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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Before Shri Rama Kanta Panda & Shri Laliet Kumar
IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Before Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No.704/Hyd/2020 Assessment Year: 2006-07 Neeraj Kumar Agarwal, Vs. The Income Tax Officer, Hyderabad. Ward-8(2), Hyderabad. PAN : AELPA3982N (Appellant) (Respondent) Assessee by: Sri P. Murali Mohan Rao, C.A. Revenue by: Sri K.P.R.R. Murthy. Date of hearing: 15.06.2022 Date of pronouncement: 27.06.2022 O R D E R Per Laliet Kumar, J.M. This appeal is filed by the assessee feeling aggrieved by the order of ld. Commissioner of Income Tax (Appeals) – 2, Hyderabad, (hereinafter referred as “ld.CIT(A)”) passed on 06.03.2020 for A.Y. 2006-07 on the following grounds : “1. The Ld. CIT(A) erred in dismissing the appeal. 2(a) The Ld. CIT(A) ought to have appreciated that the action of theAssessing Officer in passing the impugned order dated 20.02.2014 u/s 154 of the Act is not in accordance with the provisions of the Income Tax Act, 1961. (b) The Ld. CIT(A) ought to have annulled the order dated 20.02.2014 which has been passed u/s 154 of the Act. (c) The Ld. CIT(A) ought to have appreciated that meddling with the turn over admitted in the return of income filed u/s 139(5) of the Act, for the purpose of estimating income, is not within the scope of the provisions of section 154 of the Act.
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(d) The Ld. CIT(A) ought to have appreciated that the addition of Rs.6,05,37,274/- to the turn over admitted in the revised return, cannot be equated with rectification of mistake apparent from record as envisaged in section 154 of the Income Tax Act, 1961. (e) The Ld. CIT(A) ought to have followed the ratio laid down by the Apex Court in the case of ITO v. Volkart Brothers and Others, 82 ITR 50 (S.C.) with regard to mistake apparent from record that qualities for an action u/s 154 of the Act. 3. The Ld. CIT(A) erred in not adjudicating on merits all the grounds of appeal and additional grounds of appeal taken before him. 4 (a) The Ld. CIT(A) erred in dismissing ground nos. 9 to 18 taken before him, by observing that they pertained to the rectification order dated 18.03.2010. (b) The Ld. CIT(A) erred in dismissing ground nos. 9 to 18 taken before him by holding that the grounds are legal in nature and that the same do not apply to mistake from record. (c) The Ld. CIT(A) ought to have appreciated that the impugned order ed 20.02.2014 is not in accordance with the order of the Hon'ble ITAT, Bench "B", Hyderabad which has been passed in the assessee' case for the assessment year under consideration vide ITAT No.210/Hyd/2010 dated 31.03.2011. 5. The ld.CIT(A) ought to have directed the Assessing Officer to estimate the income @ 8% on the turnover of Rs.11,91,24,085/ - admitted in the revised return of income as against on the turnover of Rs.17,96,61,359/admitted in the original return of income filed. 6. The Ld. CIT(A) erred in not adjudicating the appeal on merits. 7. The Ld. CIT(A) ought to have appreciated that the impugned order dated 20.02.2014 is not valid on the ground that the original order passed u/s 154 of the Act dated 18.03.2010 in which the amount of Rs.6,05,37,274/ - has been wrongly considered as "Turn Over" for the purpose of estimation of profit @ 8%, is illegal. 8. The Ld. CIT(A) ought to have appreciated the order of the Hon'ble ITAT, Bench "B", Hyderabad in the assessee's case for the impugned assessment year and ought to have directed the Assessing Officer to estimate the profit @ 8% on the actual turn over of Rs.11,91,24,085/ - as against the amount of Rs.17,96,61,359/ - which included the amount of 6,05,37,274/ -. 9. The Ld. CIT(A) ought to have directed the Assessing Officer to estimate the profit @ 8% on the turnover of Rs.11,19,24,085/- that has been admitted in the revised return of income filed on 11.01.2008 u/s 139(5) of the Act.
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The Ld. CIT(A) ought to have appreciated that there is no direction from the Hon'ble ITAT to adopt the net profit @ 8% on the amount of Rs.6,05,37,374/- in their order in ITA No.150/Hyd/2010 dated 31.03.2011. 11. The appellant may, add or alter or amend or modify of appeal or substitute at any time or / or rescind all are any of the grounds before or at the time of hearing of the appeal.”
The captioned appeal filed by the assessee is barred by limitation by 34 days. The assessee has moved a petition requesting the bench to condone the delay. In this connection, the assessee has filed an affidavit for condonation of the said delay wherein, it was, inter-alia, affirmed that due to lock down imposed by the central government as preventive measures to contain the spread of Covid-19 form 23/03/2020, caused the impugned delay in filing the appeal belatedly. We rely on Case law Collector Land Acquisition Vs. Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that impugned delay in filing this appeal is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits.
The assessee has filed his return of income for A.Y. 2006-07 on 31.10.2006. The case of the assessee was selected for scrutiny and thereafter, the Assessing Officer had made additions in the hands of the assessee after passing the assessment order on 26.12.2008. Feeling aggrieved by the order of Assessing Officer, assessee preferred appeal before ld.CIT(A). The ld.CIT(A) had granted partial relief to the assessee. For the purposes of
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completeness of the record, we are reproducing para 4.5 of the order of ld.CIT(A) hereinbelow.
“4.5 Respectfully following the order of the ITAT for the immediately preceding Asst. Year, I feel that the assessing officer ought to have rejected the books of accounts in view of the fact that proper reconciliation of figures was not furnished. Further the fact that the debit entries passed were in respect of Creditors, who were existing in earlier assessment year also. Therefore, the assessing officer ought to have taken the fact that the debit entries were passed in respect of many of the creditors' accounts, which were brought forward and subsequently the same were reversed. Considering all the relevant facts, as the Hon'ble ITAT decided that rejection of the books of accounts by the Authorities were only the proper course of action as mentioned earlier. I am of the View that for this Assessment year also it is proper and appropriate to reject the books of accounts maintained by the appellant as defective. Once the books of accounts are rejected, I have no hesitation in :. directing the assessing officer to estimate the profit @8% on the total turnover as was decided by my predecessor in the Order for the Asst. Year 2005-06 which was upheld by the Hon'ble ITAT Hyderabad.
Feeling aggrieved by the order of ld.CIT(A), the assessee as well as the Revenue were in appeal before the Tribunal in ITA No.210/Hyd/2010 and ITA No.150/Hyd/2010. The Tribunal vide its decision dt.31.03.2011 had partly granted relief to the assessee and dismissed the grounds raised by the Revenue. Para 5 of the decision of the Tribunal reads as under :
“5. We have heard both the parties and perused the material available on record. In the present case the CIT(A) estimated the income of the assessee at 8% of the sales. The learned CIT(A) placed reliance on the order of this Tribunal in assessee’s own case (supra) wherein the Tribunal considered similar issue and held that the assessee’s income has to be estimated at 8% of sales and thereafter there cannot be any disallowance towards any addition even u/s. 40(a)(ia) of the Act. While holding so, the Tribunal placed reliance on the judgement of the jurisdictional High Court in the case of Indwell Constructions vs. CIT, reported in 232 ITR 776 and also on the decision of the Special Bench of this Tribunal in I.T.O. vs. Kenaram Sah and Subhash Sah, 301 ITR (AT) 171. Since the facts and circumstances of the present case are similar that that one considered by the Tribunal for A.Y. 2005-06 in assessee’s own case, we find no reason to interfere with the order of the CIT(A) for the assessment year under consideration. Accordingly, we confirm
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the order of the CIT(A) in estimating the income of the assessee at 8% of sales after rejecting the book results. No further disallowance of any expenses is called for and, therefore, the disallowance made u/s. 40(a)(ia) for non deduction of TDS on payment made on transportation of ore, transportation of coal and legal expenses is to be deleted. The ground raised by the Revenue is dismissed.” 5. In between before passing of the order by the Tribunal, the Assessing Officer had suomoto issued a notice for rectification of the order vide notification dt.09.03.2010 wherein the mistake pointed by the Assessing Officer was as under :-
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Thereafter, the Assessing Officer has recomputed the income of the assessee at Page 91 of the paper book which is mentioned as under :
PROCEEDINGSOF THE INCOME TAX OFFICER, WARD-8(2), HYDERABAD SRI G. SIVAIAH INCOME-TAX OFFICER F.No.154/W-8(2)/AELPA3982N Dated:20.02.2014 Sub: Modification Order u/s. 154- In the case of Sri.Neeraj Kumar Agarwal Prop.M/s. Global Enterprises. H.No. 1-11-24/1, Bhavani colony, Rajendra Nagar, Hyderabad-PAN: AELPA3982N AY 2006-07- Passing of rectification order-Regarding. Ref: Assessee’s application dated 11-12-2013 ORDER u/s. 154 OF THE INCOME TAX ACT, 1961:- Assessee’s vide letter cited in two references, requested to give credit for the amount of Rs.3,12,297/- which was paid by him. On verification of the records it is observed that the contention of the assessee is found correct and therefore, M.O is carried out duly allowing credit for the amount of Rs. 3,12,297/- Thus the modification is as under: Income@8% of total turnover Of Rs. 11,91,24,085-6,05,37,274= Rs.1,43,72,909 Add. Other income Rs. 14,41,582 Total Taxable income Rs.1,58,14,491 Tax there on Rs. 46,94,347 Add Surcharge @10% Rs.4,69,435 Add, E C 2% Rs.51,63,782 Payable Rs.1,03,275 Less:TDS & Adv.Tax Rs.52,67,057 Refundable Rs.1,25,37,849 Add: int u/s. 244A up to date of adj RO(4/06 to 9/08) Rs.72,70,792 Rs.10,90,605 Less:Refund already adj/issued against the Rs.83,61,397 Demand of 2005-06 Payable Rs.1,34,12,600 Add: Int.u/s. 234D(09/08 to 10) Rs.50,51,203 Payable Rs.4,29,352 Less:Refund for 2005-06 adjusted for AY 2006-07 Rs.54,80,555 As per C.O dated 30-03-2009 Rs.98,47,558 Refundable Rs.43,67,003
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The Assessing Officer had not given effect to the direction of the Tribunal and in fact it was submitted that the rectification order passed by the Assessing Officer on 18.03.2010 was not in conformity with the direction of the Tribunal dt.31.03.2011. The assessee had preferred to file various objections for seeking the enforcement of the order passed by the Tribunal and the letter was also written on 11.10.2013 to give effect to the order. However, on the application of the assessee dt.11.12.2013, the Assessing Officer had reiterated the earlier order passed u/s 154 dt.18.03.2010 whereby the income of the assessee was estimated at 8% on the total turnover.
7.1 Feeling aggrieved by the order passed by the Assessing Officer on 28.02.2014, the assessee filed appeal before the ld.CIT(A) and the ld.CIT(A) had rejected the appeal of the assessee. 8. Now the assessee is in appeal before us by making the above grounds. 9. At the outset, ld.AR for the assessee submitted that despite the direction of the hon’ble Tribunal in the earlier round of litigation whereby the Revenue was directed to assess the income of the assessee at 8% of the sales, the ld.CIT(A) and the Assessing Officer continued to compute the income of the assessee @ 8% of the turnover. The learned lower authorities had failed to consider that the income of the assessee was required to be assessed on the sales and not otherwise as done by the Assessing Officer. Our attention was drawn to the order passed by ITO dt.28.02.2014.
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Per contra, the learned Sr.DR had strongly relied upon the orders of lower authorities. 11. We have heard the rival submissions and perused the material on record. The Assessing Officer in the present case had passed the order giving effect after the order passed by the ld.CIT(A) on 04.01.2010 whereby the learned Assessing Officer has estimated the income of the assessee at 8% of the gross turnover of Rs.18,11,02,941/-. Thereafter Assessing Officer had issued the notice for rectifying the mistake vide letter dated 09.03.2010 thereby sought to determine the taxable income i.e., the other income as shown by the assessee in P&L. The Assessing Officer had passed the order on the basis of letter dated 09.03.2010 by revising the taxable income of the assessee at Rs1,58,14,491/-(page 91of PB). 12. Thereafter, Tribunal vide decision dated 31.3.2011 had decided the appeal of the assessee as well as revenue thereby directing the Assessing Officer to compute the income of the assesse by estimating the profit at 8% of the sales. 13. The Assessing Officer thereafter passed another order, on 20.02.2014, disregarding the decision of the Tribunal and had computed the income of the assessee on turnover basis instead of sales basis. Feeling aggrieved by the order, the assessee preferred the appeal before the ld.CIT(A), the ld.CIT(A) at page 50 had reproduced the Profit and Loss account of the assessee, including the sales of the assessee as under :
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M/S.GLOBAL ENTERPRISES 709, SWAPNALOK COMPLEX, S.D.ROAD SECUNDERABAD PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31-03-2006 To Operating Stocks 1706634.00 By Sales 119124085.00 To Purchase of Raw Materials 84931285.06 (Net Sales Value of Sponge &Waste Products through Operations of KMCL on lease) By other income 1441582.00 To Power charges 9412696.00 To HSD Purchases 1874197.00 To Purchase of consumables Stores & Spares 4391151.68 To Administrative Expenses Advertising Expenses 288024.00 Bank Charges Int and commission 1955979.52 Books Periodicals and Subscriptions 13463.98 Business/Sales Promotion Expenses 5840.00 Electricity charges 141597.00 Insurance Charges 15868.00 Legal Expenses 52860.00 Audit fee 1642500.00 Postage, Telegrams and Telephones 90000.00 Printing and Stationary Expenses 613828.00 Professional and Consultancy charges 201480.00 Rent Rates and Taxes 1244252.00 Repairs and Maintenance 1013116.00 Salaries and Wages-Incl.other benefits 1263306.00 Security Charges 7889694.00 Sundry Expenses 1110538.00 Travelling and Conveyance 309401.00 Conversion charges/Lease rentals to 1825178.43 Donations 6047120.00 Amounts Written Off 70000.00 89.73 To Depreciation 664852.00 By Net Loss 23633284 ------------------- -------------------- 144198951.40 144198951 --------------------- ------------------
From the perusal of the above, it is clear that the sales of the assessee during this period were Rs.11,91,24,085/- and therefore, the profit of the assessee was required to be estimated at 8% of the sales and not otherwise. Thus, the ld.CIT(A), had erred in dismissing the appeal of the assessee on the wrong pretext. In our considered opinion, the ld.CIT(A) erred in not giving effect to the direction of the Tribunal and had wrongly upheld the order u/s 154 of the Act passed by the Assessing Officer. Infact, the Assessing Officer as well as the ld.CIT(A) both have not understood the order of the Tribunal and have wrongly estimated the income of the assessee at 8% of the turnover instead of 8% of the total credit of the Profit and Loss account which includes net loss of Rs.2,36,33,284/- and other income of Rs.14,41,582/-. In fact, the
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lower authority was duty bound to pass an order giving effect after passing of the decision by the Tribunal on 31.03.2011. However, the Assessing Officer and the ld.CIT(A), have not acted in accordance with the direction of the Tribunal and the Assessing Officer had wrongly estimated the income of the assessee based on the earlier ld.CIT(A)’s order. 15. The Tribunal had specifically mentioned that the income of the assessee is required to be estimated on 8% of the sales and thereafter, no disallowance can be made towards addition u/s 40a(ia) of the Act. Till date, no order giving effect was passed by the Revenue computing the estimating of income of the assessee based on sales as stated by the learned counsel for the assessee and disputed by the ld.DR. In our view, the appeal of the assessee is required to be allowed for the reason that the lower authorities have not estimated the income of the assessee @ 8% on the sales as directed by the Tribunal. 16. In the light of the above, the appeal of the assessee is allowed and the Assessing Officer is directed to pass order giving effect at the earliest. We are not adjudicating the other grounds specifically raised by the assessee as all these grounds raised by the assessee are subsumed in the above order.
In the result, the appeal of the assessee is allowed.
Sd/- Sd/- (RAMA KANTA PANDA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 27th June, 2022. TYNM/sps 10
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Copy to: S.No Addresses 1 Sri Neeraj Kumar Agarwal, C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad – 500082. 2 The Income Tax Officer, Ward – 8(2), Hyderabad. 2 CIT(Appeals) – 2, Hyderabad. 3 Pr.CIT-2, Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File
By Order