SH. DWARIKA PRASAD MISHRA PROP.M/S SHRI KRISHNA AUTOMOBILES ,TIKAMGARH V. ITO , TIKAMGARH

ITA 188/AGR/2022

AI Insights

The case involves Sh. Dwarika Prasad Mishra, the proprietor of M/s. Shri Krishna Automobiles, who appealed against the order of the Income-tax Officer, Tikamgarh, for the assessment year 2014-15. The primary contention was regarding the additions made to the income on account of low gross profit rate and disallowance of various expenses. The Assessing Officer had made these additions based on non-production of books of accounts and incomplete records. The CIT(A) dismissed the appeal due to non-compliance by the assessee with the notices issued. The ITAT found that the CIT(A) had not adjudicated the issues on merits and thus restored the matter for fresh consideration.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 474817 (ITAT-AGRA)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-11-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 28-11-2022
• Other Referred Cases: Collector Land Acquisition, Anantnag & Ors. vs Mst. Katiji & Ors. (1987) 167 ITR 471 (SC), CIT vs. Anil Kumar & Co. (2016) 67 taxmann.com 278 (Karnataka)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDRA SRIVASTAVA
• Assessee Lawyers: RAJENDRA SHARMA
• Keywords: Set aside; Question of law; Gift; Gross profit estimation
• Section: 143(3); 142(1); 143(2); 37(1); 145(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH, AGRA BEFORE: SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No. 188/Agr/2022 Assessment Year: 2014-15 Sh. Dwarika Prasad Mishra, Prop. M/s. Shri Krishna Automobiles, Jhansi Road, Tikamgarh. PAN: ABCPM2321H v. Income-tax Officer, Tikamgarh. (Appellant) (Respondent) Assessee by : Sh. Rajendra Sharma, Adv. Revenue by : Sh. Shailendra Srivastava, Sr. DR Date of hearing : 21/11/2024 Date of Pronouncement : 29.11.2024 ORDER This appeal in ITA No. 188/Agr/2022 for the assessment year 2014-15 has arisen from the appellate order dated 20.06.2022 (DIN& Order No. ITBA/NFAC/S/250/2022-23/1043492972(1)) passed by ld. Commissioner of Income-tax(Appeals),NFAC, Delhi, wherein the ld. CIT(Appeals) has dismissed the appeal of the assessee, which appeal in turnhas arisen from the assessment order dated 26.12.2016 passed by Assessing Officer u/s. 143(3) of the Income- tax Act, 1961. ITA No. 188/Agr/2022 2 2. At the outset, it is observed that this appeal is filed belatedly by 29 days before the Income-tax Appellate Tribunal, Agra beyond the time prescribed u/s. 253(3) of the Act. The assessee has in its appeal in Form No. 36 stated that the appellate order dated 20.06.2022 passed by ld. CIT(A) was received on 31.08.2022 The assessee has given the email ID of his Accountant, who left the job and he has not informed the assessee about said appellate order. It was also submitted that the assessee came to know in respect of passing of the appellate order, from the office of Income-tax , Tikamgarh and thereafter steps were taken to file the appeal with ITAT, and hence, there is some delay in filing the appeal before the Income-tax Appellate Tribunal. It is prayed that there is sufficient cause for not presenting the appeal within the stipulated time. 2.2 Ld. Sr. DR has no serious objections on condonation of delay. 2.3 After hearing both the parties and perusing the material on record, I am of the view that the delay of 29 days in filing the present appeal beyond the time prescribed u/s 253(3) needs to be condoned. The assessee is not likely to gain anything by filing the appeal belatedly. If substantial justice and technical considerations are pitted ITA No. 188/Agr/2022 3 against each other, courts will lean towards advancement of substantial justice, unless malice on part of litigant is at writ large.I donot find any malice on the part of the assessee in filing this appeal belatedly. Hence, I condone the delay of 29 days, and proceed to adjudicate this appeal on merits. Reliance is placed on the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag &Ors. vs Mst. Katiji&Ors. (1987) 167 ITR 471 (SC). 3. Brief facts of the case are that the assessee is engaged in the business of Petrol and Diesel Pumps in the name and style of M/s. Shri Krishna Automobile, Mamon Darwaja, Tikamgarh. Case was selected by Revenue for framing scrutiny assessment through CASS. Notices u/s. 143(2) and 142(1) were issued by the Assessing Officer. Assessee did not file any reply nor attended the proceedings before the AO. Even, penalty u/s. 271(1)(b) of the Act was imposed by the AO for non-compliance to notice dated 23.04.2016. Show cause notices u/s. 142(1) were issued by the AO on 22.11.2016 and 29.11.2016. The assessee did not comply with SCN’s. Another SCN u/s 144 was issued by the AO u/s 144 dated 16.12.2016. Thereafter, counsel of the assessee, Shri Suraj Tripathi attended at fag end on ITA No. 188/Agr/2022 4 20.12.2016, and furnished part reply. Books of accounts, bills, vouchers and stock registers were not produced. The reason for non- production of books of accounts etc. was given that Accountant was out of town. Thereafter, the counsel attended on 26.12.2016 and filed reply. Assessing Officer observed from the reply that books of account and bills and vouchers were stated to be submitted by the assessee,but in-fact the same were not furnished. The assessee has produced manual stock register, which is mandatory for petrol pump having quantitative details, but the same was written from July, 2013 onwards. The Assessing Officer observed that intheabsence of sale wise stock register having values and price, stock cannot be verified. The counsel of the assessee submitted that in the preceding financial year 2012-13, GP rate was 1.83% and in the impugned assessment year, GP rate declared was at 1.93%, and the assessee requested AO to accept the GP rate ,but the Assessing Officer was of the view that complete details have not been submitted. Gross profit cannot be verified when quantitative details have not been furnished in the audit report and also in the Income-tax Return. The Assessing Officer observed that oil companies give fixed margin to the petrol & diesel ITA No. 188/Agr/2022 5 distributors on the sale of petrol and diesel, which was Rs.1.13 per litre for diesel. It was observed by the Assessing Officer that in the vicinity, GP rate is derived at 2.17% by petrol pumps. This led to the addition of Rs.3,83,079/- to the income of the assesseeon account of low GP declared by the assessee. 3.2 Further there was addition made by the Assessing Officer by disallowing the gift and donation expenses to the tune of Rs.1,17,600/-, which as per Assessing Officer does not seem to be business expense. The Assessing Officer observed that the assessee has claimed that keeping in view the turnover/sale of Rs.16,26,34,685/-, the said expenses are not huge amount. The assessee furnished ledger account in respect of gift and donation expenses, but no bills and vouchers were produced by the assessee in support of his claim. Accordingly, the Assessing Officer made addition of Rs.1,17,600/- on account of disallowance of gifts and donation expenses. 3.3 Further, the assessee claimed festival expenses of Rs.55,650/-, which as per Assessing Officer is not business expense. The assessee submitted that festival expenses to the tune of Rs.55,650/- ITA No. 188/Agr/2022 6 was incurred on occasion of festivals, like Diwali, Holi, New Year etc. and were given to employees as well as the customers. However, the assessee furnished ledger accounts but no bills and vouchers were given. Hence, the Assessing Officer made addition of Rs.55,650/- under this head in the hands of the assessee by adding the same to the income of the assessee. 3.4 The Assessing Officer further observed that the assessee has claimed advertisement expenses of Rs.1,17,600/-, which as per Assessing Officer are comparatively high. The assessee submitted that the total expenses are to the tune of Rs.1,35,000/- which were incurred towards painting, hoarding, paper advertisement etc. Assessee furnished copies of ledger accounts, but no bills and vouchers were produced in support of his claim. The Assessing Officer allowed 50% of the advertisement expenses and balance expenses were disallowed. 3.5 Similarly, the assessee claimed travelling expenses of Rs.1,65,000/-, which as per the AO were on the higher side. Since, the assessee furnished ledger accounts in respect of travelling ITA No. 188/Agr/2022 7 expenses, but no bills and vouchers were produced, the Assessing Officer disallowed 50% of travelling expenses. 4. Aggrieved, the assessee filed first appeal with ld. CIT(Appeals). Ld. CIT(Appeals) issued as many as four notices to the assessee, but they were not complied with by the assessee. The ld. CIT(A) dismissed the appeal of the assessee. 5. Still aggrieved, the assessee has filed second appeal with the Income-tax Appellate Tribunal, and the ld. Counsel for the assessee, Shri Rajendra Sharma, Advocate appeared before the Bench and submitted that the assessee has raised an additional ground before the Tribunal and prayers was made to admit the additional ground of appeal, which reads as under : “6. That without rejecting the books of account addition made by applying the gross profit rates and by disallowing of expenses is against the law, no addition by way of applying of gross profit rates is called for, particularly when the books of account are duly accepted, the addition made by the A.O. and sustained by the learned CIT(Appeals) is liable to be deleted.” 5.2The assessee has originally raised five grounds of appeal in the memo of appeal filed with ITAT, which reads as under: 1. That the Commissioner of Income Tax(Appeals) has erred on facts and in law while sustaining the addition for Rs. 3,83,079/- made by the AO ITA No. 188/Agr/2022 8 treating the gross profit low. No addition is liable to be made, addition made by the AO for Rs. 3,83,079/- sustained by the CIT Appeal is liable to be deleted. 2. That the learned CIT Appeal has erred on facts and in law while sustaining the addition for Rs. 1,17,600.00 made by disallowing the expenses under the head “ Donation Expenses” , no addition is liable to be made, addition made by the AO sustained by the CIT Appeal is liable to be deleted. 3. That the learned CIT Appeal has erred on facts and in law while sustaining the addition of Rs. 55,650.00 made by the AO by disallowing the expenses under the head “ Festival Expenses”. No addition is liable to be sustained, addition made by the AO, sustained by the CIT Appeal is liable to be deleted. 4. That the CIT Appeal has erred on facts and in law, while sustaining the additions of Rs. 67,500.00 and Rs. 82,500.00 made by disallowing of the expenses under the head “ Advertisement and Travelling Expenses” . No additions are liable to be sustained, additions made by the AO, sustained by the CIT Appeal are liable to be deleted. 5. That while sustaining the additions, the learned CIT Appeal has not considered the nature of the business and the facts of the case, particularly when regular books of accounts are being maintained duly audited, book result is reasonable and the products sold by the assessee was under monitoring of Ministry of Petroleum , taking into consideration , the aforesaid facts, no disallowance are called for , additions made by the AO, sustained by the CIT Appeal are liable to be deleted. The appellate order dt 20.06.2022 of CIT Appeal is bad in law, liable to be set aside.” 5.3 Ld. Counsel submitted that the accounts of the assessee were duly audited ,and the Assessing Officer has estimated income of the assessee without rejecting books of account. It was also submitted that the Assessing Officer has disallowed certain expenses, but no discrepancy has been reported by the Assessing Officer. Reference was drawn to the provisions of section 145(3) of the Act. It was ITA No. 188/Agr/2022 9 submitted that income cannot be estimated unless books of accounts are rejected. The ld. CIT(Appeals) has decided the appeal ex parte in limine without deciding the issues on merits. Further, it was submitted that the purchase and sale has not been disturbed by the Assessing Officer and were accepted ,and GP is the result of purchase and sale. It was also submitted that the Assessing Officer has not pin pointed any specific disallowable expenses , but rather disallowed the expenses on estimated basis. Reference was drawn to the provisions of section 37(1) of the Act. 5.4 Ld. Sr. DR, on the other hand, submitted that there is no estimation where the GP rate is applied based upon the non- production of books of accounts. Manual register was produced, which was also not complete and there are no other details or registers produced such as bills and vouchers etc. Attention was drawn to page 6 para 3 of the assessment order. There is no specific data in return of income as well as in the tax audit report as to the quantitative details of the purchase and sale etc. The Assessing Officer keeping in view past history as well as income of other dealers, has applied GP ratio of 2.17%. Ledgers were produced, but ITA No. 188/Agr/2022 10 no bills or vouchers were produced. Only GP was estimated and not NP and hence, other disallowances of expenses are justified. 5.4 Ld. Counsel in rejoinder submitted that the order has been passed u/s. 143(3) and not under section 144 and hence, it is bad in law. It was also submitted that the documents have been filed as desired by the Assessing Officer and section 37(1) compliance was done. There was no basis of estimation. No defects were pointed out in the books of account and arbitrary additions have been made. Reliance has been placed on the decision of Karnataka High Court in the case of CIT vs. Anil Kumar & Co. (2016) 67 taxmann.com 278 (Karnataka). The GP rate declared by the assessee is on higher side than the preceding year. 6. I have considered the rival contentions and perused the material on record. I have observed that the assessee is engaged in the business of diesel and petrol pumps. The assessee has declared turnover of Rs.16.26 crores. Case of the assessee was selectedby Revenue through CASS for framing scrutinyassessment . Statutory notices were issuedduring assessment proceedings by the AO.The assessee participated in the assessment proceedings. Several ITA No. 188/Agr/2022 11 notices u/s 142(1) and SCN’s u/s 144 were issued by the AO, but the same remained non complied with by the assessee. It is observed that the assessee submitted part replies before the Assessing Officer, and that too at the fag end. The AO made addition on account of enhanced GP rate of 2.17% of the gross turnover based on GP rate declared by other petrol pumps in the vicinity, as against GP rate of 1.93% declared by the assessee. The assessee did not produced books of accounts , stock register and bills and vouchers during assessment proceedings. The manual stock register was also not complete.Further, quantitative details of stock were not furnished nor the sale wise stock register having values and price were furnished, and as per AO in the absence thereof stock could not be verified. 6.2 There were other disallowances made by the Assessing Officer on account of various expenses claimed by the assessee, which are mainly due to the non-production of bills and vouchers and being on the higher side as held by the AO. It is observed that the Assessing Officer has disallowed the expenses, however, the Assessing Officer has not pointed out any defects/deficiency in the expenses claimed ITA No. 188/Agr/2022 12 by the assessee, mainly because the documents/details called for by the AO were not submitted by the assessee. It is also observed that the assessee did not file any reply/compliance before the ld. CIT(Appeals) during the course of appellate proceeding to as many as four notices issued by ld. CIT(A), which led to dismissal of appeal of the assesseeex parte by ld. CIT(Appeals) in limine without deciding the issues arising in appeal on merits as required u/s. 250(6) of the Act. It is observed that the ld. CIT(A) dismissed the appeal of the assessee ex-parte in limine without deciding the issues arising in the appeal. The ld. CIT(A) is obligated to pass a reasoned and speaking order. The ld. CIT(A) did not even called for the assessment records from the AO. As per Section 250(6), the ld. CIT(A) has to state point for determination, his decision and The appellate order passed by ld. CIT(A) is clearly in violation of Section 250(6). The appellate order passed by ld. CIT(A) is not final , as it is subject to appellate proceedings with higher appellate authorities. The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253. The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A. The judgment and order passed ITA No. 188/Agr/2022 13 by Hon’ble High Court is also subject to challenge before Hon’ble Supreme Court. Thus, the appellate order passed by ld. CIT(A) is not a final order, as it is subject to challenge before higher appellate authority. Thus, Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issues are cardinal as the higher appellate authority can then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues. If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) in limine without adjudicating issues arising in the appeal on merits , such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6) , and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits . As per Section 250(6), the ld. CIT(A) has to state point for determination, his decision and reasoning thereof. The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act and liable to be set aside. Merely stating the assessment order ITA No. 188/Agr/2022 14 passed by AO is upheld, and that the assessee has not submitted details/documents is not sufficient. The ld. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO., which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) and did not file the requisite details/documents during appellate proceedings to support his contentions. Thus, the assessee is equally responsible for its woes.It is also observed that the assessee has raised various important issues, which are recorded in the grounds of appeal including additional grounds of appeal as well contentions raised before me, which raises mixed question of law and facts , which requires verification of facts These issues go to the root of the matter and require proper adjudication after considering/verifying the facts as they raises mixed question of law and facts. Under these circumstances and fairness to both the parties, in the interest of justice, the appellate order of CIT(A) is set aside and the matter can go back to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee on merit in accordance with law after giving opportunities to both the parties. The assessee on his part is also ITA No. 188/Agr/2022 15 directed to comply with the direction/notices of CIT(A).The ld. CIT(A) shall admit evidences filed by the assessee. The ld. CIT(A) is directed to adjudicate all the grounds of appeal as well additional grounds of appeal raised by the assessee,as these raises important mixed question of law and fact which goes to root of the matter and requires verification/investigation of facts. I clarify that I have not commented on the merits of the issues in the appeal. Thus, the appeal of the assessee is allowed for statistical purposes and the matter is restored back to the file of ld. CIT(A) for fresh adjudication of the appeal of the assessee on merit in accordance with law. I order accordingly 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 29.11.2024. Sd/- (RAMIT KOCHAR) ACCOUNTANT MEMBER Dated:29/11/2024 *aks/- "