ITO, Roorkee V. Smt. Kaushalya,

ITA 668/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1107 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-10-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Unexplained expenditure; Opportunity of being heard
• Section: 234B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `D : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.396/DEL./2009 (ASSESSMENT YEAR : 2005-06) KAUSHALYA DEVI, VS. ITO, WARD 1, L/H LATE SH. KALU RAM, ROORKEE (HARIDWAR) VILL. LIBBERHERI ROORKEE (HARIDWAR) (PAN/GIR NO.ASUPK5907A) AND I.T.A. NO.668/DEL./2009 (ASSESSMENT YEAR : 2005-06) ITO, WARD 1, VS. KAUSHALYA DEVI, ROORKEE (HARIDWAR) L/H LATE SH. KALU RAM ROORKEE (HARIDWAR) AND C.O. NO.27/DEL./2009 (I.T. A. NO.396/DEL./2009) ASSESSMENT YEAR : 2005-06) ITO WARD 1, VS. KAUSHALYA DEVI, ROORKEE (HARIDWAR). ROORKEE (HARIDWAR) (APPELLANT) (RESPONDENT) ASSESSEE BY : (APPLICATION REJECTED IS ON RECORD) REVENUE BY : SHRI B.K. GUPTA, SR.DR ORDER PER K.D. RANJAN: AM THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AND C.O. BY THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 ARISE OUT OF THE ORDER OF C IT(A)-I, DEHRADUN. 2. THE GROUNDS OF APPEAL TAKEN IN ASSESSEES APPEAL ARE REPRODUCED AS UNDER: (1) THAT, THE LD.COMMISSIONER OF INCOME-TAX (APPEA LS), DEHRADUN HAS ESTIMATED THE NET PROFIT AND CONFIRMED THE RATE AT 5% OF GROSS RECEIPTS APPLYING PROVISION OF SECTION 44AF OF THE INCOME-TA X ACT, 1961 WHICH IS HIGHLY ARBITRARY, UNJUSTIFIED AND AGAINST FACTS OF THE CASE. ITA NOS.396,668/DEL./09 & CO NO.27/DEL./09 (A.Y. : 2005-06) 2 (2) THAT, THE LD.COMMISSIONER OF INCOME-TAX (APPEAL S), DEHRADUN HAS TOTALLY OVERLOOKED THE FACT, THAT THE ASSESSEE HAS MAINTAIN ED THE BOOKS OF ACCOUNT, FILED AUDITED BALANCE SHEET AND THE ASSESSING OFFIC ER IN HIS REMAND REPORT DATED 13.10.2008 HAS OBSERVED AS UNDER: AS PER BOOKS OF ACCOUNT THE PURCHASES OF LIQUOR WERE MADE FORM THE GARHWAL MANDAL VIKAS NIGAM LIMITED (GMVN), RAMN AGAR, ROORKEE AS STATE GOVERNMENT CORPORATION AND HAS BEEN FOUND RECORDED IN THE BOOKS OF ACCOUNT AND WERE ALSO TALLIED WITH THE FOR M NO.27-D (TCS CERTIFICATE) ISSUED BY THE GMVN. THAT CORRESPONDING SALES HAVE BEEN FOUND RECORDED IN THE BOOKS OF ACCOUNT. THE VERIFICATION OF SALE PRICE OF LIQUOR COULD NOT BE MADE AS PRICES FIXED BY THE DISTT. EXCISE OFFICER, HARIDWAR , IF ANY, ARE NOT AVAILABLE WITH THIS OFFICE; AS PER BOOKS THE NET PR OFIT OF RS.1,24,532.00 HAS BEEN WORKED OUT IN THE PROFIT & LOSS ACCOUNT, WHICH HAS BEEN DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME. (3) THAT, THE LD.COMMISSIONER OF INCOME-TAX (APPEAL S), DEHRADUN SHOULD HAVE DELETED THE ADDITION OF RS.2,89,250.00 FORM TH E INCOME AND TRADING RESULT AS DECLARED SHOULD HAVE BEEN ACCEPTED. (4) THAT, THE INTEREST LEVIED U/S 234B AND 234C OF INCOME-TAX ACT, 1961 WAS WHOLLY ILLEGAL AND AT AN RATE, WITHOUT PREJUDICE, V ERY EXCESSIVE. (5) THAT, THE TOTAL INCOME ASSESSED AND THE INCOME TAX DEMAND CREATED THEREON ARE ILLEGAL AND AT ANY RATE, WITHOUT PREJUD ICE, VERY EXCESSIVE. 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE IS LEGAL HEIR OF LATE SH. KALU RAM, LIQUOR CONTRACTOR. THE ASSESSEE WAS ENGA GED IN PURCHASE AND SALE OF IMFL & BEER ETC. THE ASSESSING OFFICER AFTER OBSERVING TH E DUE PROCEDURE ISSUED NOTICE U/S 143(2)/142(1) OF THE INCOME-TAX ACT, 1961. IN RESP ONSE THERETO, SHRI R.K. SHARMA, ADVOCATE, ATTENDED THE PROCEEDINGS FROM TIME TO TIM E. THE ASSESSEE FILED CERTIFICATE IN FORM 27D DURING THE COURSE OF ASSESSMENT PROCEEDING S. HOWEVER, BOOKS OF ACCOUNT, VOUCHER, STOCK REGISTER AND BANK STATEMENT/PASSPORT DOCUMENTS ETC. WERE NOT PRODUCED IN SPITE OF SEVERAL OPPORTUNITIES OFFERED TO THE ASSES SEE. IN THE ABSENCE OF BOOKS OF ACCOUNT AND OTHER DETAILS, THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT U/S 144 OF THE ACT. THE ASSESSING OFFICER FURTHER NOTED THAT AS PER THE BALANCE SHEET NO BANK ACCOUNT WAS MAINTAINED. THE ASSESSEE WAS REQUIRED TO PRODUCE BOOKS OF ACCOUNT AND FURNISHED THE DETAILS OF PURCHASES MADE AND MODE OF PAYMENT AGAINST THE GOODS PURCHASED. ACCORDINGLY, ASSESSING OFFICER WAS OF T HE VIEW THAT PAYMENTS EXCEEDING RS.20,000 WERE MADE IN CASH. THE ASSESSING OFFICER ESTIMATED THE PROFITS @ 5% ON GROSS SALE MADE AT RS.4,13,782. THE ASSESSING OFFI CER ALSO MADE ADDITION OF RS.18,679 ON ACCOUNT OF UNEXPLAINED EXPENDITURE. THE ASSESSI NG OFFICER FURTHER NOTED THAT ITA NOS.396,668/DEL./09 & CO NO.27/DEL./09 (A.Y. : 2005-06) 3 ASSESSEE HAD DEPOSITED RS.6,40,995/- ON DIFFERENT D ATES ON ACCOUNT OF EXCISE DUTY, BUT THE OPENING CAPITAL OF THE ASSESSEE WAS ONLY RS.30,000/ -. SINCE THE ASSESSEE WAS NOT ABLE TO PRODUCE THE BOOKS OF ACCOUNT AND DOCUMENTARY EVIDEN CE TO SUPPORT THE DEPOSITS OF RS.6,40,995/-, AFTER ADJUSTING THE ESTIMATE SALES O F RS.7,18,491/-, THE AMOUNT OF RS.14,90,777/- WAS ADDED. 4. ON APPEAL, THE ASSESSEE CHALLENGED THE ESTIMATIO N OF NET PROFIT @ 5%; THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON P AYMENT OF EXCISE DUTY AT RS.18,679/-; AND ADDITION OF AMOUNT OF UNEXPLAINED EXPENDITURE ON PAYMENT OF EXCISE DUTY AMOUNTING TO RS.14,90,779/-. BEFORE LD. COMM ISSIONER OF INCOME-TAX (APPEALS), IT WAS SUBMITTED THAT ASSESSMENT WAS COMPLETED U/S 144 OF THE ACT AS ASSESSEE DID NOT RESPOND TO SEVERAL NOTICES ISSUED BY THE ASSESSING OFFICER. IT WAS ALSO SUBMITTED THAT ASSESSING OFFICER THOUGHT OVER INVOKING THE PROVISI ONS OF SECTION 40A(3), BUT CHANGED HIS MIND AND THOUGHT IT MORE WISE TO ESTIMATE THE T AXABLE INCOME OF THE ASSESSEE @ 5% OF GROSS SALES OF THE BUSINESS AMOUNTING TO RS.82,7 5,635/-. THE ASSESSEE ALSO FILED WRITTEN SUBMISSIONS BEFORE THE COMMISSIONER OF INCO ME-TAX (APPEALS) WHICH WAS SENT TO THE ASSESSING OFFICER FOR HIS COMMENTS. THEREAFTER , LD.AR OF THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER IN HIS REPORT HAS NOT COMMENTED O N ESTIMATION OF INCOME @ 5%, BUT HAS INSTEAD GIVEN A SEPARATE AND RELATED INFORMATIO N IN HIS LETTER DATED 13.10.2008 REGARDING CERTAIN LOANS AND DEPOSITS AMOUNTING TO R S.6,36,000/-, BUT HAS NOT STATED WHETHER THESE HAD NOT BEEN VERIFIED. SUCH COMMENTS ARE, THEREFORE, INFRUCTUOUS AND MERIT TO BE IGNORED. THE COMMISSIONER OF INCOME-TA X (APPEALS) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND THE REMAND REP ORT OBSERVED THAT PRESENT ASSESSING OFFICER IN HIS REPORT DATED 13.10.2008 HAD NOT GIVE N CLEAN CHIT TO THE ASSESSEE AND HAD STATED THAT BOOKS OF ACCOUNT HAVE BEEN PRODUCED BEF ORE HIM WHEN COMMISSIONER OF INCOME-TAX (APPEALS) HAD ASKED FOR A REPORT. HE HA D EFFECTIVELY AND ESSENTIALLY WRITTEN THAT ASSESSEE HAD NEVER MAINTAINED BOOKS OF ACCOUNT WHICH COULD BE USED AT ASSESSMENT STAGE. IN THE ABSENCE OF BOOKS OF ACCOUNT, THE ASS ESSING OFFICER HAD NO ALTERNATIVE, BUT TO ESTIMATE THE INCOME IN RETAIL LIQUOR BUSINESS OF THE ASSESSEE IN THE SPIRIT OF SECTION 44AF OF THE ACT. WHENEVER AND WHEREVER BOOKS OF AC COUNT ARE NOT MAINTAINED, IN A RETAIL BUSINESS, ASSESSING OFFICER CANNOT ACCEPT TH E TOTAL INCOME AT LOWER THAN 5% OF ITA NOS.396,668/DEL./09 & CO NO.27/DEL./09 (A.Y. : 2005-06) 4 TURNOVER IRRESPECTIVE OF THE AMOUNT OF TURNOVER. H E ACCORDINGLY UPHELD THE ESTIMATION OF INCOME @ 5% OF SALES MADE BY THE ASSESSEE. AS REGA RDS THE ADDITION OF RS.18,679, THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THE BASIS O F REMAND REPORT SUSTAINED THE ADDITION OF RS.2,859/- WHICH REMAINED UNEXPLAINED. THE BALANCE AMOUNT OF ADDITION WAS DELETED. AS REGARDS THE THIRD ADDITION OF RS.14,90 ,777/-, THE COMMISSIONER OF INCOME- TAX (APPEALS) FOUND THAT THE AMOUNT HAS BEEN FOUND BY THE PRESENT ASSESSING OFFICER AS EXPLAINED WHEN BOOKS OF ACCOUNT WERE PRODUCED BEFOR E HIM, THOUGH HE WAS OF THE VIEW THAT BOOKS OF ACCOUNT WERE NOT PREPARED ORIGINALLY WHEN THE ASSESSMENT WAS MADE. HE FURTHER NOTED THAT THIS ADDITION WAS MADE IN ASSESS MENT ORDER IN THE ABSENCE OF REQUISITE BOOKS OF ACCOUNT, PAPER AND DOCUMENT WHICH HAD NOT BEEN PRODUCED BEFORE ASSESSING OFFICER. HE FURTHER NOTED THAT IN FACT, THE ADDITI ON MADE WAS PART OF TURNOVER TO WHICH RATE OF 5% WAS APPLIED BY THE ASSESSING OFFICER. T HEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING ADDITION WHEN ASSESSING OFFICER HAD HIMSELF CONCURRED IN THIS REGARD. HE ACCORDINGLY DELETED THE ADDITION OF RS.14,90,777/-. 5. THE ASSESSEE HAS FILED THE APPEAL AGGRIEVED BY T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), WHO HAD CONFIRMED THE ESTIMAT ION OF INCOME @ 5% AND THE REVENUE IS AGGRIEVED ON ACCOUNT OF RELIEF OF RS.14, 90,777/- ALLOWED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). THE ASSESSEE HAD FILED CROSS OBJECTION IN SUPPORT OF DELETION OF ADDITION OF RS.14,90,777/-. 6. BEFORE US, LD.AR OF THE ASSESSEE FILED APPLICATI ON FOR ADJOURNMENT WHICH WAS REJECTED HAVING REGARD TO THE FACT THAT ASSESSMENT IN THE CASE WAS MADE U/S 144 OF THE ACT, IN THE ABSENCE OF BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAD ESTIMATED THE INCOME @ 5% OF THE TOTAL SALES. HAVING REGARD THE ISSUE INV OLVED, THE ADJOURNMENT APPLICATION WAS REJECTED AND APPEAL IS PROCEEDED ON THE BASIS OF AR GUMENTS ADVANCED BY BOTH THE PARTIES. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS A FACT THAT ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNT DESPITE THE REPEATED OPPORTUNITIES PROVIDED TO THE ASSESSEE. THE ASSESS ING OFFICER HAS ESTIMATED NET PROFIT @ 5% OF SALES MADE BY THE ASSESSEE. THIS ADDITION HA S BEEN SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THE GROUND THAT BOOKS PR ODUCED BEFORE THE ASSESSING OFFICER ITA NOS.396,668/DEL./09 & CO NO.27/DEL./09 (A.Y. : 2005-06) 5 WERE NOT ORIGINALLY WRITTEN AT THE TIME OF ASSESSME NT PROCEEDINGS. IN CASE OF A LIQUOR CONTRACTOR, PROVISIONS OF SECTION 44AF ARE APPLICAB LE WHERE TURNOVER IS LESS THAN RS.40 LAKH. IN THE CASE BEFORE US, THE TURNOVER OVER OF THE ASSESSEE IS RS.82,75,635/- AND, THEREFORE, THE PROVISIONS OF SECTION 44AF CANNOT BE APPLIED. SINCE THE TURNOVER OF THE ASSESSEE IS MORE THAN RS.40 LAKH, THE INCOME HAS TO BE DETERMINED ON THE BASIS OF BOOKS OF ACCOUNT WHICH HAVE BEEN PRODUCED BEFORE THE ASSE SSING OFFICER DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE COMMISSIONER OF IN COME-TAX (APPEALS). IN OUR CONSIDERED OPINION, HAVING REGARD TO THE FACTS OF T HE CASE, THE MATER SHOULD BE RESTORED BACK TO THE FILE OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WITH THE DIRECTIONS THAT HE SHALL EXAMINE THE ISSUES INVOLVED IN THE APPEAL I.E APPEALS FILED BY THE ASSESSEE AND REVENUE AS ALSO THE C.O. FILED BY THE ASSESSEE ON T HE BASIS OF BOOKS OF ACCOUNT AND RELEVANT MATERIAL. THE COMMISSIONER OF INCOME-TAX (APPEALS) SHALL DECIDE THE MATTER AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND AS WELL TO THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE AND REVENUE AND C.O. BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. ORDER PRONOUNCED IN OPEN COURT ON 30/10/209. (C.L. SETHI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: OCT. 30, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A), DEHRADUN. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT