M/S.DAGINA vs. DY.C.I.T.

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TAXAP/100/2004HC GujaratGJHC24025644200418 January 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the ITAT had failed to record the issues for consideration and the reasons for rejecting the assessee's contentions. The Court noted that the Tribunal's observation that there was no evidence or material to support the assessee's contentions did not appear correct, especially in light of the paper book filed before it, which contained Rojmel entries supporting the assessee's claim of maintaining quantity details. The Court emphasized that while it is not necessary for the Tribunal to discuss every piece of evidence, its order must reflect an awareness of the controversy and an application of mind to it. The Court observed a recent trend of ITAT orders being disposed of cursorily. Consequently, the High Court quashed and set aside the impugned order of the ITAT and restored the appeal to the Tribunal's file for a fresh decision after providing parties a full and proper opportunity to make submissions. The Court admitted a substantial question of law regarding whether the ITAT was right in confirming the rejection of books and the addition without assigning any reasons.

What were the facts?

The assessee, M/s. Dagina, filed an appeal before the High Court of Gujarat challenging an order dated August 11, 2003, passed by the Income-tax Appellate Tribunal (ITAT), Ahmedabad Bench. The assessment year in question was 1997-98. The Assessing Officer (AO) had rejected the assessee's books of account due to the absence of a stock register and quantitative tally. Consequently, the AO added Rs. 2,12,047/- to the assessee's income by applying an average gross profit rate of 14% instead of the 9.43% shown by the assessee on gold ornaments. The Commissioner of Income-tax (Appeals) upheld the AO's order. The ITAT, in its impugned order, confirmed the rejection of books and the addition without providing detailed reasoning.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the rejection of books of account of the appellant as well as the addition aggregating to Rs. 2,12,047/- on account of alleged non-maintenance of day-to-day stock and fall in gross profit rate? (Question of law) 2. Whether on the facts and circumstances of the case, there was any material with the Appellate Tribunal to uphold the rejection of books of account and the addition of Rs. 2,12,047/-? (Question of mixed law and fact) 3. Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in upholding the addition of Rs. 2,12,047/- without passing a speaking and reasoned order as well as without considering the evidence produced before it? (Question of law) 4. Whether on the facts and in the circumstances of the case, the conclusion arrived at by the Tribunal was contrary to the material on record and perverse or upon a view of the facts and evidence on record it could reasonably be arrived at? (Question of law) Assessee's Contentions: The assessee argued that overall quantity details were maintained in the Rojmel, which is the practice in their line of business, and that the Tribunal failed to consider the evidence produced, including Rojmel entries. The assessee contended that the Tribunal's order was not speaking or reasoned and that its conclusion was perverse. Revenue's Contentions: The Departmental Representative supported the orders of the CIT(Appeals) and the AO.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No 100 of 2004

For Approval and Signature:

HON'BLE MR.JUSTICE D.A.MEHTA and HON'BLE MS.JUSTICE H.N.DEVANI

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?

-------------------------------------------------------------- M/S.DAGINA Versus DY.C.I.T. -------------------------------------------------------------- Appearance: 1. TAX APPEAL No. 100 of 2004 MR SN DIVATIA for the Appellant MR MANISH R BHATT for the Respondent

--------------------------------------------------------------

CORAM : HON'BLE MR.JUSTICE D.A.MEHTA and HON'BLE MS.JUSTICE H.N.DEVANI

Date of decision: 18/01/2005

ORAL JUDGEMENT

(Per : HON'BLE MR.JUSTICE D.A.MEHTA for the Court)

1.

This appeal has been preferred by the assessee appellant from the order dated 11th August 2003 made by the Income-tax Appellate Tribunal, Ahmedabad Bench "SMC" in ITA No.1109/Ahd/2001 for Assessment Year 1997-98. The assessee has proposed the following four questions :

(1) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the rejection of books of account of the appellant as well as the addition aggregating to Rs.2,12,047/- on account of alleged non-maintenance of day-to-day stock and fall in gross profit rate?

(2) Whether on the facts and circumstances of the case, there was any material with the Appellate Tribunal to uphold the rejection of books of account and the addition of Rs.2,12,047/-.

(3) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in law in upholding the addition of Rs.2,12,047/without passing a speaking and reasoned order as well as without considering the evidence produced before it?

(4) Whether on the facts and in the circumstances of the case, the conclusion arrived at by the Tribunal was contrary to the material on record and perverse or upon a view of the facts and evidence on record it could reasonable by arrived at?"

2.

Heard Mr.Samir N.Divatia, the learned advocate for the appellant.

3.

ADMIT. The following substantial question of law arises from the impugned order of the Tribunal:

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the rejection of books of account as well as addition aggregating to Rs.2,12,047/- without assigning any reasons?"

4.

On 21st December 2004, notice was issued for final disposal. Mrs.M.M.Bhatt, the learned standing counsel appears for the respondent - revenue. Heard the learned Advocates for the respective parties.

5.

The Assessing Officer rejected the books result in absence of stock register and absence of quantitative tally and applied average rate of 14% gross profit as against 9.43% shown by the assessee in relation to gold ornaments account. The CIT (Appeals) upheld the addition. The aforesaid facts have been narrated by the Tribunal in paragraph No.2 of the impugned order.

6.

In paragraph No.3, the contentions raised on behalf of the assessee have been summarized and enumerated. The Tribunal further records in paragraph No.3 that the Departmental Representative supported the orders of CIT (Appeals) and the Assessing Officer.

7.

The Tribunal disposes of the appeal with the following observations in paragraph No.4 :

"

4.

I have heard the parties and considered their rival submissions. There is no evidence or material to support the assessee's contentions. The AO has taken the average of three years and, therefore, assessee's contentions have no force. I, therefore, uphold the orders of revenue authorities."

8.

It is an admitted position that a paper-book comprising 67 pages was furnished before the Tribunal and a copy of the same has been made available on record of this Tax Appeal. One of the contentions raised on behalf of the appellant - assessee was that overall quantity details have been maintained in the Rojmel itself and the same is the practice in this line of business. In support of the said contention, Rojmel entries are available on pages 26 to 30 of the paper-book. It was necessary for the Tribunal to deal with the contentions raised and the evidence produced before it. This is just by way of an illustrative example.

9.

The Tribunal has failed to record as to what were the issues which arose for consideration and the reasons which weighed with the Tribunal in rejecting the contentions raised on behalf of the appellant. Prima facie, the finding of the Tribunal that "there is no evidence or material to support the assessee's contentions" does not appear to be correct in light of the paper-book which was filed before the Tribunal.

10.

The Court must not be understood to be laying down a proposition that, in a case where the orders of the lower authorities are required to be upheld, the Tribunal must discuss each and every piece of evidence, but at the same time, it is necessary for the order of the Tribunal to reflect that the Tribunal was aware of the controversy that it was called upon to decide and application of mind by the Tribunal to the said controversy.

11.

Before parting, it is necessary to take note of the fact that, recently, the Court has come across number of orders of the Tribunal wherein the appeals have been disposed of cursorily, to say the least. The Income Tax Appellate Tribunal is a Body which has earned a name and reputation for itself as a leading institution dispensing quick justice and it is hoped that the Tribunal shall maintain the standards it has set for itself.

12.

In this view of the matter, the question referred to the Court is answered accordingly and the impugned order dated 11th August 2003 is quashed and set aside. The appeal, being ITA No.1109/Ahd/2001 is restored to the file of the tribunal for being decided afresh after giving full and proper opportunity to the parties to make their submissions.

13.

The appeal is accordingly allowed. There shall be no order as to costs.

[D.A.MEHTA, J.]

[H.N.DEVANI, J.]

parmar*

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