ITO, ERODE vs. V.SARAVANAN, ERODE

Department by : Mr. J.Pavithran Kumar, JCIT Assessee by : Mr. S.Sridhar, Adv. : 30.09.2019 सुनवाई क. तार"ख/Date of Hearing : 18.12.2019 घोषणा क. तार"ख /Date of Pronouncement आदेश / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER:

This appeal filed by the Revenue is directed against appellate Order dated 16.11.2015 passed by learned Commissioner of Income Tax (Appeals)-3, Coimbatore (hereinafter called “the CIT(A)”), in IT Appeal No.113/14-15(A)1 for assessment Year (ay) 2011-12, the appellate proceedings before learned CIT(A) had arisen from assessment order dated 24.02.2014 passed by learned Assessing Officer (hereinafter called “the AO”) u/s.144 of the Income-tax Act, 1961 (hereinafter called “the Act”). :- 2 -:

“1. The order of the learned C1T(A) is not acceptable on the facts & circumstances of the case.

2. The learned CIT(A) has erred in deleting the addition made by the Assessing Officer.

3. The learned CIT(A) has erred in considering the fact that the assessee has maintained two sets of Balance sheet and Profit & Loss account., one for filing the return of income and other submitted to the bank.

6. The learned CIT(A) has failed to appreciate the fact that the assessee has not shown the correct figure even in respect of the CC Account with Indian Overseas Bank. :- 3 -:

Several statutory notices were issued by AO to the assessee during the course of assessment proceedings but the assessee did not appear before the AO. The summons u/s 131 of the 1961 Act were also issued by AO to the assessee during the course of assessment proceedings but the assessee did not appear before the AO in compliances of the summons issued by the AO. The details of statutory notices/summons issued by the AO from time to time during the course of assessment proceedings are elaborately mentioned in page 2-4 of the assessment order passed by the AO . The AO in the mean time obtained details directly from bankers of the assessee which reflected that the assessee has filed one different set of financial statements/accounts with the bankers for the year under consideration and there were variations in the figures as mentioned in financial statements/accounts submitted by assessee in return of income filed with Revenue and the figures as found mentioned in the financial statements/accounts submitted before the Bank for obtaining loans/limits.The assessee was maintaining cash credit(loan) account as well saving bank account with its bankers. Since, the assessee was not forthcoming before the AO during :- 4 -: the course of assessment proceedings as no details were submitted by assessee before the AO, it led to framing of best judgment assessment by AO u/s 144 of the 1961 Act. The AO observed that the assessee has closed cash credit account with Catholic Syrian Bank during the year under consideration and has obtained new cash credit limit/loan from Indian Overseas Bank during the year under consideration. The AO observed that in this connection, the assessee has submitted its return of income, Balance Sheet, Profit and Loss , 44AB duly certified by the Chartered Accountants pertaining to the year under consideration to its bankers. The AO observed that when entries in the financial statements/accounts submitted by assessee to its bankers are matched with entries in return of income, there are several differences in various accounts which are elaborately extracted by the AO at page 31 33 of its assessment order.

This led to several additions being made by AO in the hands of the assessee vide best judgment assessment order dated 24.02.2014 passed ex-parte by AO u/s 144 of the 1961 Act, leading to assessed income of Rs. 3,36,49,526/- in the hands of the assessee as against returned income of Rs. 4,67,710/- . Thus, high pitched assessment was framed by AO against the assessee ex-parte based on the two different sets of accounts being allegedly maintained by assessee viz. one set of accounts for Revenue and second set of accounts for bankers for obtaining loan/limit from the banks.

4. The assessee being aggrieved by an ex-parte high pitched assessment framed by AO u/s 144 of the 1961 Act against the assessee filed first appeal with learned CIT(A) . The assessee appeared before learned CIT(A) and made its submissions. The learned CIT(A) was pleased to grant substantial relief to the assessee and appeal of the assessee was partly allowed by learned CIT(A) vide :- 5 -: appellate order dated 16.11.2015 passed by learned CIT(A). The learned CIT(A) noted that there are two sets of account maintained by assessee one for bank for obtaining loans and second for filing income-tax return. The learned CIT(A) observed that the AO cannot pick and choose figures to suit its convenience as the AO had adopted GP ratio from return of income filed with Revenue while other differential figures were adopted from the financial statements/accounts prepared for banks. The learned CIT(A) held that the financial statements/accounts submitted by the assessee to the bank be taken as basis for framing assessment and also differential in capital account in two sets of financial statements/accounts be treated as income of the assessee, vide appellate order dated 16.11.2015.

5. Now, Revenue is aggrieved by relief granted by learned CIT(A) and an appeal is filed with tribunal. The learned DR opened arguments and submitted before the Bench that this is first round of litigation. It was at the outset submitted that non speaking order is passed by learned CIT(A) which could not be sustained in law. It was submitted that the assessee was suppressing sales and introduced capital from undisclosed sources . it was submitted by learned DR that two sets of books of accounts were maintained by assessee , one for Revenue and one set of books of accounts were maintained for banks for obtaining loans. It was submitted that the case of the assessee was selected for framing scrutiny assessment but the assessee did not appear before the AO and no details were submitted by assessee before the AO during the course of assessment proceedings . Our attentions was drawn to the assessment order wherein the AO has mentioned that several statutory notices as well summons u/s 131 of the 1961 Act were issued to the assessee but despite sufficient opportunities being :- 6 -: granted to assessee by the AO , the assessee did not co-operated with AO and did not appear before the AO wherein no details were submitted by assessee before the AO during the course of assessment proceedings, which led to an ex- parte best judgment assessment framed by the AO u/s 144 of the 1961 Act. It was submitted that the AO adopted GP ratio declared by assessee in return of income filed with Revenue and applied the same to sales declared in second set of accounts filed by assessee before the Bank. The learned DR would submit that the AO correctly framed the assessment as the assessee was not coming forth during the course of assessment and no details were furnished by assessee before the AO during the course of assessment proceedings and hence AO was forced to pass an ex-parte assessment order u/s 144 of the 1961 Act. However, it was fairly submitted by learned DR that the entire issues be set aside to the file of the AO for framing fresh assessment denovo and the assessee be directed to co-operate with Revenue in second round of litigation.

5.2 The learned counsel for the assessee on the other hand drew our attention to para 6.3/page 4 of learned CIT(A) appellate order. The learned counsel for the assessee submitted that learned CIT(A) has sustained additions to the differential in capital account in two set of accounts maintained by assessee. The learned counsel for the assessee submitted that the assessee did not appear before the AO during the course of assessment proceedings and no details were furnished by assesse eentire issues be set aside to the file of the AO for denovo assessee before the AO during assessment proceedings . It was fairly submitted by learned counsel for assessee that if the matter is restored to the file of the AO for framing denovo assessment , then the assessee will co-operate with AO in :- 7 -: second round of litigation and submit all details/explanations as will be required by the AO.

order dated 24.02.2014 passed ex-parte by AO u/s 144 of the 1961 Act, leading to assessed income of Rs. 3,36,49,526/- in the hands of the assessee as against returned income of Rs. 4,67,710/- . Thus, high pitched assessment was framed by the AO against the assessee ex-parte based on two different sets of accounts being allegedly maintained by assessee viz. one set for Revenue and second set for bank for obtaining loan/limit from the banks. The learned CIT(A) has observed that the financial statements submitted to bankers can be taken as basis for framing assessment and the AO was not correct in adopting GP ratio as declared in return of income filed with Revenue and then applying the same to sales declared in the financial statements/accounts submitted by assessee to its bankers . The additions to capital were also confirmed by learned CIT(A). We have observed that admittedly because of failure of the assessee to appear before AO , an high pitched ex-parte assessment is framed against assessee wherein assessed income was Rs. 3,36,49,526/- as against returned income of Rs. 4,67,710/- , mainly based on recovery of alleged two sets of books of :- 9 -: accounts maintained by assessee , one for filing return of income and second for bankers for obtaining loans/limits . The assessment order passed is ex-parte and learned CIT(A) has also passed bald cryptic order wherein detailed speaking and reasoned order was not passed by learned CIT(A). It is an admitted position that the assessee did not co-operated with AO during the course of assessment proceedings as various statutory notices/summons issued by AO during assessment proceedings were not complied with. It is fairly agreed by both the parties before us that the entire matter needed to be remanded back to file of the AO for framing denovo assessment. We after considering entire factual matrix of the case and after hearing both the parties are also of the considered view that the entire matter needed to be restored to the file of AO for framing fresh assessment de-novo. The assessee did not co-operated in assessment proceedings and no details were furnished by assessee during the assessment proceedings . The AO in the absence of co-operation from the AO passed ex- parte assessment order based on differential in two set of books of accounts allegedly maintained by assesse. The learned CIT(A) has also passed a cryptic non speaking non reasoned order granting substantial relief to the assessee.Both the parties have fairly agreed that under the circumstances , matter need to be remanded back to AO for framing fresh assessment denovo. We concur with the same. Thus orders passed by both the authorities below are set aside and matter is restored to the file of the AO for framing fresh assessment denovo. However, we clarify that it is an open remand and all the contentions/ issues which had arisen or which may arise in the denovo assessment proceedings are kept open.

7 In the result, the appeal filed by Revenue in 2011-12 is allowed for statistical purposes.

Order pronounced on the 18th day of December, 2019 in Chennai. (एन.आर.एस. गणेशन) (र!मत कोचर) (N.R.S. GANESAN) (RAMIT KOCHAR) "या"यक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER