M/S. M. LODHA IMPEX,RATLAM vs. THE ITO-1, RATLAM

आदेश /O R D E R PER KUL BHARAT, J.M. : This appeal by the assessee is directed against the

order of ld. Commissioner of Income tax, Ujjain, dated

02.12.2015 pertaining to the assessment year 2000-01.

appeal :-

passing the order which is arbitrary, illegal

and without affording an opportunity of

hearing.

and time barred as prescribed in proviso to

clause 2 to Section 142 of the Income-tax Act,

1961, and the Ld. CIT(A) has failed to

interpret these provisions of law and thus the

-: 3 :- M.LODHA IMPEX,RATLAM. entire proceedings are bad in law and needs

to be annulled.

directed to grant the refund as claimed of Rs.

1,75,815/- with interest.

average GP rate of previous three years @

15.34 % as against loss returned at Rs.

5075/- by the assessee without looking at the

facts of the case and thus the returned loss

may be allowed.

interest u/s 234A, 234B, 234C & 234D of the

Income-tax Act, 1961.

-: 4 :- M.LODHA IMPEX,RATLAM. 6. In view of the above, the order passed u/s

143(3) is erroneous, illegal, wrong, without

any basis & without looking at the facts of

the case. Hence needs to be deleted.

assessee firm derives income from manufacturing of

Umbrella. The assessee filed the return of income declaring

total loss of Rs. 5,075/- on 30.10.2000. The AO made the

addition of Rs. 14,71,147/- on account of low gross profit

and made addition of Rs. 50,000/- out of expenses. The

assessee preferred an appeal before ld. CIT, who after

considering the submissions partly allowed the appeal,

thereby he deleted the addition of Rs. 50,000/- and

reduced the gross profit rate from 15.34 % to 15.03 %

thereby he confirmed addition of Rs. 10,29,121/- in this

respect. Now the assessee is in appeal before this Tribunal.

-: 5 :- M.LODHA IMPEX,RATLAM. 1 4. The Ld. Counsel for the assessee reiterated the

submissions made before us, which is reproduced below : “SUBMISSION 1. Facts of the case:- That the assessee is a firm deriving income from manufacturing of Umbrella. The return of Income declaring total loss of Rs. 5075/- has been filed on 30-10-2000 and revised return claiming refund of TDS of Rs.175815/- was filed on 09-04-2001.The assesse also filed rectification u/s 154 on 3/11/2004. Then assesse filed application u/s 119(1)(b)(c) on 21/12/2004 before CIT, Ujjain. The CIT, Ujjain passed order u/s 119(2)(b) on 17/01/2008. The assessee had received first notice U/s 143(2) of the Income Tax Act, 1961 on 16-05-2008.

2.Notice Issued U/s 143(2) of the act is barred by limitation and thus Illegal :-

That the notice issued U/s 143(2) is illegal and barred by limitation. The proviso to sec 143(2) states that "no notice under this sub-section shall be served on the assessee

-: 6 :- M.LODHA IMPEX,RATLAM.

after the expiry of twelve months from the end of the

month in which the return is furnished. " 2.1Revised return is within due date as per the act The assesse filed the revised return on 09/04/2001 vide receipt no.0027 enclosing the TDS form no. 16A and claiming the TDS at Rs.1,75,815/- which could be filed till 31-03-2002 and hence revised return filed is valid since the original return was filed before the due date. Revised return was filed only for claiming TDS of Rs.1,75,815/- which was not claimed in the original return by mistake. The revised return has been filed after processing of return but since the assessment has not been completed till 09/04/2001 i.e. date of filing of revised return and therefore revised return filed is valid. Hon'ble Commissioner of Income Tax (Appeals), Ujjain has mentioned in its own order in Para no. 4.1 that "the revised return filed by the appellant was not regular return. " The assesse had filed the revised return on 09/04/2001 which is a regular return. Since the revised return can be filed upto 31/03/2002 therefore it was not a non-est.

-: 7 :- M.LODHA IMPEX,RATLAM.

In the case of S.R. Koshti v. Commissioner of Income-tax [2005] 276 ITR 165 Gujarat High court held that "the assessee can file revised return even after intimation is served. " The issue is settled to rest by the decision of Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., 291 ITR 500 (2007) in which it was held that "intimation although deem to the notice of demand u/s 156 can not taken as assessment order. "

2.2 Rectification u/s 154 not processed by Assessing Officer The assesse had filed rectification u/s 154 on 3/11/2004. Then the assesse filed an application u/s 119(1)(b)(c) on 21/12/2004 because no action taken against the application u/s 154 filed on 3/11/2004. The assessing officer should suo-moto rectify the mistake apparent on record. The same has also been held in the case of Ardor International Pvt Ltd v/s ACIT, Ahmedabad (2016) ITA No. 1170/Ahd/2013 by Income Tax Appellate Tribunal, Ahmedabad that "the ld. Assessing Officer

-: 8 :- M.LODHA IMPEX,RATLAM.

using his inherent power u/s 154 of the Act for amending any mistake apparent on record should have examined the claim of the assessee by verifying the books of accounts of the assessee as well as the relevant ledger accounts wherein the impugned amount on which TDS has been deducted, is duly reflected. " As per sec 155(14) of the act, "Where in the assessment for any previous year or in any intimation or deemed intimation under sub-section (1) of section 143 for any previous year, credit for tax deducted or collected in accordance with the provisions of section 199 or, as the case may be, section 206C has not been given on the ground that the certificate furnished under section 203 or section 206C was not filed with the return and subsequently such certificate is produced before the Assessing Officer within two years from the end of the assessment year in which such income is assessable, the Assessing Officer shall amend the order of assessment or any intimation or deemed intimation under sub-section (1) of section 143, as the case may be, and the provisions of section 154 shall,

-: 9 :- M.LODHA IMPEX,RATLAM.

so far as may be, apply thereto. Provided that nothing contained in this sub-section shall apply unless the income from which the tax has been deducted or income on which the tax has been collected has been disclosed in the return of income filed by the assessee for the relevant assessment year. "

The assesse has also shown the income in its return on

which TDS has been claimed.

2.3 0rder passed u/s 119(2)(b) after 3 years of application: The application u/s 119(1)(b)(c) was filed on 21-12-2004 before the Hon'ble Commissioner of Income tax which was decided on 17-01-2008. The application filed ought to have been decided within the reasonable time i.e. order passed after 3 years, hence, delay caused is unreasonable. 2.4 Notice issued u/s 143(2) is invalid : The proviso to sec 143(2) states that "no notice under this sub- section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is

-: 10 :- M.LODHA IMPEX,RATLAM.

furnished”. Since the notice issued u/s 143(2) on 16-05-2008 i.e. after 30/04/2002. Therefore, the same is invalid and barred by limitation. The directions of the Hon'ble Commissioner of Income tax to issue notice u/s 143(2) beyond the time prescribed under the law is illegal. In the case of Shri Ashok Jayaram Jadhav v/s Income Tax Officer,Ward - 2(1), Pune, Income Tax Appellate Tribunal, Pune (2015) held that "the notice u/s. 143(2) was issued and served after the elapse of statutory time limit as envisaged u/s. 143(2) of the Act. The defect in issue of notice is not curable, thus the notice is invalid. We are of the considered opinion that the notice issued u/s. 143(2) by the Assessing Officer was barred by limitation and was thus invalid. The proceedings arising from the said notice are also vitiated. Thus, the assessment order passed in pursuance thereof is annulled. " Hon'ble Karnataka High Court in the case of A. Balakrishnan Vs. General Manager Hindustan Machine Tools Ltd. and others reported in (2007) 290 ITR 227 held that" It is the duty of the functionaries under the IT act to

-: 11 :- M.LODHA IMPEX,RATLAM.

implement the provisions of the act in accordance with law. A return filed is bound to be processed by the Income tax authorities within the reasonable time. Section 119(2)(b) of the act cannot relieve the authorities from the obligation of examining a return filed by the petitioner. It cannot be used as an excuse for inaction on the part of respondents. " Therefore, assessee should not be penalized because of delay caused in deciding the application by the Income tax authorities and thus notice issued u/s 143(2) beyond the time limit is illegal, bad in law and needs to be annulled.

3.Grant the refund as claimed of Rs. 1,75,815/- along with interest:- That the refund claimed of Rs, 1,75,815/- in the revised return

should be paid to the assesse as the revised return filed in

within the due date prescribed in the act. The said fact has

neither been controverted by Ld. Assessing Officer nor by CIT

(Appeals).

The Commissioner of Income Tax (Appeals), Ujjain has mentioned in its order in Para no. 4.6 that "the A 0 is directed to grant the interest on refund as per law. "

-: 12 :- M.LODHA IMPEX,RATLAM.

In the case of Tarsem Kumar v/s The Income Tax Officer and

others CWP No. 19906 of 2011, The High Court Of Punjab and

Haryana at Chandigarh (2012) also held that "the assessee

for assessment year 2005-06 could file the revised return after

complying with the provisions of Section 139(5) of the Act up to

31.3.2007. The revised return filed on 26.9.2006 was thus

validly filed within limitation. Consequently, the claim of the

petitioner-assessee for the refund of the additional tax

deposited amounting to Rs. 3,61,188/- is valid and justified.

Also held that we allow the writ petition and direct that the

refund be released to the petitioner within three months from

the date of receipt of certified copy of order along with interest

at the rate of 12 per annum till the date of making the

payment to him. "

Also held in the case of Dinakar Ullal v/s Commissioner of

Income Tax (2010) 323 ITR 452 by the Karnataka High Court

that "a condition in derogation of the statue is not for the

proper administration of the Act and further held that a

circular cannot impose any burden on the tax payer can

deviate from the provisions of the Act if it is beneficial to the

-: 13 :- M.LODHA IMPEX,RATLAM.

assessee and mitigates or relaxes the rigour of law."Also held

that "the interest U/s 244A would be admissible on belated

refund claims and that the instructions cannot run counter to

the legislative provisions and create rights and obligation

which are contrary to statute. Instructions should supplant the

law and not supplement the law. "

As per Para 7 of Instruction no. 13/2006, dated 22-12- 2006 of board, "the CCsIT/CsIT are empowered to direct the Assessing Officer to make necessary enquiries or scrutinize the case in accordance with provisions of the Income-tax Act to ascertain the correctness of the claim. "According to this, case should be scrutinized as per the provisions of the act and old case can only be scrutinized through sec. 147. Drawing the attention towards CBDT Circular No. 14 (XL-35) dated 11-04-1955 which reads as follows:-

"Officers of the department must not take advantage of the

ignorance of an assessee as to his rights. It is one of their

duties to assist a taxpayer in every reasonable way,

particularly in the matter of claiming and securing reliefs

-: 14 :- M.LODHA IMPEX,RATLAM.

and in this regard the officers should take the initiative in

guiding taxpayer where proceedings or other particulars

before them indicate that some refund or relief is due to

him. This attitude would, in the long run, benefit the

department, for, it would inspire confidence in him that he

may be sure of getting a square deal from the department.

Although, therefore, the responsibility for claiming refunds

and reliefs rests with the assessees on whom it is imposed

by law, officers should (a) draw their attention to any

refunds or reliefs to which they appear to be clearly

entitled but which they have omitted to claim for some

reason or other; (b) freely advise them when approached

by them as to their rights and liabilities and as to the

procedure to be adopted for claiming refund and reliefs ".

In view of the above, officer should be directed to grant

refund claimed of Rs. 175815/- with interest till the date of

making the payment to him. 4. Addition by estimating the arbitrary G.P. rate is wrong:-

-: 15 :- M.LODHA IMPEX,RATLAM.

The CIT(A)erred in confirming the addition of Rs. 10,29,121/-

towards Gross profit by making estimation of gross profit at

15.34 of gross turnover. The Gross profit arbitrarily estimated

of Rs. 14,51,019/- in place of Rs. 4,21,898/- on turnover of Rs.

94,65,225/-. The addition made and confirmed is on very high

side as the business of assessee is a seasonal business. In

this regards assessee had already submitted the news paper

item appearing in Naidunia Dt 01.09.1999 wherein the critical

condition of Umbrella trade during the year due to low/

delayed monsoon is highlighted in detail. That the pre-

condition for estimating business income of the assessee,

where an assessee keeps accounts is that the assessee's

books should have been found to be unreliable or otherwise

not capable of proving the assessee's income.

That the assessee maintains proper books of accounts as required U/S 44AA of Income tax Act, 1961. Assessee's books are also audited by a Chartered Accountant and no adverse opinion has been given in the audit report. That the Ld. Assessing Officer without rejecting the books of accounts U/S

-: 16 :- M.LODHA IMPEX,RATLAM.

145 and without passing order U/S 144, estimated the gross profit of Rs. 18,93,045/- (Rs. 10,29,1211- confirmed by CIT (A), Ujjain) and passed order U/S 143(3). Also assesse had produced books of accounts before the Assessing Officer & same has been written in Para no. 4 of his order. Therefore, estimating the profit on ad hoc basis without rejecting books of accounts is baseless, illegal and wrong.

The comparison of gross profit of assessed year and previous

three assessment years are as under: -

Assessment Gross Profit Turnover G.P. Rate Type of sale

Year (Rs.) (Rs.)

2000-01 9465225 4.46 Local sales 42189 1999-00 1927729 9625250 20.02 Export sale

1998-99 2001171 15284610 13.09 Export sale

1997-98 1295566 10024355 12.92 Export sale

The business of assessee is export oriented and does not

deal in the local market. During the assessed year 2000-01,

due to rejection of Export order and spoilage of stock,

assessee had to sell entire stock in the local market at a very

-: 17 :- M.LODHA IMPEX,RATLAM.

low profit. This results in low Gross profit rate during the year. Assessee also closed down the business in the assessed year and no further transaction was being carried in any of the following years.

The estimate of turnover and fixation of gross profit rate are two important parameters which affect the assessment. If these are fixed or calculated in such a way that they adversely affect the assessee's case, then he is entitled to know the basis and to be given an opportunity to rebut the same. Therefore CIT (A) was not justified in confirming the addition.

Looking to the above submission and evidence, kindly delete the arbitrary addition made by the Ld. Assessing officer and confirmed by CIT(A). 5. The Ld. assessing officer erred in charging and CIT(A) erred in confirming the charging of interest U/s 234A, 234B, 234C and 234D of the Income tax act, 1961. 6. In view of the above, huge additions of Rs. 10,29,121/- are wrong, without any basis and without looking to the facts of the case. Hence, needs to be deleted. ”

-: 18 :- M.LODHA IMPEX,RATLAM.

submitted that the Ld. CIT(A) has not afforded sufficient

opportunity to the assessee.

submission and submitted that sufficient opportunity was

granted.

the record. From the impugned order, it is evident that the

Ld. Authorized Representative of the assessee has appeared

before the Ld. CIT(A) and filed written submission. The Ld.

CIT(A) has considered the written submissions. Therefore,

we do not see any merit into the averment of the assessee

that no opportunity was granted. This ground of the

assessee’s appeal is rejected.

the issuance of Notice u/s 143(2) which is illegal and time

-: 19 :- M.LODHA IMPEX,RATLAM. barred as prescribed in proviso to clause 2 to Section 142

of the Income-tax Act, 1961.

assessee firm derives income from manufacturing of

Umbrella. The assessee filed return of Income declaring

total loss of Rs. 5075/- on 30-10-2000 and filed revised

return on 9th April, 2001, claiming refund of TDS of

Rs.1,75,815/-. The assesse also filed application for

rectification u/s 154 on 3rd November, 2004. Then assesse

filed application u/s 119(1)(b)(c) on 21st December, 2004

before CIT, Ujjain. The CIT, Ujjain passed order u/s

119(2)(b) on 17/01/2008. The assessee had received first

notice U/s 143(2) of the Income Tax Act, 1961 on 16-05-

2008. The Ld. Counsel for the assessee further contended

that the notice issued u/s 143(2) of the Act is barred by

limitation and thus illegal.

The proviso to sec 143(2) states that "no notice under this

-: 20 :- M.LODHA IMPEX,RATLAM. sub-section shall be served on the assessee after the

expiry of twelve months from the end of the month in

which the return is furnished. " The Ld. Counsel for the

assessee further contended that the revised return was

filed within due date as per the Act. The Ld. Counsel for

the assessee further contended that the assesse filed the

revised return on 9th April, 2001, vide receipt no.0027

enclosing the TDS form no. 16A and claimed the TDS at

Rs.1,75,815/- which could be filed up to 31-03-2002 and

hence revised return filed was valid since the original

return was filed before the due date. Revised return was

filed only to claim TDS of Rs.1,75,815/- which was not

claimed in the original return. The revised return was filed

after processing of return but since the assessment was

not completed till 9th April, 2001, i.e. date of filing of

revised return and therefore revised return filed was valid.

The Ld. Counsel for the assessee further contended that

-: 21 :- M.LODHA IMPEX,RATLAM. Ld. CIT(A) , Ujjain, has also mentioned in para 4.1 of his

order that "the revised return filed by the appellant was

not regular return. " The assesse had filed the revised

return on 9th April, 2001, which was a regular return.

Since the revised return could be filed upto 31st March,

2002, therefore it was not a non-est. The Ld. Counsel for

the assessee placed reliance on the decision in the case of

S.R. Koshti v. Commissioner of Income-tax [2005] 276 ITR

165 Gujarat High Court, in which the Hon'ble Court held

that "the assessee can file revised return even after

intimation is served. " The Ld. Counsel for the assessee

further relied on the decision of Hon'ble Supreme Court in

the case of ACIT vs. Rajesh Jhaveri Stock Brokers (P)

Ltd., 291 ITR 500 (2007) in which it was held that

"intimation although deem to the notice of demand u/s 156

can not be taken as assessment order. " The Ld. Counsel

for the assessee further contended that the assessee filed

-: 22 :- M.LODHA IMPEX,RATLAM. application for rectification u/s 154, which was not

processed by the AO. Then the assessee filed an

application u/s 119(1)(b)(c) on 21st December, 2004. The

Ld. Counsel for the assessee further contended that the

application u/s 119(1)(b)(c) was filed on 21st December,

2004, before the ld. CIT, which was decided on 17-01-

2008. The application filed ought to have been decided

within the reasonable time i.e. order passed after 3 years,

hence, delay caused is unreasonable. The Ld. Counsel for

the assessee contended that the proviso to sec 143(2)

states that "no notice under this sub-section shall be served

on the assessee after the expiry of twelve months from the

end of the month in which the return is furnished”. Since

the notice issued u/s 143(2) on 16th May, 2008, i.e. after

30th April, 2002, the notice is invalid and barred by

limitation. The directions of the ld. CIT to issue notice u/s

143(2) beyond the time prescribed under the law is illegal.

-: 23 :- M.LODHA IMPEX,RATLAM. The Ld. Counsel for the assessee contended that the

assessee should not be penalized because of delay caused

in deciding the application by the Income tax authorities

and thus notice issued u/s 143(2) beyond the time limit is

illegal, bad in law and needs to be annulled.

orders of the lower authorities.

perused the material available on record. Now the issue is

required to be adjudicated as to whether the notice issued

u/s 143(2) by the AO is barred by time. Before adverting to

the rival submissions, for the sake of clarity, undisputed

facts are that the original return was filed on 30.10.2000.

The fact is that return was revised on 09.04.2001 to claim

refund of TDS amounting to Rs. 1,75,815/-. The assessee

filed an application u/s 199(2)(b) of the Income-tax Act,

1961. The said application came to be decided on

-: 24 :- M.LODHA IMPEX,RATLAM. 17.01.2008. While disposing of that application, the Ld.

CIT(A) directed the AO to determine the refund after

scrutinizing the case by issue of notice u/s 143 of the Act,

as per para 7 of Instruction No.13 dated 22.12.2006 issued

by the Board. In pursuance of that order, a notice u/s

143(2) was issued to the assessee on 16.05.2008. The

contention of the assessee is that the AO could not have

issued the notice u/s 143(2) of the Act. The Ld. CIT(A) in

para 4.1 in his order has decided the issue as under :-

“4.1 Through this ground of appeal, the appellant

has challenged the issuing of notice u/s 143(2) of

the I.T. Act. The appellant filed the return of income

on 3-0.10.2000. The same has been processed u/s

143(1)(a) of the I.T.Act on 16.02.2001.

Subsequently the appellant filed the revised return

on 09.04.2001 i.e. after processing ,of original

return. The appellant filed the application before

-: 25 :- M.LODHA IMPEX,RATLAM. CIT,Ujjain, for condonation of delay u/s 119(2)(b) to

regularize the revised return. The revised return

filed by the appellant was not regular return. The

revised return has been regularized vide order u/s

119(2)(b) dated 17.01.2008. Therefore, from the

date of filing of the revised return till the date of

condonation the return remained as non est. The

revised return came into the existence only on

17.01.2008 i.e. date of order u/s 119(2)(b) of the I.

T. Act. Therefore, the return deemed to have been

filed on 17.01.2008 for all practical purpose and

the same has been processed, the appellant has

been given the refund and at the same time the AO

has issued notice u/s 143(2) on 16.05.2008.

Therefore, this ground of appeal is Dismissed. ”

-: 26 :- M.LODHA IMPEX,RATLAM. 12. The moot question is whether the ld. CIT is empowered

to direct the AO for issuing notice u/s 143(2) after expiry of

normal limitation period. Section 119 of the Income-tax

Act, 1961, reads as under :-

“[Instructions to subordinate authorities.

such orders, instructions and directions to other

income-tax authorities as it may deem fit for the

proper administration of this Act, and such

authorities and all other persons employed in the

execution of this Act shall observe and follow such

orders, instructions and directions of the Board :

Provided that no such orders, instructions or

directions shall be issued—

-: 27 :- M.LODHA IMPEX,RATLAM. (a) so as to require any income-tax authority to

make a particular assessment or to dispose of a

particular case in a particular manner; or

(b) so as to interfere with the discretion of the

Commissioner (Appeals) in the exercise of his

appellate functions.

(2) Without prejudice to the generality of the

foregoing power,—

(a) the Board may, if it considers it necessary or

expedient so to do, for the purpose of proper and

efficient management of the work of assessment

and collection of revenue, issue, from time to time

(whether by way of relaxation of any of the

provisions of sections [115P, 115S, 115WD,

115WE, 115WF, 115WG, 115WH, 115WJ, 115WK,]

80[139,] 143, 144, 147, 148, 154, 155 [, 158BFA],

[sub-section (1A) of section 201, sections 210, 211,

-: 28 :- M.LODHA IMPEX,RATLAM. 234A, 234B, 234C [, 234E]], [270A] 271 and 273 or

otherwise), general or special orders in respect of

any class of incomes [or fringe benefits] or class of

cases, setting forth directions or instructions (not

being prejudicial to assessees) as to the guidelines,

principles or procedures to be followed by other

income-tax authorities in the work relating to

assessment or collection of revenue or the initiation

of proceedings for the imposition of penalties and

any such order may, if the Board is of opinion that

it is necessary in the public interest so to do, be

published and circulated in the prescribed manner

for general information;

(b) the Board may, if it considers it desirable or

expedient so to do for avoiding genuine hardship in

any case or class of cases, by general or special

order, authorise [any income-tax authority, not

-: 29 :- M.LODHA IMPEX,RATLAM. being a Commissioner (Appeals)] to admit an

application or claim for any exemption, deduction,

refund or any other relief under this Act after the

expiry of the period specified by or under this Act

for making such application or claim and deal with

the same on merits in accordance with law;

[(c) the Board may, if it considers it desirable or

expedient so to do for avoiding genuine hardship in

any case or class of cases, by general or special

order for reasons to be specified therein, relax any

requirement contained in any of the provisions of

Chapter IV or Chapter VI-A, where the assessee

has failed to comply with any requirement

specified in such provision for claiming deduction

thereunder, subject to the following conditions,

namely:—

-: 30 :- M.LODHA IMPEX,RATLAM. (i) the default in complying with such requirement

was due to circumstances beyond the control of the

assessee; and

(ii) the assessee has complied with such

requirement before the completion of assessment in

relation to the previous year in which such

deduction is claimed :

Provided that the Central Government shall cause

every order issued under this clause to be laid

before each House of Parliament.]”

Instruction No.13/2006 dated 22.12.2006 . For the sake of

clarity Instruction No.13 of 2006 is reproduced as under :-

“INSTRUCTION NO. 13/2006, DATED 22-12-2006 1. The procedure for dealing with the applications for

condonation of delay in filing returns and claiming

refund is presently governed by the Board's earlier

-: 31 :- M.LODHA IMPEX,RATLAM. Orders/Circulars issued under section 119(2)(b) of the

Income-tax Act, 1961, namely, F. No. 225/208/93-ITA-

II, dated 12-10-1993, read with Board's Circular No.

670, dated 26-10-1993 issued from F. No. 225/208/93-

ITA-II, Circular No. 812001, dated 16-5-2001 issued from

F. No. 212/35/99-ITA-II and also Instruction No.

12/2003 dated 30-10-2003 issued from F. No.

212/338/2002-ITA - II.

Instruction vests the Chief Commissioners of Income-tax

(CCsTT) with powers for acceptance/rejection of

applications/claims under section 119(2)(b) for

condonation of delay in filing return involving refund

claims above Rs. 10,00,000 and up to Rs. 50,00,000. It

also vests the Commissioners of Income-tax (CsIT) with

powers of acceptance/rejection of applications/claims

under section 119(2)(b) for condonation of delay in filing

-: 32 :- M.LODHA IMPEX,RATLAM. return involving refund claims up to Rs. 10,00,000.

condonation of delay involving refund claims exceeding

Rs. 50,00,000 would continue to be processed by

Central Board of Direct Taxes, both for acceptance and

rejection.

entertained beyond six years from the end of the

assessment year for which the application/claim is

made.

monetary limits delegated to the CCsIT/CsTT would be

subject to the following conditions:-

The refund has arisen as a result of excess tax (a)

deducted/collected at source and payments of

advance tax under the provisions of Chapters

XVII-B, XVII-BB and XVII-C respectively and the

-: 33 :- M.LODHA IMPEX,RATLAM. amount of refund does not exceed Rs. 50,00,000

in respect of CCsIT and Rs. 10,00,000 in respect

of CsIT for anyone assessment year;

The income of the assessee is not assessable in (b)

the hands of any other person under any of the

provisions of the Act; and

(c) No interest will be admissible on the belated

refund claims.

provisions of section 119(2)(b), it should be ensured that

the income declared and refund claimed are correct and

genuine and also that the case is of genuine hardship

on merits.

Assessing Officer to make necessary enquiries or

scrutinize the case in accordance with provisions of the

Income-tax Act to ascertain the correctness of the claim.

-: 34 :- M.LODHA IMPEX,RATLAM. 8. This instruction will also cover those

applications/claims for condonation of delay under

section 119(2)(b) which are pending as on the date of

issue of this instruction. ”

assessment is to be framed as per the provisions of Section

143 of the Income-tax Act, 1961. The Instruction No.

13/2006 would not override these provisions. From a bare

reading of the instructions, it is evident that the Instruction

is related to condonation of delay in respect of refund due.

This instruction is issued with an objective to mitigate the

hardship to the assessee. Para 7 of the Instruction, in our

view, is limited to the extent of ascertaining the claim of the

assessee. This does not empower the Assessing Officer to

make scrutiny of the entire case, which goes against the

spirit of the law. In the case in hand, the AO was required

to ascertain that the tax has been deducted at source and

-: 35 :- M.LODHA IMPEX,RATLAM. on the returned income, such refund is available to the

assessee or not. In our view, the AO has misconstrued

direction of the ld. Commissioner of Income-tax and

assessed the income by making scrutiny assessment. It is

also noticed that there is an inordinate delay in disposing

the application by the ld. Commissioner of Income-tax.

Under these facts, we are constrained to hold that the

impugned assessment order as framed by the AO is

contrary to the provisions of law and beyond the

jurisdiction of the AO. Accordingly, the assessment is

quashed. Ground no.2 of the assessee’s appeal is allowed.

1,75,815/- with interest.

refund claimed at Rs. 1,75,815/- in the revised return

should be paid to the assesse as the revised return filed

was within the due date prescribed in the Act. The

-: 36 :- M.LODHA IMPEX,RATLAM. Commissioner of Income Tax (Appeals), Ujjain mentioned in its order in Para no. 4.6 that "the A 0 is directed to grant the interest on refund as per law. " The Ld. Counsel for the

assessee relied on the decision in the case of Tarsem

Kumar vs. ITO and others, CWP No. 19906 of 2011,

wherein the Hon'ble High Court Of Punjab and Haryana at

Chandigarh (2012), also held that "the assessee for

assessment year 2005-06 could file the revised return after

complying with the provisions of Section 139(5) of the Act up

to 31.3.2007. The revised return filed on 26.9.2006 was

thus validly filed within limitation. Consequently, the claim

of the petitioner-assessee for the refund of the additional tax

deposited amounting to Rs. 3,61,188/- is valid and justified.

Also held that we allow the writ petition and direct that the

refund be released to the petitioner within three months from

the date of receipt of certified copy of order along with

-: 37 :- M.LODHA IMPEX,RATLAM. interest at the rate of 12 per annum till the date of making

the payment to him. "

reliance on the decision in the case of Dinakar Ullal v/s

Commissioner of Income Tax, (2010) 323 ITR 452 (Kar),

wherein the Hon'ble Karnataka High Court held that "a

condition in derogation of the statue is not for the proper

administration of the Act and further held that a circular

cannot impose any burden on the tax payer can deviate

from the provisions of the Act if it is beneficial to the

assessee and mitigates or relaxes the rigour of law."Also

held that "the interest u/s 244A would be admissible on

belated refund claims and that the instructions cannot run

counter to the legislative provisions and create rights and

obligation which are contrary to statute. Instructions should

supplant the law and not supplement the law. "

-: 38 :- M.LODHA IMPEX,RATLAM. 18. The Ld. Counsel for the assessee further drew our

attention to Para 7 of Instruction no. 13/2006,

dated 22-12-2006 of Board, "the CCsIT/CsIT are

empowered to direct the Assessing Officer to make

necessary enquiries or scrutinize the case in accordance

with provisions of the Income-tax Act to ascertain the

correctness of the claim. "According to this, case

should be scrutinized as per the provisions of the Act

and old case can only be scrutinized through sec. 147.

The Ld. Counsel for the assessee further drew our

attention towards CBDT Circular No. 14 (XL-35) dated

11-04-1955 which reads as follows:-

"Officers of the department must not take

advantage of the ignorance of an assessee as to

his rights. It is one of their duties to assist a

taxpayer in every reasonable way, particularly in

-: 39 :- M.LODHA IMPEX,RATLAM. the matter of claiming and securing reliefs and in

this regard the officers should take the initiative in

guiding taxpayer where proceedings or other

particulars before them indicate that some refund

or relief is due to him. This attitude would, in the

long run, benefit the department, for, it would

inspire confidence in him that he may be sure of

getting a square deal from the department.

Although, therefore, the responsibility for claiming

refunds and reliefs rests with the assessees on

whom it is imposed by law, officers should (a)

draw their attention to any refunds or reliefs to

which they appear to be clearly entitled but which

they have omitted to claim for some reason or

other; (b) freely advise them when approached by

them as to their rights and liabilities and as to the

procedure to be adopted for claiming refund and

-: 40 :- M.LODHA IMPEX,RATLAM. reliefs ".

arguments that in view of the above, the Officer should be

directed to grant the refund claimed at Rs. 1,75,815/- with

interest till the date of making the payment to him.

orders of the lower authorities.

perused the material available on record. Since we have

decided ground no.2 in favour of the assessee, the AO is

directed to allow the refund with interest as per law.

profit rate of previous three years @ 15.34 % as against

loss returned at Rs. 5075/- by the assessee without

looking to the facts of the case and thus the returned loss

may be allowed.

-: 41 :- M.LODHA IMPEX,RATLAM. 23. The Ld. Counsel for the assessee contended that the

the Ld. CIT(A) erred in confirming the addition of Rs.

10,29,121/- towards Gross profit by making estimation of

gross profit at 15.34 % of gross turnover. The Gross profit

arbitrarily estimated at Rs. 14,51,019/- in place of Rs.

4,21,898/- on turnover of Rs. 94,65,225/-. The Ld. Counsel

for the assessee contended that the addition made and

confirmed is on very high side as the business of assessee

is a seasonal business. The Ld. Counsel for the assessee

contended that the assessee had also submitted the news

paper item appearing in Naidunia dated 1st September,

1999, wherein the critical condition of Umbrella trade

during the year due to low/delayed monsoon was

highlighted in detail. That the pre-condition for estimating

business income of the assessee, where an assessee keeps

accounts is that the assessee's books should have been

found to be unreliable or otherwise not capable of proving

-: 42 :- M.LODHA IMPEX,RATLAM. the assessee's income. The Ld. Counsel for the assessee

contended that the assessee maintained proper books of

account as per requirement of Section 44AA of the Income-

tax Act, 1961. Assessee’s books were also got audited by

Chartered Accountants. No adverse opinion was recorded

in the audit report. The Ld. Counsel for the assessee

further contended that the A.O. without rejecting the books

of accounts u/s 145 and without passing order u/s 144,

estimated the gross profit at Rs. 18,93,045/- (Rs.

10,29,1211- confirmed by CIT (A), Ujjain) and passed order

u/s 143(3). The Ld. Counsel for the assessee further

contended that the assesse produced all the books of

accounts before the Assessing Officer. The Ld. Counsel for

the assessee contended that estimating the profit on ad hoc

basis without rejecting books of accounts is baseless,

illegal and wrong. The Ld. Counsel for the assessee drew

our attention to comparative chart of gross profit of

-: 43 :- M.LODHA IMPEX,RATLAM.

assessed year and previous three years, which is as under

:-

Assessment Gross Profit Turnover G.P. Rate Type of sale

Year (Rs.) (Rs.)

2000-01 9465225 4.46 Local sales 42189 1999-00 1927729 9625250 20.02 Export sale

1998-99 2001171 15284610 13.09 Export sale 1997-98 1295566 10024355 12.92 Export sale

The Ld. Counsel for the assessee contended that the

business of assessee was export oriented and the

assessee did not deal in the local market. During the

assessment year under consideration i.e. 2000-01, due to

rejection of Export order and spoilage of stock, assessee

had to sell entire stock in the local market at a very low

profit. This resulted in low Gross profit rate during the

year. Assessee also closed down the business in the

assessed year and no further transaction was being

-: 44 :- M.LODHA IMPEX,RATLAM. carried out in any of the following years. The Ld. Counsel

for the assessee contended that the estimation of turnover

and fixation of gross profit rate are two important

parameters which affect the assessment. The Ld. Counsel

for the assessee contended that the ld.CIT (A) was not

justified in confirming the addition. The Ld. Counsel for

the assessee concluded that looking to the above

submission and evidence, kindly delete the arbitrary

addition made by the Ld. Assessing officer and confirmed

by CIT(A).

orders of the lower authorities.

perused the material available on record. Since we have

decided ground no. 2 in favour of the assessee by holding

the assessment as bad in law. The addition as made by the

AO by estimating the gross profit does not survive. The AO

-: 45 :- M.LODHA IMPEX,RATLAM. is directed to delete the same. This ground of the assessee’s appeal is allowed. 26. Ground no. 5 relates to the charging of interest u/s 234A, 234B, 234C and 234D of the Income-tax Act, 1961. 27. This ground is of consequential nature. 28. In the result, the appeal of the assessee is partly allowed. The order pronounced in the open court on 27.06.2018.

Sd/- Sd/- (मनीष बोरड) (कुल भारत) लेखा सद�य �या�यक सद�य (KUL BHARAT) (MANISH BORAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; �दनांक Dated : 27/06/2018 CPU*/SPS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Private Secretary/DDO, Indore