Shri Chetan C.Patel, Ahmedabad V. The ACIT.,Circle-7, Ahmedabad

ITSSA 522/AHD/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1054 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-11-2015
• Assessment Year: misc
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Search and seizure; Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER) IT(SS)A NOS: 522 TO 524/AHD/2011 (BLOCK PERIOD: 01/04/1987 TO 16/10/1997) SHRI CHETAN C. PATEL, 3/12,SHRADDADEEP COMPLEX, ANKUR ROAD, NARANPURA, AHMEDABAD- 380013 PAN NO. ABRPP 5818P V/S THE ACIT, CIRCLE-7, AHMEDABAD (APPELLANT) (RESPONDENT) SHRI KAMLESH C. PATEL, 3/12,SHRADDADEEP COMPLEX, ANKUR ROAD, NARANPURA, AHMEDABAD- 380013 PAN NO. ACTPP8959Q V/S THE ACIT, CIRCLE-7, AHMEDABAD (APPELLANT) (RESPONDENT) SHRI CHUNILAL R. PATEL, 3/12,SHRADDADEEP COMPLEX, ANKUR ROAD, NARANPURA, AHMEDABAD- 380013 PAN NO. ACJPP1546P V/S THE ACIT, CIRCLE-7, AHMEDABAD (APPELLANT) (RESPONDENT) IT(SS)A NOS. 522 TO 524/AHD/2011 . B.P. 01/04/1 987 TO 16/10/1997 2 APPELLANT BY : SHRI TUSHAR HEMANI, AR RESPONDENT BY : SMT. VIBHA BHALLA, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 02-11-2015 DATE OF PRONOUNCEMENT : 04 -11-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THESE 3 APPEALS FILED BY THE ASSESSEES ARE AGAINST THE ORDER OF CIT(A)-XIV, AHMEDABAD DATED 18.07.2011 FOR B.P 01/04/1987 TO 16 /10/1997. 2. BEFORE US, AT THE OUTSET THE LD. A.R. SUBMITTED THA T THOUGH THE APPEALS ARE OF THREE DIFFERENT ASSESSEE BUT THEY RELATES TO SAME B LOCK PERIOD, THE FACTS AND CIRCUMSTANCES OF ALL THE CASES ARE SIMILAR EXCEPT F OR THE ASSESSEES AND AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR ALL THE APPEALS AND THEREFORE ALL THE APPEALS CAN BE HEARD TOGETHER. LD D.R DID NOT OBJECT TO THE AFORESAID SUBMISSIONS OF LD. A.R. WE THEREFORE PROC EED TO DISPOSE OF ALL THE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE AND TH US PROCEED WITH THE FACTS IN IT(SS)A NO. 522/AHD/2011 IN THE CASE OF CHETAN C . PATEL. 3. ASSESSEE IS AN INDIVIDUAL STATED TO BE DOING BUSINE SS IN THE TRADING OF COAL IN THE NAME & STYLE OF M/S. BEST COAL DEPOT AND CART ING IN THE NAME OF P.M. SERVICES. A SEARCH AND SEIZURE OPERATION U/S. 132 O F THE ACT WAS CARRIED OUT AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASS ESSEE ON 18.10.1997. DURING THE COURSE OF SEARCH, CERTAIN BOOKS OF ACCOU NTS/DOCUMENTS IN RESPECT TO BEST COAL DEPOT WAS FOUND AND SEIZED. THEREAFTER NOTICE U/S. 158BC WAS SERVED ON THE ASSESSEE AND IN RESPONSE TO WHICH ASS ESSEE FILED THE RETURN OF IT(SS)A NOS. 522 TO 524/AHD/2011 . B.P. 01/04/1 987 TO 16/10/1997 3 INCOME FOR THE BLOCK PERIOD 01.04.1987 TO 16.10.199 7 ON 21.10.1999 DECLARING TOTAL INCOME AT RS. NIL. THEREAFTER ASSES SMENT WAS FRAMED AND THE INCOME FOR THE BLOCK PERIOD WAS ASSESSED AT RS. 12, 91,715/- INCLUDING G.P ADDITION OF RS. 12,51,520/- IN RESPECT OF A.Y. 93-9 4 TO 96-97 INSTEAD OF NET INCOME OF RS. NIL DECLARED BY THE ASSESSEE. AGGRIEV ED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE LD CIT(A) WHERE SUBSTANTIAL RELIEF WAS GRANTED TO THE ASSESSEE. AGAINST THE ORDER OF LD. C IT(A), REVENUE CARRIED THE MATTER BEFORE TRIBUNAL. TRIBUNAL VIDE ORDER DAT ED 13.05.2008 SET ASIDE THE ISSUE TO THE FILE OF A.O. PURSUANT TO THE ORDER OF ITAT, A.O VIDE ORDER DATED 18.12.2009 PASSED ORDER U/S. 254 R.W.S. 158BC AND 143(3) AND DETERMINED THE TOTAL INCOME FOR VARIOUS YEARS AT RS . 2,29,834/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BE FORE LD. CIT(A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED B Y THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD.AO IN ESTIMATING THE INCOME OF THE APPELLANT BY APPLYING G.P. RATE INSTEAD OF N.P. RATE AND ACCORDINGLY ERRED IN MAKING ADDITION OF RS .2,29,834/- AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 2. LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN NOT FOLLOWING DIRECTIONS OF THE HONBLE I TAT IN TRUE SPIRIT AND ACCORDINGLY ERRED IN MAKING GP ADDITION. 3. LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD.AO IN TREATING INCOME FOR THE ASSESSMENT YEARS W HERE RETURN OF INCOME WAS NOT FILED AS THE INCOME WAS BELOW THE MAXIMUM AMOUNT NO T CHARGEABLE TO TAX EVEN AFTER APPLYING THE GP RATE AS ADOPTED BY THE LD. AO. 4. LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD.AO IN NOT FOLLOWING THE DIRECTIONS GIVEN BY THE THEN LD.CIT(A), IN THE FIRST ROUND OF APPEAL, TO EXCLUDE THE INCOME FROM THE BLOCK PERIOD FOR ASSESSMENT YEARS WHEREIN RETURN OF INCOME WAS NOT FILED ON ACCOUNT OF INCOME BEING BELOW TAXABLE LIMIT. SINCE IT(SS)A NOS. 522 TO 524/AHD/2011 . B.P. 01/04/1 987 TO 16/10/1997 4 THIS DIRECTIONS OF LD. CIT(A) WERE NOT CHALLENGED B Y THE DEPARTMENT IN THE FIRST ROUND OF APPEAL, THE SAME HAVE BECOME FINAL AND OUGHT TO HAVE BEEN FOLLOWED BY THE CIT(A) WHILE PASSING THE IMPUGNED ORDER. 5. LD.CIT(A) HAS ACCORDINGLY ERRED IN LAW IN REVIEWING HIS PREDECESSOR'S ORDER AND CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION IN THOSE ASSESSMENT YEARS WHEREIN THE RETURN OF INCOME WAS NOT FILED ON ACCOUNT OF IN COME BEING BELOW THE TAXABLE LIMIT, WHICH IN ANY CASE WAS SETTLED BEFORE THE FINAL FACT FINDING AUTHORITY AND THEREFORE SUCH ACTION OF BOTH THE LOWER AUTHORITIES WAS BEYON D THEIR JURISDICTION AND ACCORDINGLY ON THIS SHORT GROUND ONLY SUCH ADDITION S ARE REQUIRED TO BE DELETED. 6. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION S UBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BE FORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BRE ACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 7. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN LEVYING INTEREST U/S 158BFA(1) OF THE ACT. 8. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS U/S 158BFA(2)OF T HE ACT . 4. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT T HOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SHORT CONTROVERSY INVOLVED AND WHICH REQUIRES ADJUDICATION IS AS TO WHETHER THE GROSS PROFIT RATE (GP RATE) OR THE NET PROFIT RATE (NP RATE) SHOULD BE ADOPTED WHILE ESTIMATING T HE INCOME OF THE ASSESSEE. 5. LD. A.R. SUBMITTED THAT AGAINST THE ORDER FRAMED U/ S. 158BC BY THE A.O IN THE FIRST ROUND, ASSESSEE PREFERRED APPEAL BEFORE L D. CIT(A) WHO VIDE ORDER DATED 18.11.2002, AFTER ADOPTING NP RATE AT 1.3% CO NFIRMED THE ADDITION TO IT(SS)A NOS. 522 TO 524/AHD/2011 . B.P. 01/04/1 987 TO 16/10/1997 5 THE EXTENT OF RS. 72,657/- AS AGAINST THE ADDITION OF RS. 12,51,620/- BY A.O. THE MATTER WAS CARRIED BY REVENUE BEFORE TRIBUNAL. HONBLE TRIBUNAL SET ASIDE THE ISSUE TO THE FILE OF A.O WITH A DIRECTION TO DECIDE APPROPRIATE GP OR NP RATE IN LINE OF ASSESSEES BUSINESS. LD. A.R. SU BMITTED THAT IN THE SECOND ROUND, ASSESSEE PLACED ON RECORD THE TAX AUDIT REPO RT OF M/S. OMPRAKASH & CO. FOR A.Y. 96-97 WHICH WAS ALSO ENGAGED IN THE BU SINESS OF COAL TRADING AND IT HAD DECLARED GP RATE AT 6.19% AND NP RATE AT 1.5%. A.O IN THE SECOND ROUND ADOPTED THE GP RATE AT 6.91% BEING THE GP RAT E OF OMPRAKASH & CO. AND AFTER DEDUCTING THE ADMINISTRATIVE EXPENSES MAD E THE IMPUGNED ADDITION. LD. A.R. SUBMITTED THAT IN THE NATURE OF BUSINESS OF COAL TRADING IN WHICH ASSESSEE IS ENGAGED INTO, THE ASSESSEE HAS TO INCUR EXPENDITURE ON TRANSPORTATION AND LOADING AND UNLOADING AND WITHOU T TAKING INTO CONSIDERATION THE AFORESAID EXPENSES, THE INCOME OF THE ASSESSEE CANNOT BE ESTIMATED. HE THEREFORE SUBMITTED THAT ASSESSEE SHO ULD BE GIVEN DEDUCTION OF EXPENDITURE IN RESPECT OF TRANSPORTATION AND LOA DING AND UNLOADING EXPENSES PRIOR TO ESTIMATION OF INCOME AND ACCORDIN GLY THE NP RATE SHOULD BE ADOPTED AS AGAINST THE GP RATE ADOPTED BY THE A. O AND FOR WHICH HE ALSO PLACED RELIANCE ON THE DECISIONS IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES 258 ITR 654 (GUJ.) AND CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP). LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDE R OF A.O AND LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE ESTIMATION O F INCOME. IN THE FIRST ROUND BEFORE TRIBUNAL, THE CO-ORDINATE BENCH OF THE TRIBU NAL NOTED THAT THE SALES ARE UNDISPUTED AND THE MATTER WAS SET ASIDE TO A.O TO DECIDE THE APPROPRIATE GROSS PROFIT OR NET PROFIT TO BE APPLIED TO THE CAS E OF ASSESSEE. PURSUANT TO THE DIRECTIONS OF THE CO-ORDINATE BENCH, WE FIND TH AT A.O AT PARA 9 THOUGH IT(SS)A NOS. 522 TO 524/AHD/2011 . B.P. 01/04/1 987 TO 16/10/1997 6 HAD CONCLUDED THAT IT WAS REASONABLE TO APPLY THE N ET PROFIT RATE OF 1.5% TO THE ASSESSEE AS IN THE CASE OF OMPRAKASH & CO. TO T HE ASSESSEES BUSINESS BUT IN THE LATER PART OF THE ORDER, WE FIND THAT A. O PROCEEDED TO ADOPT THE GP RATE AT 6.19% AND DID NOT GRANT THE DEDUCTION OF EX PENSES OF TRANSPORTATION OF LOADING AND UNLOADING CHARGES ONLY FOR THE REASO N THAT ASSESSEE COULD NOT PROVE THE GENUINENESS OF EXPENSES. IT IS AN UNDISPU TED FACT THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF COAL TRADING AND IN THE NATURE OF BUSINESS IN WHICH ASSESSEE IS ENGAGED INTO, THE EXPENDITURE ON LOADING AND UNLOADING OF EXPENSES AND THE TRANSPORTATION IS AN IMPORTANT CON STITUENT OF EXPENDITURE AND WITHOUT CONSIDERING IT THE CORRECT PROFITS CANN OT BE DETERMINED. WE ALSO FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (SUPRA) HAS ALSO NOTED THAT ENTIRE UNDIS CLOSED SALES COULD NOT BE ADDED AS INCOME OF ASSESSEE BUT ADDITION COULD BE M ADE ONLY TO THE EXTENT OF EMBEDDED PROFITS EMBEDDED IN SALES AND FOR WHICH NET PROFIT WAS ADOPTED. CONSIDERING THE AFORESAID FACTS AND AFTER RELYING O N THE DECISION OF HONBLE GUJARAT HIGH COURT CITED HEREINABOVE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE WHEN THE SALES ARE UNDISPUTED, THE ENDS OF JUS TICE SHALL BE MET IF THE INCOME OF THE ASSESSEE IS ESTIMATED AFTER TAKING IN TO CONSIDERATION THE NET PROFIT RATE OF 1.5%. WE THUS DIRECT ACCORDINGLY. TH US THE GROUND OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. NOW WE TAKE UP ASSESSEES APPEAL IN IT(SS)A NOS. 52 3 & 524/AHD/2011 8. IN THE PRESENT CASES, SINCE BOTH THE PARTIES BEFORE US HAVE ADMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL T O THAT IN IT(SS)A NO. 522/AHD/2011, WE THEREFORE FOR THE REASONS STATED H EREINABOVE WHILE IT(SS)A NOS. 522 TO 524/AHD/2011 . B.P. 01/04/1 987 TO 16/10/1997 7 DECIDING THE APPEAL FOR IN IT(SS)A NO. 522/AHD/201 2 (SUPRA) AND FOR SIMILAR REASONS DIRECT THAT THE ADDITION OF NET PRO FITS BE MADE @ 1.5% OF THE TURNOVER, AS MADE IN THE CASE OF CHETAN C. PATEL (S UPRA) AND THUS ALLOW THE GROUNDS OF ASSESSEE IN THE PRESENT APPEALS. 9. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE ALLO WED ORDER PRONOUNCED IN OPEN COURT ON 04- 11 - 2015 . SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD