M/s Badani Jewellers, Rajkot V. Income Tax Officer, Ward-2(1)(5), Rajkot

MA 43/RJT/2020

AI Insights

The case involves M/s. Badani Jewellers, who filed a Miscellaneous Application against an order of the ITAT dated 28-02-2020, claiming that there were apparent mistakes in the record concerning the treatment of unaccounted sales and purchases of fine gold and gold ornaments during survey proceedings. The assessee argued that the ITAT had not considered their reconciliation statement and alternative calculations which could have led to a different estimation of gross profit. The ITAT acknowledged the oversight and the need to rectify the mistakes, thus allowing the application and setting the stage for a re-evaluation of the case.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134505 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-11-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 23-08-2020
• Other Referred Cases: GOLDEN MEADOWS PROPERTIES (P.) LTD vs. ITO, Rakesh Ramani vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 69C; 254(2)

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, (CONDUCTED THROUGH E COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER, And Ms MADHUMITA ROY, JUDICIAL MEMBER M.A No.43/Rjt/2020 in आयकर अपील सं./ITA No. 352/Rjt/2020 िनधाᭅरण वषᭅ/Asstt. Years: 2014-2015 M/s. Badani Jewellers, 20-Raj Plaza,, Mankunvarba Road, Rajkot. PAN: AAEFB3305R Vs. I.T.O., Ward-2(1)(5), Rajkot. Assessee by : Shri Kalpesh Doshi, A.R Revenue by : Shri B.D. Gupta, Sr. D.R सुनवाई कᳱ तारीख/Date of Hearing : 04/11/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 31/01/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The caption Miscellaneous Application has been directed at the instance of the assessee against the order of ITAT dated 28-02-2020 in ITA No. 352/RJT/2015 on the reasoning that there are mistakes apparent from the record. The assessee in the miscellaneous application has pointed out certain errors in the order of the ITAT which are apparent from record as detailed below: I. The assessee submitted that during the survey proceedings at its premises the physical stock of fine gold was found short by 1775.275 M.A No.43/Rjt/2020 in ITA No. 352/Rjt/2020 A.Y. 2014-15 2 gram which was treated as unaccounted sale by the AO. Accordingly, the AO worked out sale value as per market rate and estimated the gross profit @ 15% which was added to the total income. The matter reached to the ITAT where it was explained that the difference arises due to the fact the fine gold was sent to “karigar” on job work basis for making ornament and to this effect reconciliation statement was furnished. Alternatively, it was also submitted that if reconciliation statement is not accepted and it is assumed that fine gold stock was sold outside the books, then the profit should be determined by deducting cost of purchases of such fine gold as the cost is duly identifiable and recorded in the books of accounts which is supported by the copy of purchases invoice, stock statement etc which were also furnished. The Hon’ble member ITAT accepted that the fine gold to the extent of 500 gram sent for job work and treated remaining fine gold of 1275.275 gram as sold outside books. However, the Hon’ble member without considering the alternative claim as discussed above directed to estimate gross profit on sale of fine gold @ 11.75% instead of working out gross profit by deducting purchase cost directly from the market value. Thus the alternative ground was not adjudicated which is an error/mistake apparent from the record. II. The survey team also found excess gold ornament of 540.840 gram. It was explained that the difference arises due to gold ornament received from the job worker yet to be recorded in the books. However lower authorities treated such difference as unaccounted purchases and made addition under section 69C of the Act for the full amount. Nevertheless, before the Hon’ble ITAT, it was again explained that gold ornament of 540.840 gram was received from the job worker after allocating fine gold of 500 grams. The Hon’ble ITAT while adjudicating the first ground w.r.t. deficit in fine gold accepted the fact that fine gold of 500 grams was sent to the job worker. However, at the time of deciding the issue of difference M.A No.43/Rjt/2020 in ITA No. 352/Rjt/2020 A.Y. 2014-15 3 in gold ornament directed the AO to make addition of GP only instead of full value of purchase. As the Hon’ble bench failed to take notice of above said crucial fact i.e. 540.80 grams of gold ornament was out of the fine gold of 500 grams sent for job work. Hence, a mistake apparent from record crept in the order of the Hon’ble ITAT. 2. In view of the above, the learned AR before us contended that the order of the ITAT suffers from apparent mistakes and therefore, the same needs to be corrected within the provisions of section 254(2) of the Act. 3. On the other hand, the learned DR for the Revenue before us vehemently supported the order of the ITAT. 4. We have duly considered the rival contentions and gone through the records carefully. It is settled position of law that power for rectification under section 254(2) of the Act can be exercised only when mistake, which is sought to be rectified, is an obvious and patent mistake, which is apparent from the record and not a mistake, which is required to be established by arguments and long drawn process of reasoning on points, on which there may conceivably be two opinions. We also note that if a crucial fact and argument brought on record by any party of the appeal which may have impacted the final outcome of the appeal but the same has not been considered or omitted to be considered will amount to a mistake apparent from record. In holding so, we draw support and guidance from the order of coordinate bench of Mumbai Tribunal in case GOLDEN MEADOWS PROPERTIES (P.) LTD vs, ITO reported in 149 Taxman 17 where it was held as under: Section 254(2) specifically empowers the Tribunal to rectify any mistake which is apparentfrom the record. The Tribunal has inherent power to set aside an order where an appeal has been decided on wrong grounds. The inherent power to rectify a mistake committed by the Tribunal is not really speaking a power to review. It is the atonement to the wronged party by the Court or the Tribunal for the wrong that it has itself committed. It is a basic principle of jurisprudence that if there is a mistake committed by the Tribunal, it needs to be rectified as no one should suffer or come to grief on account of the mistake committed by the Court. Even the rules of procedure and technicalities should not come in the way in rendering justice to the parties by correcting the mistake committed by the Tribunal. The purpose of the Tribunal is to render justice and not to negate it. M.A No.43/Rjt/2020 in ITA No. 352/Rjt/2020 A.Y. 2014-15 4 The principles of law as enunciated by various decisions are summarized as follows : 1.That where there is a wrong assumption of facts it will constitute mistake apparent from record. 2.Where there is a failure to consider certain evidence brought on record it would also constitute a mistake apparent from record. 3.Where there is an omission on the part of the Tribunal to consider the principles of law enunciated by the decisions of various Courts on which reliance was placed in the course of hearing, it will also constitute mistake apparent from record. 4.1 We also find support and guidance from the order of Mumbai Tribunal in case of Rakesh Ramani vs. ITO reported in 5 SOT 547 wherein it was held as under: The principles of law are : (1) where there is a wrong assumption of facts, it will constitute a mistake apparent from record, (2) where there is a failure to consider certain evidence brought on record, it would also constitute a mistake apparent from record, and (3) where there is omission on the part of the Tribunal to consider the principles of law enunciated by the decisions of various Courts on which reliance is placed by the assessee, it will also constitute mistake apparent from record. In the light of the above principles of law, it could be found that mistakes had occurred in the Tribunal’s appellate order as various facts and materials brought on record had not been considered by the Tribunal while deciding the appeal. In the instant case, there had inadvertently been non-consideration of vital facts, brought on record and judicial decisions, cited during arguments of appeal, which all went to the root of the matter and were so crucial as might even tilt the balance of decision. Accordingly, in passing the impugned appellate order, mistake apparent from record had occurred, rendering the said appellate order of the Tribunal liable to be rectified by essentially recalling the same by passing a fresh order. Therefore, the Tribunal’s appellate order was liable to be set aside/recalled and the related appeal fixed so as to be decided afresh. [Para 7] 4.2 Coming to facts of the case on hand. The contention of the learned AR for the assessee is that the ITAT has erred in directing to estimate the profit on alleged unaccounted sale of fine gold and unaccounted purchase of gold ornament without considering the crucial argument brought by the ld. AR of the assessee. The crucial argument/facts, as pointed out by the learned AR, have been elaborated in the preceding paragraph which certainly have bearing on the outcome of the dispute raised by the assessee but admittedly these facts have not been appreciated by the ITAT while delivering the order. These crucial facts stand as under: i. The alternate contention of the assessee that, if reconciliation statement of fine gold is not accepted and it is assumed that fine gold stock was sold outside the books, then the profit should be determined by deducting M.A No.43/Rjt/2020 in ITA No. 352/Rjt/2020 A.Y. 2014-15 5 cost of purchases of such fine gold as the cost is duly identifiable and recorded in the books of accounts which is supported by the copy of purchases invoice, stock statement etc and the same were also furnished. ii. It was explained by the assessee that gold ornament of 540.840 gram was received from the job worker after allocating fine gold of 500 grams. The Hon’ble ITAT while adjudicating the issue of deficit in fine gold accepted the fact that fine gold of 500 grams was sent to the job worker. However, Hon’ble bench while giving finding on the issue excess stock of gold ornament failed to take notice of above said crucial fact i.e. 540.80 grams of gold ornament was out of the fine gold of 500 grams sent for job work. 4.3 Undoubtedly, these crucial facts cited above were brought to the notice to the Bench at the time of hearing but the ITAT inadvertently omitted to make a note of these facts which amounts to mistakes apparent from record in the light of the cases cited above. Accordingly, we recall the order of the ITAT and restore to its original number with the direction to the registry to fix for fresh hearing under intimation both the parties. Hence, the Miscellaneous Application filed by the assessee is allowed. 5. In the result, the Miscellaneous Application filed by the assessee is allowed. Order pronounced in the Court on 31/01/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/01/2023 Manish