Rakesh Vaid, New Delhi V. ITO WARD - 62(2), New Delhi

ITA 7821/DEL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4920 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 25-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Rule of consistency; Additional evidence; Tangible material; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 147; 148; 44AD; 142(1); 234B; 208; 64; 13; 145(3)

Judgement Text

1 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. 7821/DEL/2019 [Assessment Year: 2010-11] Rakesh Vaid, H.No. 11-D, pocket-B, Mayur Vihar, Phase-II, New Delhi-110091 PAN- AACPV5536G Vs Income-tax Officer, Ward-62(2), New Delhi. APPELLANT RESPONDENT Appellant by Shri Piyush Kumar Kamal Adv. & Sh. D.K. Gandhi Adv. Respondent by Sh. Anil Kumar Sharma, Sr. DR Date of hearing 17.02.2022 Date of pronouncement 08.04.2022 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-38, New Delhi, dated 13.06,2019, pertaining to the assessment year 2010-11. The assessee has raised following grounds of appeal: 2 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO “1. That the learned Commissioner of Income Tax (Appeals)-38, New Delhi has erred both in law and, on facts in upholding the determination of income made by the learned Income Tax Officer, Ward-62 (2), New Delhi of the appellant at Rs. 14,66,5280/- in an order of assessment dated 13.06.2019 u/s 147/144 of the Act. 2. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/144 of the Act without appreciating that the same were without jurisdiction and hence deserved to be quashed as such. 2.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no specific relevant, reliable and tangible material on record to form a "reason to believe" that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable. 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded mechanically without application of mind do not constitute valid reasons to believe for assumption of jurisdiction u/s 147 of the Act. 2.3 That in absence of any valid approval obtained under section 151 of the Act, initiation of proceedings u/s 147 of the Act and assessment framed u/s 147/144 of the Act are invalid and deserve to be quashed as such. 2.4 That in absence of valid service of notice u/s 148 of the Act the impugned assessment is otherwise illegal, invalid and unsustainable. 3 That while upholding the above addition, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the factual substratum of the case, statutory provisions of law and as such, addition so upheld is highly misconceived, totally arbitrary, wholly unjustified and therefore, unsustainable. 3.1 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that the learned Assessing Officer in his remand report 3 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO had accepted that entire evidence including books of accounts were produced which had also been examined by him. In view of such admission, the disallowance sustained is absolutely untenable and, on hypothetical considerations. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since expenses were duly vouched and such expenses ought to have been allowed as such and could not be disallowed on surmises, conjectures and suspicion. 3.3 That the learned commissioner of Income Tax (Appeals) has failed to appreciate in absence of rejection of books of accounts by invocation of section 145(3) of the Act no disallowance could be made out of business expenses claimed by the appellant and business income declared ought to have been accepted as such. 3.4 That the finding that "additional evidence produced by appellant does not support its case in any manner whatsoever. The facts remains that amount of Rs. 97,76,856/- would have escaped assessment had department not initiated the assessment on the basis of data available from NMS, The appellant deliberately did not appear before the Assessing Officer and has produced additional evidence during the appellate proceeding which do not support his case at all. " is wholly illegal, invalid and entirely vitiated. 3.5 That aforesaid justification is contrary to binding circular No. 14 (XL 35) of 1955, dated 11.04.1955 issued by the CBDT providing instructions for guidance of Income Tax Officers on matter pertaining to assessment wherein it has been provided that Offices of the department must not take advantage of ignorance of an assessee has to his rights. It is further provided as under: "Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should— a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; 4 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO 4 That percentage of profit estimated by the learned Assessing officer and sustained by CIT (A) both in law and on facts in upholding the addition of Rs.14,66,528/- applying rate of profit of 15% on gross receipts to 6 different parties without any basis. 4.1 That prejudice to the above the learned Commissioner of Income Tax (Appeals) ought to have restricted addition by applying rate of profit to the aforesaid sum as adopted in subsequent years and, not denied the entire expenditure claimed and incurred by the appellant. 4.2 That various adverse findings and conclusions recorded by the learned Commissioner of Income Tax (Appeals) are factually incorrect and contrary to record, legally misconceived and untenable. 5 That both the authorities below have framed the impugned order without granting sufficient proper opportunity to the appellant and therefore the same are contrary to principle of natural justice and hence vitiated. 6 That the learned commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding the levy of interest of under section 234A and u/s 234B of the act which are not leviable on the facts and circumstances of the case of the appellant.” 2. Facts giving rise to the present appeal are that the Assessing officer noticed that as per NMS data, the assessee had not filed his return of income for the assessment year 2010-11, but ITS statement showed gross contractual receipts amounting to Rs. 97,76,856/-. Subsequently, after obtaining the approval from the Principal Commissioner of Income-tax, a notice u/s 148 of the Income-tax Act, 1961, hereinafter referred to as the “Act” was issued. No one attended the 5 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO proceedings, therefore the Assessing Officer proceeded ex parte qua the assessee. While framing the assessment, the Assessing Officer treated 15% out of gross receipt as the income of the assessee and assessed the income of the assessee u/s 144 read with section 147 of the Act at Rs. 14,66,528/-. Aggrieved against this, the assessee preferred appeal before the learned CIT(Appeals), who also dismissed the appeal. Aggrieved against this, the assessee is in appeal before this Tribunal. 3. Ground no. 1 is general in nature and needs no separate adjudication. 4. Ground nos. 2 & 3 are against the validity and legality of the reassessment u/s 147 of the Act. Learned counsel for the assessee reiterated the submissions as made in the written submissions. Submissions of the assessee are reproduced for the sake of clarity. “Ground 2 to 2.3 relate to initiation of proceeding and 'reasons recorded' by learned Income Tax Officer (hereafter AO) in absence of a valid approval disputed the validity of assumption of jurisdiction by issuance of notice dated u/s 148 of the Act. It is submitted that there is no tangible material which could enable to form a prima facie belief that income of the appellant had escaped assessment. It is submitted that proceedings under section 147 of the Act can be initiated only on the basis of the tangible material and not on the basis of assumptions and presumptions. The precondition under section 147 of the Act is “reason to believe” and, the expression is stronger than the word “satisfied". The belief entertained by the learned Assessing Officer must not be arbitrary or irrational. It must be reasonable. In other words it must be based on reasons which are relevant and material. The existence of tangible 6 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO and relevant material is a precondition for assuming jurisdiction, as has been held in the case of CIT vs Kelvinator of India Ltd. reported in 320 ITR 561 (SC) and ACIT vs Rajesh Jhaveri Stock Brokers (P) Ltd. reported in 291 ITR 500 (SC). It is thus submitted that in the instant case there is no material much less valid material. It is submitted that assumptions which are merely in the nature of suspicion cannot be the foundation for proceedings u/s 147 of the Act. It is therefore submitted that, reasons recorded are highly vague, indefinite, farfetched, remote and cannot by any standard of imagination lead to a conclusion of the escapement of income and they are merely presumptuous in nature. The assessee seeks to rely upon the judgment of Delhi High Court in the case of CIT vs. Batra Bhatta & Co. reported in 321 ITR 526, wherein it has been held as under: “9. The proceedings under Section 147 are not to be invoked at the mere whim and fancy of an Assessing Officer and it has to be seen in every case as to whether the invocation is arbitrary' or reasonable. ... It is not belief per se that is a pre-condition for invoking Section 147 of the said Act but a belief founded on reasons. The expression used in Section 147 is 'If the Assessing Officer has reason to believe' and not. 'If the Assessing Officer believes'. There must be some basis upon which the belief can be built. It does not matter whether the belief is ultimately proved right or wrong, but, there must be some material upon which such a belief can be founded. 3. Ground 2.4 of the grounds of Appeal relates to valid service of notice u/s 148 of the Act, assumption of jurisdiction under section 147 of the Act is not accordance with law. 3.1. That addition made in absence of service of notice u/s 148 is not in accordance with law. 3.2. Section 148 of the Act reads as under: “Issue of notice where income has escaped assessment. 7 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.” [Emphasis Supplied] 3.3 It is submitted that submission of the appellant is that there has been no valid service of notice under section 148 of the Act. It is submitted that during the course of assessment proceedings, learned assessing officer had stated as under: (para 5 of the order of assessment) “5. Final notice u/s 142(1) and show cause notice dated 20.11.2017 was issued to the assessee and was served by affixture at the last known address, but again no response was received from the assessee..” It will be apparent from the above that appellant has contended that notice was served on the assessee address and therefore, any service of notice under section 148 of the Act on an incorrect address renders the proceedings illegal and void ab initio. It was clarified that notices were sent at the address EA-1/66, Inderpuri, Delhi-110012 despite the fact that, new address of the appellant was at 11-D, Pocket-B, Mayur Vihar-II, New Delhi. It was also stated that this address was declared in the returns of income for assessment year 2011-12 and 2012-13 and other statutory records having same address. It is therefore apparent that initiation of proceedings without valid service of notice under section 148 of the Act is absolutely illegal and untenable. It will be apparent from the above that once notice has been sent at an incorrect address and there is no dispute as to invalid service of notice under section 148 of the Act, proceedings be held to be without jurisdiction. 8 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO It may be stated as there is no evidence to establish that such notice was also effectively served on the appellant. It is submitted that though the learned Assessing Officer in communication dated 20.11.2017 alleges that notice was served by affixture at the last known address without making an enquiry. However, no such proof of service has ever been enclosed. It is thus submitted that in absence of valid service of notice, proceedings initiated under section 148 of the Act are without jurisdiction which is statutory mandate of law. Reliance in support of the aforesaid proposition is placed on the judgment of Hon’ble Delhi High Court in the case of Veena Devi Karnani reported in 410 ITR 23 wherein the Hon’ble High Court had examined that invalid service of notice vitiates the order of assessment. The relevant findings of the Hon’ble Court are extracted hereunder for the sake of convenience: “Rule 127(2) clearly states that the addresses to which a notice or summons or requisition or order or any other communication may be delivered or transmitted shall be either available in the PAN database of the assessee or the address available in the income-tax return to which the communication relates or the address available in the last income-tax return filed by the assessee - all these options have to be resorted to by the concerned authority - in this case the Assessing Officer. Therefore, in the facts o this case when the Assessing Officer issued the reassessment notice, as he did on December 13, 2013- he was under a duty to access the available PAN database of the addressee or the address available in the income-tax return to which the communication related or the address available in the last income return filed by the addressee. The returns for the assessment years 2011-12 and 2012-13 had already been filed on February 22, 2012 and December 13, 2012 respectively, reflecting the changed address but with the same PAN and before the same Assessing Officer. The Assessing Officer omitted to access the changed PAN database and going by the explanation of the Revenue, he merely mechanically sent notices at the old address. Even after issuing the reassessment notice, all succeeding notices under section 142(1), were sent to the old address. It was in these circumstances that the reassessment was completed on best judgment basis. 9 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO The court recollects the decision of the Privy Council in Nazir Ahmed vs. King Emperor [1936] 38 Bom LR 987 (PC) which had been followed subsequently in several Supreme Court rulings that where the law mandates doing something in a particular manner, that is the only maner permissible in law and no other mode can be considered legal. Therefore, the Assessing Officer ws circumscribed and bound by the express mandate of rule 127 which is clearly addressed to the authorities of the Revenue vis-a- vis the mode of communication. Given these compulsions, the Revenue’s argument is a desperate “fall back” of the last resort i.e. the notice which was never under section 292B of the Act is one of despair. It amounts to saying that a notice which was never sent or received is deemed to have been sent and all proceedings despie such lack of notice and despite the Revenue’s fragrant violation of law are deemed to be justified. In such circumstances, the argument, i.e., the Revenue’s invocation of section 292B only needs to be noticed in order to be rejected as countenancing it, would mean that all illegalities are deemed to be tapered over, in its favour. Section 292B in the opinion of the court would admit that no controversy with respect to the question of notice or proper service of summons, if at all were issued in the proper manner, known to law. Here clearly that is not the case. The narrative of facts and the behavior of the Assessing Officer in this case is disturbing to say the least. The Assessing Officer appears to have completely and mechanically proceeded on the information supplied to him by the bank without caring to address himself to the correct position in law and deduced to ensure that the reassessment notice (which is a matter of moment as far as the assessee is concerned) was issued properly and served at the correct address in the manner known to law. The assessee has relied upon a screenshot of the PAN database at the stage when the petition was filed to say that the Revenue always had the wherewithal to access the correct address, PAN number and all other relevant details including the e- mail ID as well as the bank account. The omissions of the Assessing Officer deserves, therefore, to be not only adversely noticed but appropriately reflected in his or her confidential reports and appropriate proceedings initiated by the Revenue authorities which is so directed. The concerned Commissioner, Principal Commissioner 10 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO or other superior authorities, as the case may be, are directed to file a report in this regard within eight weeks from today. Subject to the above observations, the writ petition is allowed, the impugned reassessment notice as well as the order under section 144/147, and the consequential action, i.e., attachment of the assessee’s accounts are hereby quashed.” 3.6 Reliance here is also placed on the following judicial pronouncements: a) 213 Taxation 93 CIT (Del) CIT vs. Mani Kakar b) 296 ITR 333 (Del) CIT vs. Hotline International (P) Ltd. c) 178 ITR 591 (P&H) CIT v Harparshad d) 206 Taxation 312 (P&H) CIT vs. LaxmiNarain e) 229 CTR 188 (P&H) CIT vs. Cebon India Ltd. f) CIT vs. Eshaan Holding (P) Ltd. in ITA No. 1171/2008 dated 31.08.2009 (Del) g) CIT vs. Chandra Agencies ITA No. 99, 100 and 125 of 2004 dated 201.0.2010 (Del) h) 208 Taxation 649 (P&H) CIT vs. Avtar Singh i) 328 ITR 173 (P&H) CIT vs. Kishan Chand j) 157 Taxman 357 (P&H) CIT vs. Sunita Gupta 3.7 It is also submitted that, so far as the validity of initiation of proceedings is concerned, the service of a valid notice is a condition precedent to the validity of assessment. This is well settled proposition of law and if any authority is required, the same will be found in the following judicial pronouncements: - i) CIT Vs T.R. Rajkumari (1974) 96 ITR 78 (Mad) ii) Y. Narayana Chetty V ITO (1959) 35 ITR 388, 392 (SC) iii) CIT Vs Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC) iv) CIT Vs Kurban Hussain lbrahimji Mithi borwala (1971) 82ITR 821 (SC) 11 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO v) Vijay Kumar Jain Vs CIT (1975) 99 ITR 349, 353 (Punj) vi) CIT Vs Ramsukh Motilal (195) 27 ITR 54 (Bom) vii) R.K. Das & Co. Vs CIT (1956) 30 ITR 439 (Cal) viii) Tansukhrai Bodulal Vs ITO (1962) 46 ITR 325 (Assam-FB) ix) Sewlal Daga Vs CIT (1965) 55 ITR 406 (Cal) 3.8 It has been further held by the Hon'ble Apex Court in the case of CWT Vs.KundanLal Behari Lal (1975) 99 ITR 581 (SC) wherein it has been held that the word ‘issue’ meant ‘serve’ and thus a notice cannot be said to have been issued to a person unless he is served with it. Service of the notice after issuing the same within the period of limitation prescribed under section 149 being a condition precedent to the exercise of jurisdiction and if the Assessing Officer is unable to prove that the notice was duly served upon the assessee after issuing the same within the prescribed period, any return filed by the assessee after the expiry of that period will not invest the Assessing Officer with jurisdiction to reassess the income of the assessee pursuant to such a return. This was so held in CIT Vs. Thyaballi Mulla Jeevaji Kaapasi (1967) 66 ITR 147 (SC). It is therefore submitted that any notice u/s 148 of the Act having ever been served on the assessee the impugned assessment is void and liable to quashed as such. 3.9 It is submitted that, it has been also held by the Madras High Court in the case of Venkat Naicken Trust v ITO reported at 242 ITR 141, 143 that, when the assessee pleads that he has not been properly served with any notice it is for the department to place the relevant material to substantiate their plea that the assessee was served with proper notice. The Mysore High Court in the case of C.N. Nataraj Vs. Fifth ITO 56 ITR 250 has further held that a notice prescribed under section 148 for initiating reassessment proceedings was not a mere procedural requirement; the service of the prescribed notice on the assessee was a condition 12 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO precedent to the validity of any reassessment made under section 147; if no notice was issued or if the notice issued was shown to be invalid, then the proceedings taken by the ITO without a notice or in pursuance of an invalid notice would be illegal and void. Therefore, as held by the Hon’ble Mysore High Court, the assessment passed in pursuance of an invalid notice was illegal and void and, the assessment made by the learned ITO had to be cancelled. 3.10 It is submitted that, there could be no “acquiescence”, to any invalid initiation of proceedings. It is submitted that, assessee’s compliance could not be held, as any valid ground for a conclusion that the proceedings on the basis of said notice, were validly initiated and had been acquiesced by the assessee. It is submitted that, merely because, the assessee had acted upon such notice, which otherwise was nonest in law cannot be a ground to contend that the proceedings were validly initiated. It may be stated that the provisions of Chapter XIV of the Income Tax Act are highly onerous and have to be strictly complied with and in accordance with law. It is well settled rule of law, that there is no equity about the taxing provisions and as such it is submitted that before any tax can be realised, it is equally obligatory in law that the proceedings have to be initiated too, in accordance with law and not in disregard of statutory provisions of law. The short submission of the assessee thus is that in the instant case, the initiation of proceedings under Chapter XIV of the Income Tax Act is invalid and as such the entire assessment made is totally untenable, which assessment deserves to be annulled. 3.11 Even otherwise assessee raised a ground regarding service of notice which had not been disposed by CIT(A) in an order dated 08.12.2017. 3.12 It is thus prayed that, in absence of service of notice, order of assessment should, therefore, be annulled and, be held a nullity. 4. Ground 3 to 3.5 the grounds of appeal relate to acceptance of evidence furnished by assessee during the course of remand proceedings and after examination accepting the nature of services and disallow the claim of the assessee. 4.1 That in absence of any specific defect being pointed in the books of accounts maintained by the appellant, the learned Assessing Officer was not 13 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO justified to reject the claim of appellant. Reliance is placed on the following judicial pronouncements: a) 315 ITR 185 (P&H) CIT vs. OM Overseas b) 320 ITR 116 (All) CIT vs. Mascot India Tools & Forgings (P) Ltd. c) 64 DTR 409 (Jai) Asstt. CIT vs. Shankar Exports d) 325 ITR 13 (Del) CIT vs. Paradise Holidays e) ITA No. 999/2010 dated 03.08.2010 CIT vs. M/s Rice India Exports Pvt. Ltd. in, “3 It is settled law that in revenue matters, the onus of proof is not a static one. Though the initial burden of proof lies on the assessee yet when it files purchase bills and affidavits, the onus shifts to the Revenue. One must not forget that it is Revenue which has powers regarding discovery, inspection, production and calling for evidence as well as survey, search, seizure and requisition of books of accounts.” f) 326 ITR 223 (Del) CIT vs. Smt. Poonam Rani 8 The fall in gross profit ratio, in the absence of any cogent reasons could not, by itself, have been a ground to hold that proper income of the assessee cannot be deduced from the accounts maintained by her and consequently, could not have been a ground to reject the accounts invoking Section 145(3) of the Act. 9. The fall in gross profit ratio could be for various reasons such as increase in the cost of raw material, decrease in the market price of finished product, increase in the cost of processing by the assessee etc. There is no finding that the actual cost of the raw material purchased by the assessee was less than what was declared in the account books. There is no finding that the actual cost of processing carried out by the assessee was less than what had been declared in her account books. No particular expenditure shown in the account books has been disallowed by the Assessing Officer. There is no finding by the Assessing Officer that the actual quantity of finished product produced by the assessee was more than what it was shown in the accounts books. There is no finding that the assessee had made any such sale of the finished product which was not reflected in the accounts books. There is no finding by the Assessing Officer that the finished product was sold by the assessee at a price higher than what 14 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO was declared in the accounts books. In these circumstances, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, in our view, were justified in holding that the Assessing Officer could not have increased the gross profit ratio merely because it was low as compared to the gross profit ratio of the preceding year. g) 324 ITR 95 (Del) CIT vs. Jas Jack Elegance Exports h) ITA No. 796/2011 (Del) dated 3.05.2012 CIT vs. Winner Constructions (P) Ltd. i) 316 ITR 120 (Raj) Malani Ramjivan Jagannath v. ACIT” 5. On the contrary learned DR opposed the submissions and supported the orders of the authorities below. He contended that the assessment is validly reopened. The assessee failed to explain the reasons for not filing the return of income and also did not attend the proceedings before the Assessing Officer. 6. I have heard rival submissions, perused the material on record and gone through the orders of the authorities below. The assessee has taken various ground to challenge the validity of reopening of the assessment and serviced of notice u/s 148 of the Act. There is no dispute with regard to the fact that the assessment was reopened on the basis that the assessee failed to file his return of income. Moreover, the assessee had contractual receipts. Therefore, he was under legal obligation to file his return of income. So far as question of reopening of the assessment is concerned, the case laws as relied upon by the learned counsel for the assessee would not help the assessee and are distinguishable under the facts of the present case. Therefore, considering the material available on record, I do not 15 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO see any reason to interfere in the finding of authorities below regarding reopening of the assessment. Hence, ground nos. 2 and 3 of the assessee’s appeal are dismissed. 7. Ground nos. 4 to 5 are on merit of the addition made by the Assessing Officer and sustained by the learned CIT(Appeals). 8. Learned counsel for the assessee reiterated the submissions as made in the written synopsis. For the sake of clarity, the submissions of the assessee are reproduced here in below: Sr. No. Finding of AO in remand report and CIT(A) 1 Finding of AO in remand proceeding (Page 103-105 of Paper Book) 4.(a) Statement of salary and wages alongwith ESIC and EPFO paid challans The assessee has firstly furnished a moth- wise summary of the salary paid to its works for the F.Y 2009-10 relevant to the A.Y.2010-11 the total salary claimed to be disbursed during the year is Rs. 55,54,9467- now, as per the summary of the salary disbursed during the year, the assessee has paid salary in cash for the major part of the total salary claimed to be disbursed, i.e out of total salary claimed to be disbursed amounting to Rs. 55,54,496/- only Rs. 3,94,00/- is claimed to have been disbursed by cheque. The remaining amount of Rs. 51,60,496/- has been paid in cash further, the assessee has not furnished any statement / evidence etc. as to the documents of salary for the months of September 2009 and February 2010. Also, as per the summary of salary paid Issue: Salary AND WAGES ALONGWITH ESIC AND EPFO - That during the course of remand proceedings assessee submitted following details regarding payment of salary and ESIC EPFO as under a) Copy of ledger account month wise salary debited to regular employees from April 2009 to March 2010 (Page No. 9 to 53 of paper book) b) Copy of ledger account of month wise summary of salary for April 2009 to March 2010 (Page no. 54 of paper book) c) Copy of ledger account of E.P.F contribution share monthly summary April 2009 to March 2010 (Page no. 55 of paper book) d) Copy of ledger account of Administrative Charges monthly summary April 2009 to March 2010 (Page no. 56 of paper book) e) Copy of telephone expenses monthly summary April 2009 to March 2010 (Page no. 57 of paper book) f) Copy of deposits pay in slip of EPF and ESIC 16 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO during the year 2009-10, the assessee has paid Rs. 3,27,643 for the month of April 2009 and Rs. 1.25,000/- for the month of February 2010 under the head other salary. There is no record as to whom this amount has been paid, what is the mode of payment and moreover whether this salary has been actually paid or not. Perusal of the additional evidence reveals that the assessee has not furnished any evidenced as to the amount of EPF in the form of challans for the months of May, June, August, September, October, December (2009), January and March 2010. It can be seen from the table above that the assessee has declared ESIC paid for the month of January 2010 at Rs. 22,994/- but has paid ESIC amounting to Rs, 22,720/- Similarly, the assessee has declared ESIC paid for the month of March 2010 at Rs. 23,400/- but has paid ESIC amounting to Rs. 15,796/- Therefore, it can be safely said that the assessee has furnished incomplete details which he has submitted are factually incorrect. The details furnished to not in any way support the claim of the assessee as it is not corroborated by any other supporting documents lie, attendance sheet, identity of the workers, muster roll etc. (Page no. 58 to 65 of paper book) g) Copy of EPF return of contributions in Form-5 (Page no. 66 to 69 of paper book) h) Copy of ledger account of salary paid through bank (Page no. 95 of the paper book) - That year under consideration assessee claimed expenditure against work contracts from following parties as under: a) M/s Adobe Systems India Pvt Ltd. b) M/s Calypto DesignSystems India (P) Ltd. c) M/s loreal India (P) Ltd d) M/s nestle India Ltd e) M/s Tata Tele services. - That The purpose of payment washing cleaning of premises used by aforesaid companies . - It is submitted that the learned Assessing Officer in the order has not disputed work done by the assessee other than to hold that there was infirmities in evidences of expenditure and support the claim of the assessee as it is not corroborated by any other supporting documents of the assessee. But it is an undisputed fact that the assessee incurred the expenses for the purpose of business - That it is the quality and nature of payment in question and not the method of the payment or its measure, that should be the basis of determining the taxability of an item under the provisions of the Act, Reliance is placed on the following decisions: (i) 95 ITR 664 Jamshedpur Motor Accessories Stores vs. CIT Bihar & Orissa (ii) (3 ITC 219) Indian Turpentine & Rosin co Ltd. Vs. CIT United Provinces. (iii) 42 ITR 392 (SC) Senariram Doongarmal vs. CIT (iv) 74 ITR 7 (SC) New Savan Sugar & Gur Refining Co. Ltd. 2 Finding of AO in remand proceeding In the additional evidence submitted by the Issue: Purchase invoices - That during the course of remand proceedings assessee submitted following 17 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO assessee, he was furnished copies of some of the bills/invoices for the purchases he has made during the year. These bills / invoices total upto Rs. 1,63,272/- only. The assessee has not submitted the total amount of purchases made during the year. The assessee has also not furnished any details as to the party, the mode of payments. The confirmation from the party for the purchases. Therefore, it can be safely said that the documents furnished in support of the purchases for not support the claim of the assessee due to patent infirmities. details: Ledger account on 96-99 of Rs. 1915611/- a) Copy of sample of purchase invoices of the metrical used during the course of supply of services under work contract services (Page no. 70 to 78 of paper book) b) Copy of account statement of oriental bank of commerce for current account no. 1129101100516 for the period of 01.04.2009 to 31.03.2010 (Page on. 79 to 87 of paper book) c) Copy of ledger account of material used of Rs. 1915611/- during the course of supply of services and details of payment to whom material purchased and payment made to account pay cheques (Page no. 96 to 99 of paper book) d) Copy of bank account statement showing payment has been made through cheque (Page no. 86 to 87 of the paper book) - It is settled law that, no disallowance can be made on the basis of suspicion. Reliance for the proposition is placed on Uma Charan Shaw & Bros. Co. vs. CIT reported in 37 ITR 271. It has been further held in the following cases that suspicion howsoever strong cannot take the place of proof: i) 37 ITR 151 (SC) Omar Salay Mohammad Sait v CIT ii) 26 ITR 736 (SC) Dhirajlal girdharilal v CIT, Bombay iii) 26 ITR 775 (SC) Dhakeshwari Cooton Mills Ltd v CIT iv) 37 ITR 288 (SC) Lal Chand Bhagat Ambica Ram v CIT 3 The assessee has submitted a note on “Presumptive” Taxation Scheme which are essentially the provisions of Section 44AD and 44AE. These sections are not applicable to the case of the assessee as the turnover of the assessee during the year under consideration is Rs. 97,76,586/- and the which is above the threshold limit of Rs. Moreover, even applying the rule of consistency, disallowance made is untenable. It is submitted that, once immediately preceding assessment years namely Assessment Years 2011-12 to 2012-13, claim stands allowed then both logically and, legally is even allowable in the year under consideration. 18 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO 40.00 lakh to claim the benefit under presumptive taxation shame viz. 44AD. Therefore, the provisions of section 44AD and 44AE do not apply to the assessee. 4 The assessee has furnished a statement of bonus paid during the year amounting to Rs. 2,73,664/- perusal of the payment of bonus, it is seen that the assessee has paid bonus amounting to Rs. 1,00,139/- inly. There is no evidence as to the payment of the remainder of the bonus amount. Further, the assessee has submitted a detailed calculation of the bonus payable amount. Which 5comes to Rs. 2,85,321/- this is in direct contrast to the fact that the assessee has furnished statement of bonus paid during the year amounting to Rs. 2,73,664/- therefore, it can be safely said that the documents furnished by the assessee are not reliable as they suffer from inconsistencies at every step. Issue: Bonus on salary paid Bonus had been paid according to salary paid to employee a) Copy of employee’s wise bonus details as calculated on the basis of salary payment (Page no. 88 to 89 of paper book) b) Copy of employee’s wise bonus payable for the year ended 31 st March 2010 (Page no. 90 to 94 of the paper book) 5 The assessee furnished bank account statement of his account maintained with oriental Bank of Commerce, Mayur Vihar, New Delhi for the period 01.04.2009 to 31.03.2010. Perusal of the bank account statement referred to above reveals that there is no complete narration sot the deposits and withdrawals. Only in some of the cases there is a vague mention of the purpose for which the payment has been made. There is no mention as to the deposits the fund in the account of the assessee, and in most cases, the party and purpose for which the payment has been made. Therefore, the bank account of the assessee does not support the other additional evidence furnished by the assessee under Rule 46A. light of the above findings in Paras 4a to 4e, it can be clearly seen that the additional evidence assessee furnished by the assessee suffers from patent infirmities and shortcomings. The details and evidences furnished by the assessee in respect of salary / wages, ESC and EPF are grossly incomplete. The salary has been claimed to be mostly paid in cash. There are no details on record in respect of other salary Letter to bank to release salary in the bank account of permanent employee Summary at page 95 of PB - It is submitted that in the absence of the burden having not been discharged, it was not permissible in law to draw adverse inference against the assessee. Reliance is also placed on the following judgments: i) 131 ITR 597 (SC) K.P. Varghese v. ITO ii) 316 ITR 46 (Del) CIT v. Shakuntala Devi iii) 335 ITR 572 (Del) CIT v. Bajrang Lal Bansal iv) 261 ITR 664 (Del) CIT vs. Naresh Khattar. - It is settled law that, no disallowance can be made on the basis of suspicion. Reliance for the proposition is placed on Uma Charan Shaw & Bros. Co. vs. CIT reported in 37 ITR 271. It has been further held in the following cases that suspicion howsoever strong cannot take the place of proof: i) 37 ITR 151 (SC) Omar Salay Mohammad Sait v. CIT ii) 26 ITR 736 (SC) Dhirajlal Girdharilal v. CIT Bombay iii) 26 iTR 775 (SC) Dhakeshwari Cotton Mills Ltd. v. CIT iv) 37 ITR 288 (SC) Lal chand Bhagat Ambica Ram v. CIT 19 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO amounting to Rs. 3,27,643/- (April 2009) and Rs. 1,25,000/- (February 2010). The comparison of the ESIC amounts as per ESIC returns and as claimed by the assessee reveals that they are also different for the months of January and March 2010. The purchase bills submitted amounting to Rs. 1,63,272/- do not in any way reflect their genuineness or their purpose. The details of bonus paid to the employees also contradictory in as far as the statement of bonus paid to the employees, bonus actually paid and the calculated for the year under consideration. The bank account statement furnished by the devoid of any narration of the debit and credit entries contained therein. The assessee tried to bring his case under the provisions of section 44AD and 44AE but these sections do not apply to the assessee as that total turnover of the assessee during the year under consideration exceeds Rs. 40.00 lakhs. Therefore, it can be concluded that the additional evidence furnished by the assessee under Rule 46A is devoid of merit, suffers from factual inaccuracies and is not fit to be evidence in true sense of the word. - Apart from the above, it is also submitted that the cogent, reasonable explanation cannot be unreasonably rejected as has been held by the Hon'ble Delhi High Court in the case of Sona Electric Co. v CIT reported in 152 ITR 507 at page 512 wherein it has been observed as under: “We think that the section makes it clear that the entry can be rejected if the explanation offered by the assessee can be rejected by the Income-tax Officer on cogent grounds. When such grounds are themselves based on no evidence, the question of presumption does not arise. - It is next submitted that an explanation by an assessee, which is prima facie reasonable, cannot be rejected on capricious or arbitrary grounds or on mere suspicion or on irrelevant grounds as has been held by following cases: i) 27 ITR 602 (Pat0 Chunnilal Tikaamchand Coal Co. Ltd. vs. CIT ii) 30 ITR 181 (SC) Mehta Parikh & Co. vs. CIT iii) 37 ITR 288 (SC) Lalchand Bhagar Ambica Ram vs. CIT iv) 42 ITR 689 (all) Sri Ram Tandon vs. CIT 6. the outset, it is submitted that, the issue stands concluded by learned Assessing Officer in the subsequent years in the case of appellant Moreover, even applying the rule of consistency, disallowance made is untenable. It is submitted that, once subsequent assessment years namely Assessment Years 2011-12 to 2012-13, identical claim stands allowed in an order under section 143(3)/147 of the Act then both logically and, legally is even allowable in the year under consideration, the summary in chart as under: Sr. no. Assessment Year Gross Receipts Profit % of Profit Assessed Income (%) Assessed u/s (date of order) Pages of PB 1 2010-11 97,96,856 7,96,814 8.15 14,66,528 (15%) 144/147 (8.12.2017) Disputed in appeal before this Hon’ble court 2 2011-12 13,25,0446 10,93,695 8.25 10,93,695 (8.25%) 147/143(3) (21.12.2018) 116-120 3 2012-13 11330088 9,35,865 8.26 9,35,865 (8.26%) 147/143(3) (19.12.2019) 130-132 20 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO 6.1. Reliance in support of the principle of consistency is placed on the following judgments: i) 358 ITR 295 (SC) CIT vs. Excel Industries Ltd. “29. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." 30. Reference was also made to Parashuram Pottery Works Ltd. v. Income Tax Officer, [1977] 106 ITR 1 (SC) and then it was held: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 21 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO "On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken." 31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip- flop on the issue and it ought let the matter rest rather than spend the tax payers' money in pursuing litigation for the sake of it.” ii) (2001) 1 SCC 748 State of Andhra Pradesh v A.P. Jaiswal iii) 266 ITR 99 (SC) CIT vs. Berger Paints iv) 249 ITR 219 (SC) UOI vs. Kuomidini Narayan Dalai and Another v) 249 ITR 221 (SC) UOI vs. Satish Panna Lai Shah vi) 308 ITR 161 (SC) CIT vs. J. K. Charitable Trust 9. On the contrary learned DR opposed the submissions and submitted that the assessee has not filed these evidences before the assessing authority. He submitted that the evidence filed by the assessee at the belated stage has rightly been not admitted by the authorities below. 10. I have heard rival submissions and perused the material available on record. Learned Assessing officer has treated the contractual receipt amount reflected in ITS statement as the gross contractual receipt amounting to Rs. 97,76,856/-. The 22 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO Assessing officer has treated 15% of the receipt as the income of the assessee. This, addition is sustained by the learned CIT(Appeals). However, it is seen that none of the authorities below has commented upon the claim of the assessee about payment of salary, contribution to ESIC and EPFO etc. The assessee has provided sufficient evidence that goes to demonstrate the incurrence of the expenses by the assessee. The Assessing Officer did not make any independent inquiry and proceeded to make addition on ad hoc basis. Such action of the Assessing authority do not conform to the mandate of law and therefore, cannot be sustained. In my considered view the Assessing Officer ought to have made verification regarding claim of the assessee and also examine the past history of the account of the assessee. It is seen that in the subsequent year i.e. for the assessment year 2012-13 as per the computation of income on gross receipts of Rs. 1,13,30,088/- and the profit on this amount was Rs. 9,35,856/-, giving profit rate of 8.26%. Therefore, looking to the facts and circumstances of the present case, wherein the Revenue itself has accepted the net profit at 8.26% of gross receipts under identical facts, I, therefore, direct the Assessing Officer to apply the net profit at 8.3% in the present year. The ground raised by the assessee on this issue is partly allowed. 23 ITA no. 7821/Del/2019 Rakesh Vaid Vs. ITO 11. So far as charging of interest u/s 234A and 234B is concerned, the same is consequential. The Assessing Officer is directed to recalculate the charging of interest, if any, while giving effect to the appellate order. 9. In the result, assessee’s appeal, ITA no. 7821/Del/2019, is partly allowed. Order pronounced in open Court on 08/04/2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI