Swapan Kumar Maji, Bankura V. ITO, Ward-4, Bankura, Bankura

ITA 922/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8057 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-06-2012
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Assessee Lawyers: D K SEN
• Keywords: Principle of natural justice; Source of fund

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [ () )) ) , , , , . .. .!' !'!' !'. .. . , , , , #$ ] ]] ] [BEFORE SMT.DIVA SINGH, JM & SRI C. D. RAO, AM ] & / I.T.A NO. 922/KOL/2012 '( )*/ ASSESSMENT YEAR : 2008-09 SWAPAN KUMAR MAJI . -VS.- I.T.O., WARD-4, BANKURA [PAN : AEOPM 2532 F ] BANKURA [ ,- /APPELLANT ] [ ./,-/ RESPONDENT ] ,- / FOR THE APPELLANT : SHRI D.K.SEN, ADVOCATE ./,- / FOR THE RESPONDENT : SHRI K.N.JANA 0'1 2 '$ /DATE OF HEARING : 30.10.2012. 3) 2 '$ /DATE OF PRONOUNCEMENT : 30.10.2012. #4 /ORDER . .. .!' !'!' !'. .. . , , , , #$ PER C. D. RAO, A. M. THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORD ER OF LD. CIT-(A), DURGAPUR DATED 10.04.2012 PERTAINING TO ASSESSMENT YEAR 2008 -09. 2. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS :- 1. FOR THAT THE ORDER OF THE LD. CIT (A) IS ARBITR ARY, ILLEGAL AND BAD IN LAW. 2. FOR THAT THE LD. C.I.T(A) HAVING AGREED THAT THE METHOD OF ESTIMATION ADOPTED BY THE LD. ADDL. C.I.T WAS NOT AGREEABLE TO HIM, HE SHOULD HAVE GIVEN DEFINITE DIRECTION WITH REGARD TO THE COMPUTATION OF INCOME. 3. FOR THAT THE LD. C.I.T(A) EXCEEDED HIS JURISDICT ION IN REMITTING BACK THE ENTIRE ISSUE TO THE FILE OF THE AO TANTAMOUNT TO SET ASIDE OF THE O RDER WHEN THE APPEAL SHOULD HAVE BEEN DECIDED ON MERITS. 4. FOR THAT THE LD. C.I.T(A) HAVING FOUND THAT THE PROFIT ESTIMATED WAS NOT CORRECT AND WEIGHTED AVERAGE SHOULD HAVE BEEN GIVEN, HE HIMSELF SHOULD HAVE ESTIMATED THE REASONABLE RATE OF PROFITS ON THE FACTS AND CIRCUMS TANCES OF THE CASE. 5. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ORDER OF THE CIT(A) BE MODIFIED AND THE ASSESSEE BE GIVEN THE RELIEF PRAYED FOR. 2 6. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 3. AT THE TIME OF HEARING, THE LD. COUNSEL APPEARING O N BEHALF OF ASSESSEE HAS REITERATED THE GROUNDS RAISED IN THE APPEAL AND SUB MITTED THAT THE MATTER MAY BE SET ASIDE TO LD. CIT(A) FOR ESTIMATION OF REASONABLE RA TE OF PROFITS ON FACTS AND CIRCUMSTANCES OF THE CASE. 4. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHAL F OF THE REVENUE DID NOT OBJECT FOR THE SAID REQUEST OF THE LD. COUNSEL FOR ASSESSE E. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT WHIL E DOING THE SCRUTINY ASSESSMENT THE A.O.HAS ADDED AN AMOUNT OF RS.10,08,988/- ON ACCOUN T OF GROSS PROFIT BY RE- CONSTRUCTION OF THE TRADING ACCOUNT AFTER TAKING IN TO CONSIDERATION OF THE DIRECTIONS OF THE ADDL. C.I.T. (A) U/S 144A OF THE ACT. 5.1. ON APPEAL THE LD. CIT(A) HAS RESTORED THE MATT ER TO THE FILE OF AO BY OBSERVING AS UNDER :- I AM NOT IN AGREEMENT WITH EITHER THE ADDL.COMMIS SIONER OR THE A.O, WHO HAS CARRIED OUT THE INSTRUCTIONS GIVEN U/S.144A, AS REG ARDS THE METHOD OF ESTIMATION. WHEN A SURVEY HAS TAKEN PLACE, BOOKS OF ACCOUNTS HAVE BEEN FOUND AND IMPOUNDED AND THE AMOUNT OF SALES CAN BE WORKED OUT FROM SUCH BOOKS T HEN, I FAIL TO SEE, WHY ESTIMATION OF SALES HAVE TO BE RESORTED TO. IN THIS CASE, IT MAY BE NOTED THAT AS PER MATERIAL FOUND DURING COURSE OF SURVEY, THE SALES OF THE APPELLANT WORKED OUT TO RS.9,76,90,485/-, WHEREAS IN THE ACCOUNTS FURNISHED WITH THE RETURN OF INCOME SALES HAVE BEEN SHOWN AT RS.9,75,86,817/. AS MENTIONED BY THE A.O., THE SALES REGISTER PRODUC ED IN COURSE OF ASSESSMENT SHOW SALES AT RS.9,77,34,235/-. THERE IS THUS, A VERY MINOR DI FFERENCE BETWEEN THE THREE FIGURES. IN MY OPINION, AS FIGURES OF SALES HAVE BEEN FOUND IN COURSE OF SURVEY AND THE APPELLANTS FIGURES SHOW ONLY A MINOR VARIATION WITH IT THERE I S NO CAUSE FOR ESTIMATING SALES. FURTHER, NO ENQUIRY IS ON RECORD TO SHOW THAT ACTUAL SALES W ERE HIGHER THAN WHAT HAS BEEN SHOWN BY THE APPELLANT. ALSO, AS PER THE FORMULA, ROUNDING O FF THE AVERAGE RATE OF GROSS PROFIT, 2.93% TO 3% WILL ALSO TEND TO PUSH UP THE FIGURE OF ESTIMATED SALES, WHICH, IN THE INTEREST OF NATURAL JUSTICE, CANNOT BE JUSTIFIED. IT IS ALSO NOTICED THAT THE A.O. HAS TAKEN A SIMPLE ARITHMETICAL AVERAGE OF THE GROSS PROFITS OF SEVERA L ITEMS TO ARRIVE AT THE FIGURE OF 2.93%, WHEREAS, IN MY VIEW, A WEIGHTED AVERAGE BY AMOUNT O F PRODUCT SOLD WOULD HAVE BEEN MORE RELEVANT HERE. NO MATHEMATICAL BASIS FOR THE F ORMULA SUGGESTED BY THE ADDL. CIT HAS BEEN GIVEN. IT IS ALSO NOTICED THAT INDIRECT COSTS WHICH ARE TO BE INCLUDED IN VALUATION OF 3 STOCK HAS BEEN EXCLUDED FROM THE FORMULA. FURTHER, I FIND THAT AFTER RECEIPT OF DIRECTIONS FROM ADDL.CIT, THE A.O. HAS AMENDED THE FIGURES OF TOTAL PURCHASE, UNRECORDED PURCHASE, CLOSING STOCK AND G.P. RATE ACCORDING TO HIS FINDIN GS. THIS, IN MY OPINION, HAS MADE THE ENTIRE ESTIMATION PROCESS LOPSIDED AND, IT CANNOT B E SAID, THAT, A FAIR RESULT HAS EMERGED FROM SUCH EXERCISE. ESTIMATION, IN MY VIEW, SHOULD BE BASED ON A COGENT BASIS. IN THIS CASE, I DO NOT SEE THE A0. ADVANCING THAT OR THE NE CESSITY OF RESORTING TO AN ESTIMATION, IN VIEW OF THE FACT THAT SALES FIGURES ARE AVAILABLE. IT IS OBSERVED, THAT THE A.O. HAS TALKED ABOUT UNR ECORDED PURCHASE. FROM THE TENOR OF HIS ASSESSMENT ORDER, IT APPEARS, THAT, BY THIS HE IS REFERRING TO PURCHASES WHICH HAVE NOT BEEN ENTERED INTO THE STOCK REGISTER AND, ALSO, THAT HE HAS CONSIDERED SUCH PURCHASES TO BE OUTSIDE THE BOOKS AND, THEREFORE, U NDISCLOSED. SUCH UNRECORDED PURCHASES ARE SEEN TO BE OF THE ORDER OF RS.59,10,392/-. HOWE VER, ONE ASPECT IS TO BE MENTIONED. A PURCHASE WHICH IS UNRECORDED IN THE STOCK REGISTER AND SO OBSERVED IN COURSE OF SURVEY DOES NOT NECESSARILY MEAN THAT IT IS A PURCHASE OUT SIDE THE BOOKS. IF THE STOCK REGISTER IS INCOMPLETE WHICH APPEARS TO BE THE CASE HERE EVEN D ISCLOSED PURCHASES MAY GET OMITTED. IN THIS CASE, IT IS SEEN THAT ALL SUCH UNRECORDED P URCHASES HAVE BEEN BROUGHT TO THE A.OS NOTICE BY THE APPELLANT HIMSELF. IT IS ALSO OBSERVE D THAT THE SOURCE OF PAYMENTS FOR THESE PURCHASES HAVE NOT BEEN QUESTIONED BY THE A.O. NO E NQUIRY ON THIS ASPECT FINDS MENTION IN THE ASSESSMENT ORDER. EVEN IN THE CASE OF CASH P URCHASES, THE A.O. HAS NOT MADE OUT A CASE THAT SUCH PAYMENTS HAVE BEEN MADE OUT OF THE A PPELLANTS UNDISCLOSED INCOME. IN FACT, IN THE ASSESSMENT ORDER THIS ASPECT FINDS NO MENTION AT ALL. NO CASH BOOK IS SEEN IN THE LIST OF IMPOUNDED DOCUMENTS. PRESUMABLY, THEREF ORE, THE A.O. DOES NOT HAVE ANY ADVERSE VIEW ON THE APPELLANTS SOURCE OF FUNDS. WITHOUT HARBOURING SUCH ADVERSE VIEWS AND CONDUCTIN G ENQUIRIES THEREIN, THE A.O. APPEARS TO HAVE SIMPLY ASSUMED THAT PURCHASES UNREC ORDED IN THE STOCK REGISTERS ARE NECESSARILY UNDISCLOSED. IN MY OPINION, THIS, THERE FORE, IS NOT A FINDING OF FACT AND CANNOT BE JUSTIFIED. WHEREAS, I AM IN AGREEMENT WITH THE A.OS DECISION TO REJECT BOOKS OF ACCOUNTS, I FIND THAT ESTIMATION OF SALES, AND ESTIMATION OF G.P. AS RESORTED TO BY THE AO. IS FLAWED. IN MY VIEW, THE A.O. SHOULD ADOPT THE HIGHEST FIGURE OF S ALES OF THE THREE HE HAS AT HIS DISPOSAL AND APPLY A G.P. RATE THIS SHOULD BE THE WEIGHTED AVERAGE OF THE G.PS CALCULATED ACROSS THE VARIOUS PRODUCTS THE APPELLANT DEALS IN. APPLYI NG THAT RATE TO THE SALES, THAT IS RS.9,77,34,235/ WOULD GIVE THE RESULTANT G.P. I ALS O FIND THE A.OS COMMENT ON THE APPELLANTS CLAIM OF DAMAGES TO BE CRYPTIC. IT IS N OT KNOWN WHAT EVIDENCE WAS CALLED FOR TO SUBSTANTIATE SUCH CLAIM. HOWEVER, DAMAGES ARE A REGULAR FEATURE OF BUSINESS AND THE A.O. SHOULD HAVE APPLIED HIS MIND TO THE MATTER. IN THE PRESENT CASE, HE IS NOT SEEN TO HAVE DONE SO. THEREFORE, WHILE GIVING EFFECT TO THIS ORD ER, THE A.O. WILL PROVIDE THE APPELLANT NECESSARY OPPORTUNITY TO SUBSTANTIATE HIS CLAIM. TH EREAFTER, THE A.O. WILL WORK OUT THE REQUIRED ADDITION ON THE BASIS OUTLINED ABOVE. THES E GROUNDS OF APPEAL ARE THEREFORE PARTLY ALLOWED SUBJECT TO THE DIRECTION GIVEN ABOVE. 5.2. AGGRIEVED BY THIS, NOW ASSESSEE IS IN APPEAL BEFORE US ON THE SAID ABOVE GROUNDS. 6. AFTER HEARING BOTH THE PARTIES AND ON CAREFUL PE RUSAL OF THE IMPUGNED ORDER 4 WHICH WAS ABSTRACTED IN THE PRECEDING PARAGRAPH THE LD. CIT(A) IS NOT JUSTIFIED IN SETTING ASIDE THE MATTER TO THE FILE OF AO IN VIEW OF THE P ROVISION OF SECTION 251(1)(A) OF THE IT ACT WHICH SPECIFIES THAT LD. CIT(A) ON APPEAL BY TH E ASSESSEE HAS EITHER TO CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT AND THE SET TING ASIDE PROVISION HAS BEEN OMITTED BY THE FINANCE ACT 2001 W.E.F. 01.06.2001. THEREFORE, WE SET ASIDE THE MATTER TO THE FILE OF LD. CIT(A) TO WORK OUT THE REQUIRED ADDITION ON THE BASIS OUTLINED BY HIM IN THE IMPUGNED ORDER. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. #4 $0# 5 0' 6 7 '$ ORDER PRONOUNCED IN THE OPEN COURT ON 30.10.2012. SD/- SD/- [ , ] [ .!'., , , , #$ ] [ DIVA SINGH ] [ C. D. RAO ] JUDICIAL MEMBER ACCOUNTANT MEMBER ('$) DATED : 30.10.2012. [RG '89 : /.PS] 5 #4 2 .; <#;)/ COPY OF THE ORDER FORWARDED TO: 1. SWAPAN KUMAR MAJI, VILL. & POST-SIMLAPAL, DIST.BANK URA, WEST BENGAL.. 2 I.T.O., WARD-4, BANKURA. 3. THE CIT, 4. THE CIT(A)- DURGAPUR 5. DR, KOLKATA BENCHES, KOLKATA [/; ./ TRUE COPY] #4'0/ BY ORDER, 9 /ASSTT REGISTRAR