OF THE TURNOVER OF THE ASSESSEE. THE LD. CIT(A) HAS RESTRICTED THE ADD ITION BY APPLYING THE NET PROFIT @ 0.20%. WE FIND THAT THE NET PROFIT APP LIED BY THE LD. CIT(A) IS BASED ON THE DETAILS FURNISHED BY THE ASSESSEE O F THE COMPARATIVE RATES. FOR READY REFERENCE, WE REPRODUCE THE ALLEGED COMPA RATIVE RATES APPLIED BY THE LD. CIT(A) AS UNDER:- S.NO. NAME OF THE ASSESSEE PAN A.Y. G.P. TO SALES ( IN PERCENTAGE) 1. MAHAK DIAM PRIVATE LIMITED AAGCM9676E 2017-18 2018-19 0.03 -1.59 2 DARSH EXIM PRIVATE LIMITED AAFCD0287N 2017-18 2018-19 -0.05 -1.15 3. YASHIKA JEWEL PRIVATE LIMITED AAACY5072H 2017-18 2018-19 0.61 -1.15 4. KUMKUM DIAMONDS PRIVATE LIMITED AADCK8656 N 2011 -12 0.18 5. GANGOTRI EXIM PRIVATE LIMITED AADCG7410Q 2011-12 0.17 6. GOLDSTONE EXIM PRIVATE LIMITED AADCG8161E 2011-1 2 0.19 7. EXCELLENT DIAMONDS PRIVATE LIMITED AACCE0160G 20 10-11 2011-12 0.18 0.21 ITA NO.645/JP/2019 ITO, WARD- 1, BEAWAR VS SHRI LALA RAM GUR JAR, BIJAINAGAR (AJMER) 6 IT IS APPARENT FROM THESE DETAILS CONSIDERED BY THE LD. CIT(A) AS PRODUCED BY THE ASSESSEE THAT ALL THESE CASES ARE H AVING LOSSES OR ONLY INSIGNIFICANT G.P. THEREFORE, THESE ARE ONLY SELECT ED CASES BY THE ASSESSEE WHERE ENTITIES / PARTIES ARE SHOWN EITHER LOSSES O R VERY MEAGER G.P. THEREFORE, IT IS NOT A FAIR AND REASONABLE APPLICAT ION OF N.P. AS COMPARABLE CASES ARE ONLY SELECTED BY THE ASSESSEE WHICH APPEARS TO BE CHERRY PICKING HAVING ONLY LOSS OR NEGLIGIBLE G.P. THUS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT A PROPER AND REASONABLE BASIS SHOULD BE APPLIED FOR ESTIMATING T HE INCOME OF THE ASSESSEE. ACCORDINGLY, THE MATTER IS SET ASIDE TO T HE RECORD OF THE AO FOR DECIDING THE SAME AFRESH BY TAKING A PROPER AND REA SONABLE BASIS OF N.P. AS PREVAILING IN THE TRADE OF DIAMOND. WE FIND THAT IN SOME OF THE REPORTED CASES THIS TRIBUNAL AND HON'BLE HIGH COURT HAVE TAKEN 2 TO 3% REASONABLE PROFIT IN THE BUSINESS OF DIAMOND TRADIN G. HOWEVER, WITHOUT DECIDING THE ISSUE CONCLUSIVELY, WE HAVE SET ASIDE THIS MATTER BACK TO THE RECORD OF THE AO TO CONSIDER THE PROPER AND REASONA BLE N.P. FOR ESTIMATION OF THE INCOME OF THE ASSESSEE. NEEDLESS TO SAY THAT THE ASSESSEE BE GIVEN APPROPRIATE OPPORTUNITY OF HEARING OF APPE ALS BEFORE PASSING THE FRESH ORDER. ITA NO.645/JP/2019 ITO, WARD- 1, BEAWAR VS SHRI LALA RAM GUR JAR, BIJAINAGAR (AJMER) 7 3.0 IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT ON 05 /12/2019 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05 /12/ 2019 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- 1, BEAWAR 2. IZR;FKHZ@ THE RESPONDENT- SHRI LALA RAM GURAJAR, BIJAINAGAR, AJMER 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.645/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR