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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SH. ANIL CHATURVEDI & MS SUCHITRA KAMBLE
ORDER PER ANIL CHATURVEDI, AM: These two appeals filed by the assessee and Revenue are directed against the order dated 28.03.2016 of the Commissioner
(Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 2 of Income Tax (A)-20, [‘CIT(A)’] New Delhi relating to Assessment Year 2012-13.
The relevant facts as culled from the material on records are as under:
3. Assessee is an individual who is stated to be engaged in the business of purchase of live stock and selling the same to slaughter houses. Assessee electronically filed his return of income for A.Y. 2012-13 on 26.09.2012 declaring total income at Rs.8,04,680/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) vide order dated 27.03.2015 and the total income was determined at Rs.3,30,45,680/-. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who vide order dated 28.03.2016 (in Appeal No.204/2015-16) granted partial relief to the assessee. Aggrieved by the order of CIT(A), Revenue and assessee are now before us. The grounds raised by the assessee in Appeal No.3103/Del/2016 reads as under:
“1. The Ld CIT(A) has acted arbitrarily while estimating Net Profit (Income) at the rate of 1% of Sales as against declared G P Rate of 0.29% and Net Profit Rate of 0.055% of Sales by the appellant.
2. Ld CIT(A) is not justified in upholding the action of Rejection of Books of Accounts by AO and invoking the Provision of Section 145(3). The action of CIT(A) is bad in law and on facts.
Without prejudice to what has been stated above, the Ld CIT(A) failed to appreciate the past history of the appellant and that NO comparable case was quoted by AO while estimating Net Profit (Income) @ 1% of Sales.
(Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 3 4. On the contrary, the Ld CIT(A) and the AO failed to consider the GP Rate of 0.21% declared in comparable case of Mohd. Nadir for A.Y. 2012-13 by the AO of the same ward for which copy of assessment order was submitted by the Appellant at the time of assessment and appeal. 5. The appellant may kindly be permitted to add, amend or modify grounds of appeal at any time.”
4. On the other hand, grounds raised by Revenue in Appeal No.3329/Del/2016 reads as under: “1. In the facts and circumstances of the case, the Ld CIT(A) has erred in reducing the estimation of income from 2% of the total sales to 1% of total sales i.e. from Rs.3,30,45,676/- to Rs.1,65,22,880/- ignoring the GP rate between 2.01% to 4.92% declared in comparable cases on account of rejection of books of accounts.
2. The appellant may kindly be permitted to add, amend or modify grounds of appeal at any time. It is prayed that the order of the CIT(A) is contrary to the facts on record and the settled position of law, and the order of the Assessing Officer deserves to be restored.”
5. Before us at the outset, both the parties submitted that the grounds raised by the Assessee and Revenue are interconnected
During the course of assessment proceedings, AO noticed that on the total sale of Rs.165.22 crores, assessee has showed Gross Profit Rs.47.93 lakh which worked out to 0.29% and Net Profit of Rs.9.04 lakh (0.055%). Assessee was asked to file the details inter alia including the names and addresses of the persons from whom sale/ purchase were made, reasons for low Gross and Net Profit. AO noted that assessee did not produce proper books of accounts despite various opportunities granted
(Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 4 by him but had only produced copies of some bought notes and cash payment’s slips which did not contain the names or the addresses. AO was of the view that in view of these facts the transactions of the assessee could not be independently verified and the purchase, sales and profits shown by the assessee cannot be relied upon. He, therefore rejected the books of accounts u/s 145(3) of the Act and thereafter estimated the income of the Assessee at 2% of the sales which worked out to Rs.3,30,45,676/- and considered it to be the income of the Assessee. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who after considering the submissions of the assessee, directed the estimation of income be made at 1% of the receipts as against the 2% of the receipts considered by AO and accordingly granted partial relief to the Assessee. Aggrieved by the order of CIT(A), both the parties are now before us.
Before us, at the outset, Learned AR submitted that assessee has made application under Rule 29 of the Income-tax (Appellate Tribunal) Rule, 1963 for admission of additional evidence which inter alia includes the copy of gate passes, weight slips, bought notes, purchase invoices and the copy of accounts. He submitted that the Assessee is illiterate and not well versed with the legal and income tax proceedings. His income tax proceedings right from the inception of his business was represented by Shri Subhash Gupta (CA). For the previous assessment proceedings, assessee was represented by Mr.
(Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 5 Subhash Gupta, Advocate and who inter alia for A.Y. 2011-12 had attended the assessment proceedings. Due to the unfortunate, death of Shri Subhash Gupta on 12.12.2012, his son, Mr Kshitij Gupta took over the matters looked after by Mr. Subhash Gupta. Mr. Gupta expired and the assessee was represented by Mr. Kshitij Gupta, son of Mr. Subhash Gupta. Mr. Kshitij Gupta also could not fully concentrate during the assessment proceedings due to the bereavement. On 26.01.2014, Assessee met with an accident and due to the fracture in his leg, he was bed ridden and could not furnish the details called for by the authorities. The Assessee now therefore proposes to file additional evidences which has direct nexus and bearing on the addition made by the AO. He therefore prays that the additional evidences which the Assessee now proposes to be filed be admitted. He further submitted that on identical facts and for same reasons, Assessee had made prayer to file additional evidences before the Hon’ble tribunal for A.Y. 2011-12 and the Hon’ble Tribunal vide order dated 28.11.2019 had admitted the additional evidences and remitted the matter to the file of the AO for the examination of the fresh evidences. He pointed to the copy of the order of Hon’ble Tribunal in his own case which is placed in the paper book. He therefore, submitted that since the issues involved in the year under consideration are similar to that of earlier years, the additional evidences be admitted and the matter may be remitted to the file of AO. Learned DR objected to the prayer of the Assessee for the admission of additional evidences. He submitted that various opportunities were granted to the assessee by the (Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 6 lower authorities and the assessee could not produce the same. In such a situation the additional evidences filed by the assessee now needs to be rejected.
We have heard the rival submissions and perused the relevant materials on record. The issue in the present appeals is with respect to the estimation of the income. It is the case of the Revenue that in the absence of complete details filed by the assessee, AO had no other option but to invoke the provisions of s.145(3) and thereafter estimate the income of the assessee. Before us, assessee has prayed for filing of the additional evidences which are in the nature of gate passes/ weight slip/ bought notes/ purchase invoices/ copy of accounts which according to him goes to the root of the matter and which could not be filed before the lower authorities. Considering the totality of the facts, we are of the view that in the present case the Assessee could not lead the required evidence before the lower authorities. We are of the view that the evidences which the assessee has filed now have a material bearing on the issue which is before us. We further find that assessee had also filed additional evidences before the Co-ordinate bench of Tribunal for A.Y. 2011-12 and the same were admitted and the matter was restored to the file of AO by observing as under: “9. We have given a thoughtful consideration to rival contentions and have carefully perused the application made under rule 29 of the ITAT Rules. The undisputed fact is that the discretion lies with the Tribunal to admit additional evidence in the interest of justice. It is also not to dispute that Rule 29 of the ITAT Rules is aking to order 41 Rule 27(1) of the CPC. Our view is fortified by the decision (Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 7 of the Hon’ble High Court in the case of CIT vs Text Hundred India Pvt. Ltd. 351 ITR 57 the relevant observation of the Hon’ble Delhi High Court read as under: “13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need to be a suo moto action of the Tribunal The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well- settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect.
The next question which arises for consideration is as to whether the exercise of discretion in the instant case permitting the additional evidence by the Tribunal, is apposite? It is undisputed that Rule 29 of the Rules is akin to Order 41 Rule 27(1) of the Code of Civil Procedure. The true test in this behalf, as laid down by the Courts, is whether the Appellate Court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought to be adduced. The legitimate occasion, therefore, for exercise of discretion under this rule is not before the Appellate Court hears and examines the case before it, but arises when on examining the evidence as it stands, some inherent lacuna or defect becomes apparent to the Appellate Court coming in its way to pronounce judgment, the expression ‘to enable it to pronounce judgment’ can be invoked. Reference is not to pronounce any judgment or judgment in a particular way, but is to (Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 8 pronounce its judgment satisfactory to the mind of Court delivering it. The provision does not apply where with existing evidence on record the Appellate Court can pronounce a satisfactory judgment. It is also apparent that the requirement of the Court to enable it to pronounce judgment cannot refer to pronouncement of judgment in one way or the other but is only to the extent whether satisfactory pronouncement of judgment on the basis of material on record is possible. In Arjan Singh vs. Kartar Singh AIR 1951 SC 193, while interpreting the provisions of Order 41 Rule 27, the court remarked as follows: -
The legitimate occasion for the application of Order 41, rule 27 is when on examining the evidence as it stands, some inherent lacuna or defect becomes apparent, not where a discovery is made, outside the court of fresh evidence and the application is made to impart it. The true test, therefore, is whether the Appellate Court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought o be adduced.
[Emphasis supplied] [See also Netha Singh v. Financial Commissioner AIR 1976 SC 1053]”
In the present case the reason which was given by the assessee in support of its plea for admission of additional evidence was that the assessee could not produce these records before the lower authorities due to non-retrievability of e-mail on the date because of technological difficulties. This reason was specifically mentioned in the application filed. No reply to this application was filed refuting this averment, though the departmental representative had opposed the admission of the additional evidence. The ground pleaded by the assessee was not confronted. In this backdrop, the Tribunal looked into the entire matter and arrived at a conclusion that the additional evidence was necessary for deciding the issue at hand. It is, thus, clear that the Tribunal found the requirement of the said evidence for proper adjudication of the matter and in the interest of substantial cause. Rule 29 of the Income-tax (Appellate (Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 9 Tribunal) Rules categorically permits the Tribunal to allow such documents to be produced for any substantial cause. Once the Tribunal has predicated its decision on that basis, we do not find any reason to interfere with the same. As a result, the questions of law are answered in favour of the assessee and against the Revenue resulting into dismissal of these appeals. No costs.”
10. As mentioned elsewhere with the demise of the Counsel of the assessee the assessee could not be represented properly either before the Assessing Officer or before the CIT(A). In the interest of justice, the additional evidences are admitted.
11. The additional evidences contained documents establishing that the appellant is only an agent of Allana Group. In our considered opinion, these documents need thorough investigation/verification at the assessment stage. We, accordingly, restore the entire issues to the files of the AO. The assessee directed to furnish all these evidences before the AO and the AO is directed to examine the same and decide the issues afresh, after affording reasonable and fair opportunity of being heard to the assessee.”
Before us, Revenue has not pointed out any distinguishing feature in the facts of the case under the consideration and that of AY 2011-12. Considering the totality of the facts, we are of the view that the ends of justice demands the admission of the additional evidences. We accordingly admitted the same. Since the evidences which have been filed by the Assessee now before us requires verification and examination by the AO, we restore the entire issue back to the file of the AO and direct him to examine the evidences filed by the assessee and examine the same and thereafter decide the issue afresh. The AO is free to call for any other evidence required by him for deciding the issue afresh. The assessee is also directed to co-operate with AO by (Assessee’s Appeal) (Revenue’s Appeal) Mohd. Gulzar (A.Y. 2012-13) 10 promptly filing the relevant details called by him. Needless to state, that the AO shall grant adequate opportunity of hearing to the assessee.
Since the issue raised in Revenue’s appeal is inter connected to the ground raised by the assessee and since the appeal of the assessee is restored to the file of the AO, the appeal of revenue is also restored back to the AO.
In the combined result, the appeal filed by the assessee and Revenue are allowed for statistical purposes
Order pronounced in the open court on 27.07.2020