Kamal Kishore Soni, Surat V. Income Tax officer, Ward 2(3)(7), Surat

MA 32/SRT/2022

AI Insights

The case involves two Miscellaneous Applications filed by Kamal Kishore Soni against the Income Tax Officer, Ward-2(3)(7), Surat, concerning the assessment years 2013-14 and 2014-15. The applications sought to rectify what the assessee claimed was a mistake apparent from the record in the Tribunal's earlier order dated 16.11.2021, which estimated a disallowance of 6% on disputed purchases. The assessee argued that the Tribunal did not consider certain additional grounds and evidence presented, which justified a lower disallowance rate of 0.25%. The Tribunal, however, found that the original decision was in line with judicial precedents and did not constitute a mistake apparent from the record.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301709 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-04-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 29-05-2022
• Other Referred Cases: Pankaj K. Chaudhary vs. ITA No.1152/AHD/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM Miscellaneous Application No.32/SRT/2022 [Arising in ITA Nos.32 & 126/SRT/2019] Assessment Year: (2013-14) (Physical Hearing) Kamal Kishore Soni, 311, Tulsi Appartment, 3 rd floor, Somnath Mahadeo Ni Sheri, Mahidarpura, Surat – 395003. Vs. The ITO, Ward-2(3)(7), Surat. (Appellant) (Respondent) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAKPS3474Q Miscellaneous Application No.33/SRT/2022 [Arising in ITA Nos.33 & 127/SRT/2019] Assessment Year: (2014-15) (Physical Hearing) Kamal Kishore Soni, 311, Tulsi Appartment, 3 rd floor, Somnath Mahadeo Ni Sheri, Mahidarpura, Surat – 395003. Vs. The ITO, Ward-2(3)(7), Surat. (Appellant) (Respondent) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAKPS3474Q Appellant by Shri Prakash Jhunjhunwala, AR Respondent by Shri Vinod Kumar, Sr. DR Date of Hearing 21/04/2023 Date of Pronouncement 19/07/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: By way of these two Miscellaneous Applications, the assessee has sought to point out that a mistake apparent from record within the meaning of section 254(2) of the Income Tax Act, 1961 (in short ‘the Act’) has crept in the order of the Tribunal dated 16.11.2021. Page | 2 MA.32 & 33/SRT/2022 Kamal Kishor Soni 2. Since, the issues involved in all the Miscellaneous Applications, are common and identical; therefore, these Miscellaneous Applications, have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in Miscellaneous Applications, No.32/SRT/2022, have been taken into consideration for deciding the above Miscellaneous Applications, en masse. 3. The contention raised by the Ld Counsel for the assessee in the lead Miscellaneous Application No.32/SRT/2022, are as follows: “1.1 In assessment order, Ld. AO held that the purchase of traded goods (diamonds) made by the assessee from Shri Pravin Kumar Jain Group of Rs.37,45,45,503/-are non-genuine, accordingly estimated the disallowance of purchase @ 25% atRs.9,36,36,375/-. 1.2 In 1 st appeal, Ld. CIT(A) held that the assessee had furnished relevant documentary evidences and only profit could be brought to tax and on considering various judicial decisions, accordingly estimated the disallowance @5% of unverified purchase atRs.46,81,818/-. 1.3 During course of 2 nd appeal, the assessee filed the Additional-cum- Revised Grounds of Appeal (copy enclosed) on 14/10/2021 with a prayer to estimate the profit @ 0.25% since entire purchase debited in P & L A/c (Pg- 77 of PB) is held as non-genuine. During course of hearing, the AR relied on the purchase register, sale register and stock register (pg-58 to 62 of PB) to prove Pravin Kumar Jain group. The AR relied on confirmation of account (Pg- 4, 11,18 of PB) to justify that the assessee had disclosed the purchase and sales had been made from/to the same entities belonging to Shri Pravin Kumar Jain group. The AR relied on audited P & L A/c (Pg.77 of PB) to justify that entire purchases made by the assessee are from Shri Pravin Kumar Jain group. The AR also relied on a booklet containing 8 judicial decisions (filed on 14/10/2021) with a prayer to estimate the profit @ 0.25% of turnover since both purchases and sales are made from/to the alleged non-genuine entities; 1.4 The Hon'ble ITAT did not consider the Additional Grounds of Appeal, arguments of AR and relied judicial decisions and estimated the disallowance of purchase @ 6% of disputed purchases without considering the fact that both disputed purchase and corresponding sales had been made to similar alleged non-genuine parties. Mistake apparent from the record Page | 3 MA.32 & 33/SRT/2022 Kamal Kishor Soni (A) The Hon'ble ITAT did not adjudicate the Additional-cum-Revised Ground of appeal no.2, wherein the assessee had made a prayer to estimate the profit @ 0.25%, since entire purchases disclosed in P & L a/c corresponds to the sales made to similar non-genuine parties; (B) The Hon'ble ITAT did not consider the fact that the disputed purchase and corresponding sales had been made to non-genuine parties belonging to Shri Pravin Kumar Jain group, resultantly only the commission/profit @ 0.25% on purchase and sales made from/to non-genuine parties could be brought to tax; (C) The Hon'ble ITAT did not consider the direct judicial decisions relied by AR, wherein the profit had been estimated @ 0.10 to 0.35% on accommodation purchase and sale transactions. PRAYER;- A humble prayer is made:- a) To modify the order on estimating the suppressed profit @ 0.25% of accommodation turnover as per Additional-cum-Revised Ground no.2, since both purchase and sale of goods (diamonds) had been made from/to the parties belonging to Shri Pravin Kumar Jain group; b) To re-call the entire order for adjudication afresh; c) To pass the order in any other manner as Hon'ble ITAT may deemed fit.” 4. Based on the contents of the above Miscellaneous Application, the ld Counsel contended that order of the Tribunal dated 16.11.2011 contains mistake apparent from record, hence it should be recalled. 5. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue submitted that Tribunal has adjudicated the issue on merit by following the judgment in the case of Pankaj K. Chaudhary, in ITA No.1152/AHD/2017, for AY.2007-08, therefore the decision rendered by the Tribunal on merit, should not be altered /changed, hence these two Miscellaneous Applications, should be rejected. 6. We have heard both the parties and perused the material available on record. We note that Tribunal has adjudicated the issue on merit, by Page | 4 MA.32 & 33/SRT/2022 Kamal Kishor Soni relying on the judgment in the case of Pankaj K. Chaudhary(supra). The relevant observations of the Tribunal, on merit, are as follows: “23. We note that in all the assessment years, the net profit ratio declared by the assessee is less than 1% and gross profit ratio is less than 5%. Hence, these all appeals are covered by the judgment of this Coordinate Bench in the case of Pankaj K. Choudhary, in ITA No.1152/AHD/2017 (AY 2007-08), order dated 27.09.2021, wherein it was held as follows: “21.We have seen that during the financial year under consideration the assessee has shown total turnover of Rs. 66,09,62,458/-. The assessee has shown Gross Profit @ .78% and net Profit @ .02% (page 11 of paper Book). The assessee while filing the return of income has declared taxable income of Rs. 1,81,840/- only. We are conscious of the facts that dispute before us is only with regard of the disputed purchases of Rs, 4.34 Crore, which was shown to have purchased from the entity managed by Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for the revenue vehemently submitted that the ratio of decision of Hon’ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. We find that in Mayank Diamonds the Hon’ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of Rs. 1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal raised by revenue are dismissed.” 24. Respectfully following the above binding precedent, we restrict the disallowance @ 6% of impugned purchases/disputed purchases. Therefore, grounds of appeal raised by the assessee are dismissed and grounds of appeal raised by the Revenue is partly allowed. 7. We note that there is no infirmity in the order of the Tribunal. We note that the provisions of section 254(2) of the Act, states as follows: “Orders of Appellate Tribunal “254. (2) The Appellate Tribunal may, at any time within [six months from the end of the month in which the order was passed], with a view to rectifying any mistake apparent from the record, amend any order passed Page | 5 MA.32 & 33/SRT/2022 Kamal Kishor Soni by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the [Assessing] Officer. Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard : [Provided further that any application filed by the assessee in this sub- section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.]” 8. Having gone through sub-section 2 of section 254 of the Act, as noted above, we observed that “any mistake apparent from the record” can be rectified. The plain meaning of the word 'apparent' is that it must be something which appears to be ex-facie and incapable of argument and debate. Thus, section 254(2) of the Act does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. Therefore, amendment of an order under section 254(2) of the Act, does not mean entire obliteration of order originally passed by the Tribunal and its substitution by a new order of Tribunal, this is not permissible under section 254(2) of the Act. Power to rectify an order, under section 254(2) of the Act is extremely limited and it does not extend to correcting errors of law, or re-appreciating factual findings. The Tribunal has adjudicated all the grounds of appeals of the assessee, by relying on the identical precedent. Therefore, we note that there is no mistake apparent from record, hence we dismiss both the Miscellaneous Applications filed by the assessee. 9. In the result, both the Miscellaneous Applications filed by the assessee are dismissed. Page | 6 MA.32 & 33/SRT/2022 Kamal Kishor Soni Registry is directed to place one copy of this order in all appeals folder / case files. Order is pronounced on 19/07/2023 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 19/07/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat