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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI D.T GARASIA & SHRI RAMIT KOCHAR
Assessee by: Shri. Devendra Jain Revenue by : Shri. V. Jenandhanan सुनवाई की तारीख /Date of Hearing : 07-11-2017 घोषणा की तारीख /Date of Pronouncement : 09.11.2017 आदेश / O R D E R
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being 2012-13, is directed against the appellate order dated 01.08.2016 passed by learned Commissioner of Income Tax (Appeals)-12, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2012-13, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 09.03.2015 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”).
The grounds of appeal raised by the Assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
“ 1. The Ld. CIT (A) and the Ld. AO have completed the assessment without considering the facts & circumstances of the case, which is contrary to law and is against the principles of natural justice. 2. (a) On the facts and in the circumstances of the case, the learned A.O. has erred in estimating a Gross Profit @ 30% of the turnover resulting in an addition of Rs. 44,93,213/ -. (b) On the facts and in the circumstances of the case, the learned CIT (A) has erred in estimating a Gross Profit @ 25% (directing the A.O. to restrict the G.P. estimation to 25% after due verification) as against the actual Gross Profit which is 22.76% as per the Audited books of accounts. (c) The Ld. CIT(A) has erred in ignoring the vital facts that the profits offered to tax are as per proper books of accounts including Stock Register as reported in Tax Audit Report and without appreciating the fact that the Ld. A.O. has not pointed out any infirmities in the books of accounts or records maintained by the Assessee.
On the facts and in the circumstances of the case the Ld. CIT (A) has erred in confirming the addition of Rs. 61,319/- (out of total disallowance of Rs.81,972/-) representing one half percent of average value of investment towards indirect expenses, without appreciating the fact that pro-rata indirect expenses cannot be disallowed where the Assessee has not earned any exempt income.
4. The appellant craves leave to add, alter, modify, amend or substitute all or any of the above grounds of appeal.”
3. At the outset learned counsel for the assessee submitted that the assessee did not want to press ground no. 3 and 4 raised by the assessee in memo of appeal filed with the tribunal and prayed that the same may be dismissed as not pressed. The learned DR did not raise any objection to the dismissal of ground no. 3 and 4 . After considering rival contentions we dismiss ground no 3 and 4 as not being pressed. We order accordingly.
The brief facts of the case are that the assessee is engaged in the business of manufacturing of construction chemical and chemical compound. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2), the assessee was asked by the AO to produce ledger copy of the following parties:
a) Polymers Enterprises with confirmation from the parties b) BSA Poly container with confirmation from the parties c) Hozel Mercantile Ltd with confirmation from the parties d)Kemrock Industries and Exports Limited with confirmation from the parties e)Nutron Pharmaceuticals Ltd. with confirmation from the parties And also assessee was asked by the AO to explain the transaction, if any for purchase and sales with the following parities:- 1. Sthepa Trading Imp P Ltd 2 Topship Trading Co. Pvt Ltd 3 Symphony Metals P Ltd The assessee was also asked to produce purchase bills and to produce stock register. The assessee did not furnish any detail with respect to the purchases and also did not submit anything regarding stock valuation details including direct stock component included in the stock. The assessee also did not produce the purchase bills to verify the stock quantity . The assessee expressed its inability to produce the same . Thus it was observed by the A.O that it will not be possible to compute the correct GP of the assessee business from the books of accounts of the assessee. The AO observed that proper books of account has not been maintained by the assessee in accordance with provisions of Section 44AA of the 1961 Act. The AO rejected the books of accounts by invoking provision of section 145(3) of the Act . The AO took into account average GP of the last three years of the assessee and applied GP @ 30% on total turnover of Rs. 14.49 crores which comes to GP of Rs. 4,34,94,399/- which was estimated by the AO . Since the assessee declared GP of Rs. 3,90,01,186/-, the AO made addition of Rs. 44,93,213/- to the income of the assessee which was brought to tax by the AO, vide assessment order dated 09-03-2015 passed by the AO u/s 143(3).
Aggrieved by the assessment order dated 09-03-2015 passed by learned AO u/s 143(3) , the assessee filed first appeal with learned CIT(A) . The assessee filed various details and evidences before the learned CIT(A) as additional evidences which were not admitted by learned CIT(A) as the assessee did not give reasons for non production of these additional evidences before the AO during the course of assessment proceedings u/s 143(3) r.w.s. 143(2). The assessee contended before learned CIT(A) that the assessee has maintained proper books of accounts as well stock records which is also commented by the tax-auditors to be properly maintained. It was also submitted that accounts of the assessee were also audited by statutory auditors under the Companies Act and they have observed that proper books of accounts are maintained by the assessee. It was submitted that stock records maintained by the assessee reflect quantitative details of stock and consumption. Thus, in nut-shell the assessee submitted additional evidences to support its contentions that no additions on account of GP is warranted and there was no occasion to reject books of accounts by the AO u/s 145(3) had these evidences were produced before the AO. The learned CIT(A) did not admit the additional evidences as the assessee could not explain the reasons for non production of these evidences before the AO during assessment proceedings and learned CIT (A) estimated GP @ 25% as against GP @ 30% estimated by the AO ,wherein the learned CIT(A) directed the AO to verify the claim of the assessee to have average GP @25% as against wrongly computed by the AO @30% as claimed by the assesse .
The assessee has now come in appeal before the tribunal . The Ld. Counsel for the assessee submitted that A.O estimated GP @ 30% by rejecting books of accounts u/s 145(3) as no details/evidences was submitted before the A.O by the assessee with respect to the purchases made by the assessee . It was submitted that in tax audit report quantitative details of stock were given and several other details were given before the learned CIT(A) as additional evidences which were not admitted by the learned CIT(A) . The learned counsel for the assessee placed reliance upon the decision of Hon’ble Bombay High Court of in the case of Shri Prabhvati S. Shah v. CIT reported in (1998) 100 taxmann.com 404 (Bom) to contend that learned CIT(A) was duty bound to admit additional evidences as contemplated u/s 250(4) read with Rule 46A of the Income-tax Rules,1962. It was submitted that in accordance with mandate of Section 250(4) , the ld. CIT is duty bound to admit additional evidences even if no application has been filed for admission of additional evidences u/r 46A if the additional evidences goes to the route of the matter and are critical to decide the dispute between the rival parties. The ld. Counsel for the assessee conceded that keeping in view factual matrix of the case , the issue in this appeal needs to be set aside and restored to the file of the A.O for resolving the dispute between the rival parties as the additional evidences need to be verified by the AO . It was submitted that these additional evidences goes to the root of the matter and in the interest of the substantial justice the same may be directed to the admitted and then adjudicated on merits by the AO in set aside proceedings . The Ld. DR fairly submitted that he has no objection if the matter is set aside and restored to the file of the A.O for de-novo deciding the dispute between rival parties .
We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is manufacturer of construction chemical and chemical compound . The assessee’s case was selected for scrutiny u/s. 143(2) r.w.s 143(3) and the assessee was asked by the AO to produce ledger copy of the following parties:
a) Polymers Enterprises with confirmation from the parties b) BSA Poly container with confirmation from the parties c) Hozel Mercantile Ltd with confirmation from the parties d)Kemrock Industries and Exports Limited with confirmation from the parties e)Nutron Pharmaceuticals Ltd. with confirmation from the parties And also assessee was asked by the AO to explain the transaction, if any for purchase and sales with the following parities:- 1. Sthepa Trading Imp P Ltd 2 Topship Trading Co. Pvt Ltd 3 Symphony Metals P Ltd The assessee was also asked to produce purchase bills and to produce stock register by the AO. The assessee did not furnish any detail with respect to the purchases and also did not submit anything regarding stock valuation details including direct stock component included in the stock before the AO during assessment proceedings . The assessee also did not produce the purchase bills to verify the stock quantity . The assessee expressed its inability to produce the same before the AO . Thus it was observed by the A.O. that it will not be possible to compute the correct GP of the assessee business from the books of accounts of the assessee. The AO observed that proper books of account has not been maintained by the assessee in accordance with provisions of Section 44AA of the 1961 Act. The AO rejected the books of accounts by invoking provision of section 145(3) of the Act . The AO took into account average GP of the last three years of the assessee and applied GP @ 30% on total turnover of Rs. 14.49 crores which comes to GP of Rs. 4,34,94,399/- which was estimated by the AO . Since the assessee declared GP of Rs. 3,90,01,186/-, the AO made addition of Rs. 44,93,213/- to the income of the assessee which was brought to tax, vide assessment order dated 09-03-2015 passed by the AO u/s 143(3). The asessee submitted additional evidences before learned CIT(A) in appellate proceedings to prove that the purchases were genuine and stock records including quantitative details and reconciliation of stock were also submitted by the assessee before learned CIT(A) as an additional evidences but the assessee did not submitted application for admission of additional evidences as is envisaged u/r 46A. We have observed that these evidences are crucial for resolving dispute between rival parties and goes to the root of the matter , thus it is considered fit and proper in the interest of justice to admit these additional evidences and restore the matter back to the file of the A.O for fresh adjudication of the issue on merits in accordance with law after considering of additional evidences on merits by the AO. Thus, the appellate order of the learned CIT(A) is set aside . Needless to say that the AO shall give proper and adequate opportunity of being heard to the assessee in de-novo proceedings in accordance with the principal of natural justice in accordance with law. We order accordingly.
In the result appeal of the assessee in 2012-13 is allowed for statistical purposes.
Order pronounced in the open court on 09.11.2017 आदेश की घोषणा खुऱे न्यायाऱय में ददनांकः 09.11.2017 को की गई ।