SRI SUBHAS JAISWAL,HOWRAH vs. ITO, WARD - 47(2), KOLKATA , KOLKATA

The grounds of appeal of the AY 2008-09 raised by the assessee is that the Ld. CIT(A) has wrongly dismissed the petitioner’s appeal for AY 2008-09 by wrongly recording the facts of AY 2013-14. Likewise, for AY 2013-14 the assessee’s ground of appeal is against the action of the Ld. CIT(A) in deciding the appeal by wrongly recording facts of AY 2008-09.

Brief facts of the case of AY 2008-09 is that AO noted that assessee had returned total income of Rs.1,07,860/- vide return of income dated 30.03.2009. Later the case was taken up for scrutiny wherein it was found that the assessee was the sole proprietor of four other concerns in different names and was having several bank accounts of Standard Chartered Bank and HDFC Bank. It was also noted by the AO that substantial transactions were made by the assessee from these bank accounts. On verification of the bank accounts, the AO found that assessee’s total turnover of around Rs.5.51 cr. from the bank accounts which were not shown by the assessee. Therefore, the AO asked for explanation from the assessee and not satisfied with it, went for estimation of income. For that the AO taking note that in the ROI for this assessment year, since the assessee has declared its turnover of Rs.12,38,270/- from which he derived net profit of Rs.1,58,215/- which comes to 12.11% of the turnover over and thereafter taking took note of three other comparable companie’s trading result, came to the conclusion that 3% of Rs.5.51 cr. would be the suppressed undisclosed income which works out to Rs.16,53,000/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), which was instituted on 29.01.2016. While the appeal was pending before the Ld. CIT(A), the Pr. CIT exercised his revisional jurisdiction u/s. 263 of the Act on 27.10.2017 and set aside the order passed by the AO dated 18.12.2015. Thereafter the Ld. CIT(A) has passed this impugned order whereby the Ld. CIT(A) has taken note of the facts of AY 2013-14 and dismissed the appeal of the assessee for AY 2008-2009.

Coming to the fact of AY 2013-14, we note that the AO has passed an order u/s. 144 of the Act dated 04.03.2016 wherein the AO has estimated the net profit after rejecting the books of account @ 0.75% of the turnover of Rs.34,36,41,460/- which comes to Rs.25,77,311/-. Aggrieved, the assessee has preferred an appeal before the Ld. CIT(A), who was pleased to dismiss the same vide the impugned order, however, took note of the facts of AY 2008-09. Therefore, this appeal has been preferred before us.

We note that for AY 2008-09 the Appeal was instituted on 29.01.2016 and inadvertently the Ld. CIT(A) took the facts of AY 2013-14, wherein the AO rejected the books of account of the assessee and made an estimated addition @ .75% of turnover of Rs.34,36,41,460/- at Rs.25,77,311/-, which the AO made vide order dated 04.03.2016. After taking note of the facts pertaining to AY 2013-14, the Ld. CIT(A) decided to confirm the action of the AO vide order dated 31.01.2018.

While the statutory first appeal filed by the assessee was pending before the Ld. CIT(A), the Pr. CIT vide order u/s. 263 dated 27.10.2017 set aside the original assessment order dated 18.12.2015 and directed the AO to re-do the assessment afresh in respect of Rs.5.51 cr. undisclosed transaction. So after perusing the order of both the assessment years (AYs. 2008-09 and 2013-14), I find that inadvertently the decision of Ld. CIT(A) got mixed up and though the Ld. AR stoutly assailed the action of Ld. CIT(A) as an outcome of non-application of mind, I remind myself that to err is human and I do not find any reason to say that this mix-up is intentional. So, when I adjudicate the decision of AY 2008-09 on merits, I do not countenance the action of the Ld. CIT(A) in dismissing the appeal of assessee, when the fact was brought to his notice that the impugned assessment order dated 18.12.2015, which was passed u/s. 147/143(3) of the Act was set aside by Pr. CIT u/s. 263 of the Act by order dated 27.10.2017 which the Ld. CIT(A) has taken note of and still went ahead to dismiss the appeal, which gives the impression that AO’s order has been confirmed, however, I note that the Ld. CIT(A) has made it clear that, “Therefore, the present assessment order against which the instant appeal lies has become infructuous to that extent. In light of the above, as this issue against which the appeal does not survive, the appeal is dismissed.” So, the ultimate result spelled out by Ld. CIT(A) though is that appeal is dismissed, what the Ld. CIT(A) meant from the language used by him indicates that the appeal of assessee after the assessment order dated 18.12.2015 of AY 2008-09 was set aside was passed by Ld. Pr. CIT u/s. 263 of the Act (legality of which has not been challenged before us, so we refrain to comment on its legality) has become infructuous and so the appeal against a non-existing assessment order cannot survive; and so ideally either the assessee should have withdrawn the appeal or the Ld. CIT(A) should have held the appeal to be non-maintainable. So the result of the appellate order impugned before me that appeal for AY 2008-09 which was dismissed by Ld CIT(A) is legally unsustainable needs to be interfered with and since the AO’s order dated 18.12.2015 wherein AO estimated the net profit @ 3% of Rs.5.51 cr. has been set aside by Ld. Pr. CIT u/s. 263 of the Act vide order dated 27.10.2017 and direction to re-do the assessment afresh, I note that the legal effect is that AO’s order dated 18.12.2015 is non-est in the eyes of law and so the appeal before the Ld. CIT(A) after Ld. Pr. CIT passed order u/s. 263 dated 27.10.2017 was an appeal on a non-existent order, so the appeal itself had no foundation (assessment order dated 18.12.2015), so when the foundation goes the super structure falls, so the result is that the appeal of the assessee is not maintainable being infructuous. So the result is that since there is no assessment order dated 18.12.2015 existing in the eyes of law, no appeal of assessee is maintainable against that assessment order which is non-existing. So the appeal before the Ld. CIT(A) needs to be treated as non-maintainable and so non-est in the eyes of law. With this observation, the appeal for AY 2008-09 is disposed off.

Coming to AY 2013-14. The AO rejected the books and estimated the income @ 75% of turnover of Rs.34,36,41,460/- at Rs.25,77,311/- by assessment order dated 04.03.2016. As noted above, the Ld. CIT(A) mixed up the facts in the appeal for AY 2013- 14 with the facts for AY 2008-09, which according to me was an inadvertent error. So, when I adjudicate the action of Ld. CIT(A) my attention was drawn to ground no. 4 which reads as under: “Ground no. 4. For that, the AO did not allow your petitioner any chance to retract his stand before applying the net profit of 0.75% on turnover of sales”.

It is taken note that this ground of appeal of the assessee before the Ld. CIT(A) has been totally ignored. In this regard, it is noted that during assessment proceedings the AO issued Show Cause Notice as on 15.01.2016 calling for details and explanation and the assessee replied by filing written explanation on 10.02.2016 through the assessee’s AR and the AO acknowledged that assessee annexed with the submission certain documents, but according to AO, it was not any supporting documents. Thereafter, again the AO issued Show Cause Notice dated 11.02.2016 conveying his intention to reject the books and his decision to frame the assessment ex parte. Pursuant to which though the assessee replied, the AO was not satisfied with the reply of assessee and proceeded to estimate net profit @ 0.75%. I note that no opportunity was given to assessee to furnish the comparables if he desired to do so, which could have enabled the AO to reach the estimate of income at a reasonable and fair manner. It should be kept in mind that it is not the decision which matters, the decision making process which should be fair, just and reasonable and which is an inbuilt feature of Art. 14, 19 & 21 of the Constitution as held by the Hon’ble Supreme Court in Maneka Gandhi’s case. So, I am inclined to set aside the order of the Ld. CIT(A) and direct the AO to give proper opportunity to assessee as held by the Hon’ble Supreme Court in the case of Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC), wherein it was held as under:

In the light of the facts discussed supra, I am inclined to set aside the impugned order of Ld. CIT(A) and remand the matter back to AO for de novo assessment. In case the situation warrants to reject the books of account as per law and if the AO proceeds to estimate the income of the assessee, then proper opportunity is to be given to assessee to bring in comparables of similar traders like assessee and in that event, the AO also can make his own enquiries and bring comparables and after taking into consideration the objection raised in-respect of comparables to be finally adopted for estimating the income of assessee in an objective manner; and by a reasoned order frame an assessment in accordance to law.

In the result, the appeal of assessee for AY 2008-2009 is disposed of as not maintainable and appeal for AY 2013-14 is allowed for statistical purposes.