M/S. RATNAVEER STAINLESS PRODUCTS PVT. LTD.,VADODARA vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-4, BARODA

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ITA 1116/AHD/2017Status: DisposedITAT Ahmedabad16 December 2022AY 2010-115 pages
AI SummaryRemanded

What did the Tribunal hold?

The tribunal decided to admit additional evidence filed by the assessee and remand the issue back to the CIT(A) for proper adjudication. The assessee was to be given an opportunity of hearing, following principles of natural justice.

What were the facts?

The assessee's appeal was filed with a significant delay, which was condoned by the tribunal. The case involved additions made by the Assessing Officer based on findings from a Directorate of Revenue Intelligence (DRI) investigation regarding suppressed sales and unaccounted income.

What were the issues?

Whether the CIT(A) erred in not admitting additional evidence and in making additions based on DRI findings without independent investigation. The tribunal also considered the validity of the GP estimation and the non-consideration of customs duty.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 271(1)(c),Section 234A,Section 234B,Section 234C,Section 234D

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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD

Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED

For Appellant: Shri Tushar Hemani, Sr. Advocate &, Shri Parimalsinh B. Parmar, AR
For Respondent: Shri B.P. Makwana, Sr. DR
Hearing: 01.12.2022Pronounced: 16.12.2022

PER SUCHITRA KAMBLE, JUDICIAL MEMBER :

1.

This appeal is filed by the Assessee against order dated 24.03.2014, passed by the CIT(A)-III, Baroda for the Assessment Year 2010-11.

2. The Assessee has raised the following grounds of appeal :-

“1. Both the lower authorities have erred in confirming the addition of Rs.35,27,370/- as unaccounted income of the appellant based purely on the findings of the DRI without carrying out any independent investigation.

2.

In any case, the adjudicating order of the DRI has later on been set aside and quashed in appeal and therefore, also the impugned addition deserves to be deleted.

3.

The Learned CIT(A) has erred in law and on the facts of the case in not admitting additional evidence under Rule 46A of the IT Rules.

4. The learned CIT(A) has erred both in law and on the facts of the case in rejecting the books of account and working out gross profit of Rs.35,27,370/- at the rate of 23.4% of the purchase price of Page 2 of 5 Rs.1,50,74,231/- Ld. CIT(A) further erred in treating this gross profit as income of the appellant.

5. In any case, the GP estimation of 23.4% is on the higher side and without any basis.

6. The learned CIT(A) has erred both in law and on the facts of the case in not accounting for Customs Duty of Rs.37,14,657/- while making GP estimation.

7.

Learned CIT(A) has further erred in not allowing opportunity to cross examine persons whose statements were used against the appellant.

8.

Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural justice and therefore deserves to be quashed.

9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s.234A/B/C/D of the Act.

10.

The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s.271(1)(c) of the Act.”

3. There is a delay of 1074 days in filing the present appeal for which the assessee has filed condonation of delay application along with affidavit of the Managing Director of the assessee company. The Ld. AR submitted that since the concerned Accountant left the job somewhere in April 2014, the assessee was not aware about the order dated 24.03.2014 passed by the CIT(A) in the quantum appeal. The Ld. AR submitted that somewhere in the year 2017 when the appellate proceedings in connection with the appeal filed against the penalty order were going on, during the course of such proceedings, the CIT(A) categorically enquired about the status of ITAT appeal with respect to the quantum proceedings. At this juncture only the assessee realised that no appeal was filed before the ITAT against the order passed by the CIT(A) in the quantum proceedings. Therefore, the Ld. AR submitted that non-filing of appeal is not deliberate as the Accountant who was taking care of the proceedings has left the job in 2014 after passing of the CIT(A)’s order in quantum

Page 3 of 5 proceedings. The Ld. AR prayed that the delay may be condoned and the matter may be heard on merit.

4.

The Ld. DR vehemently opposed the delay in filing of the appeal and further submitted that the appeal may be dismissed.

5.

We have heard both the parties and perused all the relevant material available on record. The affidavit explaining the delay on the part of the assessee dated 02.04.2019 is taken on record. The said affidavit of the Managing Director of the assessee reveals that since the Chief Accountant had left the organisation abruptly in April/May 2014, the assessee was not aware about further course of action related to the order of the CIT(A) in respect of Section 143(3) proceedings. The assessee has submitted the details related to the last drawn salary of the Chief Accountant and also given the details as to when the assessee has realised that the assessee has not filed the appeal against the order of the CIT(A). The reasoning given by the assessee appears to be genuine and fault on the part of his employee cannot be held responsible for the assessee for the delay in filing the appeal. Therefore, the delay of 1074 days is condoned.

6.

Now coming to the merits of the case, the facts are that the assessee filed return of income on 26.09.2010 declaring total income at Rs.1,52,38,160/- . The case was selected for scrutiny and notice under Section 143(2) of the Act has been issued on 27.09.2011. The assessee is engaged in the business of manufacturing of stainless steel precision fabrication equipments. During the year, search action was carried out by the Directorate of Revenue Intelligence (DRI) at the office/factory premises of the assessee on 31.07.2009. The Directorate of Revenue Intelligence has completed the investigation/search proceedings and passed show cause notice under Section 124 read with Section 128 of the Customs Act, 1962 on 17.01.2011. The Income Tax Department received information and it was observed that there was clear laid down in respect of suppressed value of goods and sales outside books. The Assessing Officer, after taking cognisance of the contentions of the assessee, made addition of Rs.37,68,558/- as unaccounted income on the suppressed sale.

Page 4 of 5 7. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

8. The Ld. AR submitted that the CIT(A) has not taken cognisance of the additional evidences filed before the CIT(A). Ld. AR further submitted that the CIT(A) erred in rejecting books of account and worked out the G.P. of Rs.35,27,317/- @ 23.4% on the purchase price of Rs.1,50,74,234/-. The CIT(A) erred in treating the G.P. as income of the assessee. Ld. AR further submitted that the G.P. estimated of 23.4% is on the higher side and is without any basis. The Ld. AR further submitted that the CIT(A) has not taken into account Customs duty of Rs.37,14,652/- while making G.P. estimation.

9.

The Ld. DR relied upon the Assessment Order and the Order of the CIT(A). The Ld. DR further submitted that in the decision of the Tribunal in the case of Vijay Proteins Limited vs. ACIT, 58 ITD 428 the GP estimated was @ 25% in case of bogus purchases and, therefore, the addition was that of 23.4% which is correctly made by the Assessing Officer.

10. We have head both the parties and perused all the materials available on record. The CIT(A) observed that the assessee was importing duty free inputs under various advances authorisations and subsequently diverting the said duty free materials in the local markets. The removal of imported stainless steel sheets/coils was determined at 1,45,925 kgs. on taking the physical stock of raw materials. The DRI’s enquiries revealed that the goods were sold without any bills and invoice and the payments were received in cash, but from the perusal of records it appears that the assessee has substantial evidence to establish his case which was not taken into cognisance by the CIT(A). Therefore, it will be appropriate to admit the additional evidence filed by the assessee under Rule 46A of the Income Tax Rules and remand back this issue to the file of the CIT(A) for proper adjudication of the issues. Needless to say the assessee be given opportunity of hearing by following the principles of natural justice.

11.

In the result, appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open Court on this 16th day of December, 2022.

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