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Income Tax Appellate Tribunal, B BENCH, MUMBAI
order
: 28.02.2023 O R D E R
Per Rahul Chaudhary, Judicial Member:
The present appeal filed by the Revenue and Cross-Objection filed by & CO No. 146/Mum/2021 Assessment Year: 2008-09 the Assessee arise from the order of Commissioner of Income Tax (Appeals)-26, Mumbai, [hereinafter referred to as „the CIT(A)‟] passed on 28.08.2019 for the Assessment Year 2008-09, which in turn arose from the Assessment Order, dated 29.03.2016, passed under Section 144 read with Section 147 of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟].
The Revenue has raised the following grounds of appeal: 1. " Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.5,47,829/- on account of capital introduction u/s.68 of the Act, by entertaining the additional evidence under Rule 46A, which was not produced before the A.O. during the course of assessment proceedings, and thereby contravening the provisions of Rule 46A(1) of the I.T.Rules?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred treating the additions of Rs1,91,40,185/-in respect of cash deposits being undisclosed income and Rs. 5,23,19,395/- in respect of cash credits being undisclosed income as the turnover to arrive at the net income of the assesse, by entertaining the additional evidence under Rule 46A, which was not produced before the A.O. during the course of assessment proceedings, and thereby contravening the provisions of Rule 46A(1) of the I.T.Rules?
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not giving a reasonable opportunity to the A.O.to examine the additional evidence submitted by the assesse under Rule 46A, which was not produced before the A.O. during the course of assessment proceedings, and thereby contravening the provisions of Rule 46A(1) of the 1.T.Rules?"
4. The appellant prays that the order of the Ld. CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.”
3. The Assessee has raised the following grounds of Cross Objections: “1. In the facts and circumstances of the case and in law, the & CO No. 146/Mum/2021 Assessment Year: 2008-09 learned Commissioner of Income Tax (Appeals), Mumbai has erred in not adjudicating the ground challenging the reopening of the assessment.
2. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), Mumbai has erred in concluding that the appellant had not disputed the rejection of the books of accounts u/s 145(3) of the Act and the estimation of the net profit rate of 5 per cent.
3. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), Mumbai has erred in sustaining the addition of Rs. 23,38,949/- being 5 per cent of total turnover of Rs. 4,67,78,975/- as net profit under the head Income from Business and Profession without considering - i. the net profit rate of 1.13 per cent as accepted for AY 2006-07 in assessment order u/s 143(3) dated 25.11.2008 in appellant's own case and ii. the net profit rate of 0.40 per cent as accepted for AY 2007-08 in assessment order u/s 143(3) dated 29.12.2009 in appellant's own case.
4. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), Mumbai has erred in confirming the net profit rate of 5 per cent without providing any cogent reasons.
5. The respondent craves leave to add, alter, delete or modify all or any of the above grounds of cross objection. All the above grounds are without prejudice to each other.”
4. When the appeal was taken for hearing, none appeared for the Respondent/Assessee. The Learned Departmental Representative submitted that none has been appearing for the Assessee since last 3-4 hearings. On perusal of record, we find that the Assessee is placed on record submissions dated 21/08/2019 filed before the CIT(A). Taking the same into account, we proceed to adjudicate the & CO No. 146/Mum/2021 Assessment Year: 2008-09 grounds raised the appeal and cross objection on merits after hearing the Learned Departmental Representative.
The Learned Departmental Representative taking us through the Assessment Order, dated 29/03/2016, passed under Section 144 read with Section 147 of the Act submitted that during the assessment proceedings the Assessee failed to produce the books of accounts for verification and did not file any details/documents. Therefore, the Assessing Officer was constrained to reject the books of accounts and estimate the net profits at INR 11,25,185/- being 5% of total receipts/sales of INR 2,25,03,698/-. The Assessing Officer made an addition of INR 5,47,829/- under section 68 of the Act holding that the capital of INR 5,47,829/- introduced by the Assessee was unexplained cash credit. The assessing officer also noted that the bank statements of the Assessee reflected cash deposit of INR 1,91,40,185/- and other deposits of INR 5,23,19,395/-. A show cause notice was issue to the Assessee to explain why the cash/other deposits should not be treated as undisclosed income of the Assessee. Since the Assessee failed to provide any response or details, the Assessing Officer treated the same as undisclosed income and made addition of INR 1,91,40,185/- in respect of cash deposits and of INR 5,23,19,395/- in respect of other deposits. Thus, the Assessing Officer assessed the total income of the Assessee at INR 7,31,32,594/-. Being aggrieved, the Assessee filed appeal before the CIT(A) and filed written submissions which have been reproduced in paragraph 5 of the order passed by CIT(A). The Learned Departmental Representative, referring to paragraph 8, 9.2 and 9.3 of the order passed by CIT(A), submitted that additional evidences were filed by the Assessee before the CIT(A). However, the CIT(A) admitted the same without calling for a remand report from the Assessing Officer and thus, violating with the provisions of Rule 46A 4 & CO No. 146/Mum/2021 Assessment Year: 2008-09 of the Income Tax Rules, 1962 (Hereinafter referred to as „the Rules‟). He, therefore, submitted that the order passed by the CIT(A), to the extent it granted relief to the Assessee deleting addition of (a) INR 5,47,829/- relating to capital introduction, (b) INR 1,91,40,185/- relating to cash deposits in bank and (c) INR 5,23,19,395/- relating to other deposits in bank, by placing reliance upon additional evidence was in violation of provisions of Rule 46A of the Rules, and, therefore, the Ld. Departmental Representative submitted that the same should be set-aside to the file of CIT(A) with the directions to adjudicate the aforesaid issues afresh after complying with the provisions of Rule 46A. In response to the query from the Bench, the Learned Departmental Representative submitted that in the Cross Objection filed by the Assessee, the Assessee has challenged the order passed by CIT(A) to the extent the CIT(A) had determine net profits of the Assessee by accepting the rate of 5% adopted by the Assessing Officer to estimate profits. He submitted that before CIT(A) the Assessee had stated that the Assessee was engaged in trade of commodity - majorly onion and that the Assessee had made export sales of INR 2,20,82,713/- and domestic sales of INR 2,39,15,210/- during the relevant previous year. Therefore, the CIT(A) computed net profits of the Assessee at INR 23,38,949/- being 5% of the aggregate sales of INR 4,59,97,93/-. The Learned Departmental Representative invited attention to paragraph 6.3 of the Assessment Order and submitted that the Assessee had itself agreed to the net profit rate of 5%.
We have perused the material on record and the written submissions filed by the Assessee before CIT(A). We have also taken into consideration the Assessment Order for the Assessment Year 2006- 07, dated 25/11/2008 and Assessment Year 2007-08, dated 29/12/2009 passed under Section 143(3) of the Act. We find merit in 5 & CO No. 146/Mum/2021 Assessment Year: 2008-09 the contention advanced by the Learned Departmental Representative that the Assessee had failed to file any documents/details before the Assessing Officer, and that the CIT(A) had deleted the additions made in relation to introduction of capital, as well as cash deposits & other credits in the bank account on the basis of additional evidence furnished by the Assessee in the appellate proceedings before CIT(A). The order passed by CIT(A) is silent about compliance of Rule 46A of the Rules. There is nothing on record to controvert the submission advanced by the Learned Departmental Representative that the provisions of Rule 46A have not been complied with. On the other hand, we also find merit in the grounds raised by the Assessee in Cross Objections. We find that while passing the Assessment Order, in paragraph 6.3 the Assessing Officer has recorded that the Authorised Representative of the Assessee vide Order Sheet Noting, dated 23/02/2016, has agreed that the rate of 5% of total sales/receipts be considered to compute net profits for the Assessment Year 2008-09. However, in the very next paragraph 6.4, the Assessing Officer has recorded - „Till date no reply is received‟. Further, total receipts/sales as per Assessing Officer were INR 2,25,03,689/-. Therefore, the concession made by the Authorised Representative in the aforesaid circumstances cannot bind the Assessee. The Assessee, who was engaged in trading of commodity, mainly onion, during the relevant previous year, had placed before CIT(A) the Assessment Order for the Assessment Year 2006-07 and 2007-08 wherein the net profit rate of 1.13% and 0.40% has been accepted after scrutiny assessment under Section 143(3) of the Act. He had also stated that the Assessee had incorrectly stated the net profits from domestic sales instead of Gross Sales and Expenses in the Profit and Loss Account. However, the CIT(A) declined to consider the same holding that the Assessee ITA. No. 6749/Mum/2022 & CO No. 146/Mum/2021 Assessment Year: 2008-09 had accepted the net profit rate of 5% before Assessing Officer.
We are not inclined to accept the approach adopted by the CIT(A). Accordingly, in view of the above, and after taking into consideration the overall facts and circumstances of the case, we deem it appropriate to set-aside the order passed by CIT(A), and remand all the issues raised in the present appeal back to the file of the CIT(A) for fresh adjudication taking into account all the evidence/details filed by the Assessee after calling for remand report from Assessing Officer in compliance with the provisions of Rule 46A of the Rules. The CIT(A) is also directed to arrive at estimated net profit rate and while doing so the CIT(A) may take into consideration the Assessment Orders passed in the case of the Assessee for the Assessment Years 2006-07 and 2007-08. The CIT(A) shall confront the Assessee with the remand report, if any, received from the Assessing Officer and grant the Assessee reasonable opportunity of being heard. With the aforesaid directions, Ground Number 1 to 3 raised by the Revenue in the appeal, and Ground Number 1 to 4 raised by the Assessee in the Cross Objection are allowed for statistical purposes.
In result the appeal preferred by the Revenue as well as Cross Objection by the Assessee are allowed for statistical purposes.