The ITO, Ward-6(3), Surat V. Shri Rameshkumar Mafatlal Doshi, Surat

ITA 838/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5883 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JYOTI LAXMI
• Assessee Lawyers: RASESH SHAH
• Keywords: Opportunity of being heard; TDS; Set aside
• Section: 142(1); 144

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K.SHARMA, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WD 6(3), SURAT. VS . SHRI RAMESHKUMAR MAFATLAL DOSHI, PROP. M/S BLUE STAR, 501, RAJENDRA KRUPA BLDG., JADAKADI, MAHIDHARPURA, SURAT. (APPELLANT) .. (RESPONDENT) AND SHRI RAMESHKUMAR MAFATLAL DOSHI, PROP. M/S BLUE STAR, 501, RAJENDRA KRUPA BLDG., JADAKADI, MAHIDHARPURA, SURAT. VS . INCOME-TAX OFFICER, WD 6(3), SURAT. (APPELLANT) .. (RESPONDENT) REVENUE BY :- SMT. JYOTI LAXMI, SR.D.R. ASSESSEE BY:- SHRI RASESH SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO CROSS APPEALS ONE FILED BY THE REVE NUE AND THE OTHER FILED BY THE ASSESSEE FOR ASST. YEAR 2004-05 ARISING FROM THE ORDER OF LD. CIT(A) DATED 26.12.2007. SINCE THEY INVOLVE COMMON ISSUE THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. ITA NO.838/AHD/2008 ASST. YEAR:2004-05 ITA NO.1135/AHD/2008 ASST. YEAR:2004-05 2 2. IN REVENUES APPEAL FOLLOWING GROUND HAS BEEN RA ISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .21,25,557/- MADE BY THE AO ON ACCOUNT OF NON-DISCLOSURE OF INTE REST INCOME AS INCOME FROM OTHER SOURCES. WHEREAS IN ASSESSEES APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN FRAMING EX PARTE ASSESSMENT U/S 144 OF TH E IT ACT. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.4,44,191/- BY TREAT ING 1% OUT OF TOTAL LABOUR PAYMENT AS NON-GENUINE. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.44,30,279/- AT THE RATE OF 25% OF TOTAL PURCHASES AS ALLEGED NON GENUINE PURCHASES . ITA NO.838/AHD/2008 ASST. YEAR 2004-05 (REVENUES APPEAL) 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF TRADING IN POLISHED DIAMONDS AND PROCES SING OF DIAMONDS ON JOB WORK BASIS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUIRED THE ASSESSEE TO MAKE COMPLIANCE OF VARIOUS QUERIES RAIS ED BY HIM THROUGH A NOTICE UNDER SECTION 142(1) AND THROUGH THE NOTICE U/S 143(2). NO COMPLIANCE WAS MADE AND ACCORDINGLY PROCEEDED TO FR AME THE ASSESSMENT EX PARTE UNDER SECTION 144. 3 5. FROM THE SCRUTINY OF RECORDS AO FOUND THAT ASSES SEE AS PER TDS CERTIFICATE ISSUED BY VARIOUS PARTIES INTEREST INCO ME EARNED BY ASSESSEE WAS RS.23,71,415/- WHEREAS THE ASSESSEE HAS DECLARE D ONLY AN INCOME OF RS.1,36,781/- AND THUS BALANCE OF INTEREST INCOME O F RS.22,34,634/- WAS NOT DISCLOSED. IN ADDITION TO THIS, AO NOTICED THAT ASSESSEE ACCEPTED UNSECURED LOANS OF RS.10,90,777/- ON WHICH HE ESTIM ATED INTEREST EXPENSES @ 10% AT RS.1,09,077/-. THUS HE CONSIDERED BALANCE AMOUNT OF RS.21,25,557/- (RS.23,71,415/- (-) 1,09,077/- (-) 1 ,36,781/-) AS UNDISCLOSED INCOME AND WAS ACCORDINGLY ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 6. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT DECLARAT ION OF INTEREST INCOME WAS ON NET BASIS AND COMPLETE DETAILS WERE F ILED BEFORE THE AO. SOME RECONCILIATION STATEMENT WAS FILED BY THE ASSE SSEE BEFORE LD. CIT(A) WHICH WAS CLAIMED THAT IT WAS ALREADY ON RECORD. TH E LD. CIT(A) ACCORDINGLY DELETED THE ADDITION. 7. BEFORE US LD. DR SUBMITTED THAT ORDER OF LD. CIT (A) IS CRYPTIC AND DOES NOT INDICATE AS TO HOW ENTIRE INTEREST INCOME CAN BE TREATED AS DISCLOSED. 8. ON THE OTHER HAND, LD. AR SUBMITTED THAT ALL THE DETAILS WERE FILED BEFORE THE AO. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT IS NOT SHOWN TO US AS TO WHAT DETAILS WERE FILED BEFORE THE AO AND HOW THE DIFFERENCE OF INTEREST INCOME WAS WO RKED OUT BY HIM AT RS.21,25,557/- WHICH COULD BE TREATED AS DISCLOSED. FROM THE ORDER OF AO 4 IT IS APPARENT THAT ASSESSEE DID NOT CO-OPERATE WIT H THE AO AND DID NOT COMPLY WITH THE QUESTIONNAIRE ISSUED. THEREFORE, IT IS NOT POSSIBLE TO INFER THAT ALL THE MATERIAL WAS AVAILABLE ON RECORD. IT S EEMS THAT LD. CIT(A) HAS ACCEPTED THE VERSION OF THE ASSESSEE THAT IT HAS SU BMITTED ALL THE MATERIAL BEFORE THE AO. WE, THEREFORE, CONSIDER IT PROPER TO RESTORE THE MATTER TO THE FILE OF AO WHERE ASSESSEE WILL EXPLAIN AS TO HO W THE DEFICIENCY IN INTEREST INCOME AS WORKED OUT ON THE BASIS OF TDS C ERTIFICATE AND AS DECLARED IN THE RETURN OF INCOME IS DISCLOSED. AO W ILL EXAMINE THE ISSUE AFRESH AND WILL GIVE HIS FRESH FINDING. HE WILL ALS O GIVE PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDI NGLY THIS GROUND OF REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 10. OTHER TWO GROUNDS ARE GENERAL AND, THEREFORE DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. ACCORDINGLY APPEAL FILED BY THE REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ITA NO.1135/AHD/2008 ASST. YEAR 2004-05 (ASSESSEES APPEAL) 11. GROUND NO.1 RELATES TO FRAMING OF EX PARTE ASSE SSMENT. 12. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VI EW EX PARTE ASSESSMENT IS UPHELD AS ASSESSEE DID NOT COMPLY WIT H THE NOTICES ISSUED BY THE AO. THIS GROUND IS ACCORDINGLY REJECTED. 13. GROUND NO.2 RELATES DISALLOWANCE OF LABOUR PAYM ENT BY 1%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTI CED THAT ASSESSEE HAS SHOWN LABOUR PAYMENTS OF RS.4,44,19,158/-. THE AO REQUIRED THE ASSESSEE TO FILE CONFIRMATIONS FROM THE PARTIES TO WHOM SUCH PAYMENTS WERE MADE, AND ALSO TO PROVE THE GENUINENESS OF THE TRANSACTIONS. 5 HOWEVER, THE ASSESSEE DID NOT SUBSTANTIATE HIS CLAI M OF LABOUR PAYMENT. HE ACCORDINGLY DISALLOWED 1% OF THE CLAIM WHICH WAS WORKED OUT AT RS.4,44,191/-. THE LD. CIT(A) CONFIRMED THE ADDITIO N ON THE GROUND THAT NO DETAILS OF CONFIRMATION OF LABOUR PAYMENT WERE F URNISHED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. 14. THE LD. AR SUBMITTED THAT PROPER OPPORTUNITY OF BEING HEARD WAS NOT GIVEN AND THE AO HAS HASTILY PASSED ORDER UNDER SECTION 144. 15. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE R OF LD. CIT(A). 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE RES TORE THE MATTER TO THE AO WHO WILL PROVIDE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO PROVE THE CLAIM OF LABOUR PAYMENTS AND IN CASE LABO UR PAYMENTS ARE NOT SUBSTANTIATED THE ISSUE WILL BE CONSIDERED TOGETHER WITH G.P. DECLARED BY THE ASSESSEE. ACCORDINGLY WE SET ASIDE THE ISSUE TO THE FILE OF AO FOR CONSIDERING AFRESH AFTER GIVING REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. THUS THIS GROUND OF ASSESSEE IS ALLOW ED BUT FOR STATISTICAL PURPOSES. 17. GROUND NO.3 RELATES TO DISALLOWANCE OUT OF PURC HASES OF POLISHED DIAMONDS AT RS.1,77,21,117/-. IN SPITE OF SPECIFIC QUERY RAISED VIDE AOS LETTER DATED 19.6.2006, THE ASSESSEE FAILED TO FURN ISH THE MONTH-WISE DETAILS OF PURCHASES AND SALES OF DIAMONDS. NO CONF IRMATIONS FROM THE PARTIES FROM WHOM THE PURCHASES WERE MADE WERE FILE D. SIMILARLY, HE FAILED TO PROVE THE OUTSTANDING LIABILITIES IN RESP ECT OF SUCH PURCHASES. ACCORDINGLY THE AO RELIED ON THE DECISION OF ITAT I N THE CASE OF ACIT VS. VIJAY PROTEINS LTD. (1986) 55 TTJ (AHD) 76 AND DISALLOWED 25% OF THE TOTAL PURCHASES AT RS.44,30,279/- WHICH WAS ADD ED TO THE TOTAL INCOME 6 OF THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE ADDIT ION ON THE GROUND THAT GENUINENESS OF THE PURCHASES WAS NOT ESTABLISHED. 18. THE LD. AR SUBMITTED THAT THIS DISALLOWANCE WIL L ENHANCE THE GP RATE SUBSTANTIALLY AND, THEREFORE, THE ADDITION IS UNREASONABLE. 19. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE RS OF AUTHORITIES BELOW. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE REST ORE THIS ISSUE TO THE FILE OF AO WHO WILL GIVE AN OPPORTUNITY TO THE ASSE SSEE AND IDENTIFY THE ONLY CASH PURCHASES FOR THE PURPOSE OF RATIO IN VIJ AY PROTEINS (SUPRA). HE WILL, HOWEVER, CONSIDER THE GP RATE ALSO WHICH WOUL D RESULT AFTER MAKING THIS ADDITION. THE GP RATE DECLARED IN THIS LINE OF BUSINESS WILL BE CONSIDERED WHILE MAKING THE ADDITIONS EITHER OUT OF LABOUR PAYMENTS OR OUT OF UNPROVED PURCHASES. THUS THIS GROUND IS ALSO RESTORED TO THE FILE OF AO FOR FRESH CONSIDERATION. 21. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE AND THAT OF ASSESSEE ARE ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 18/06/2010 SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 18/06/2010 MAHATA/- 7 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD