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Income Tax Appellate Tribunal, DELHI BENCHES : “F” NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
PER H.S. SIDHU, JUDICIAL MEMBER This is an appeal filed by the Revenue directed against the order of Ld.CIT(Appeals) New Delhi dt. 29TH May, 2009 for the Assessment Year 2006-07 on the following grounds :-
1. “The Ld. CIT(A) erred in law and fact in deleting the addition made on account of estimated net profit of Rs. 32,24,772/- added to the income of the assessee.
2. The Ld. CIT(A) erred in law and facts in deleting the addition of Rs. 5,04,000/- made u/s. 68 of the I.T. Act, on account of benami investment made in purchase of plot situated at Bahadurgarh. 3. The Ld. CIT(A) erred in law and fact in deleting the addition of Rs. 70,000/- made u/s. 69 of the I.T. Act, on account of benami investment made in purchase of shop of Mandawali.
4. The Ld. CIT(A) erred in law in accepting the additional evidences during the course of appellant proceedings without providing an opportunity to the AO which is a violence of Rule 46A(3) of the I.T. Rules, 1962.
5. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The brief facts of the case are that the assessee is an individual and is in the business of travel agency. A survey u/s 133A of the Act was conducted on 3.10.2005 at the business premises of the assessee. The assesee filed his return of income declaring income of Rs. 2,31,550/- on 31.10.2006. The return was processed u/s. 143(1) of the I.T. Act, 1961 on 15.2.2008. The return was accompanied by computation sheet, profit and loss account, tax audit report, balance sheet, PPF receipt and TDS certificates etc. The case was selected for scrutiny under compulsory guidelines of action plan. Accordingly, notice u/s. 143(2) of the Act, was issued on 10.4.2007 which was duly served upon the assessee and in response thereto assessee’s AR appeared for hearing from time to time and filed the requisite information and documents. Thereafter the assessment order was passed u/s 143(3) of the I.T. Act determining the total income of Rs.40,30,320/ vide order dated 26.12.2008.
Aggrieved with the aforesaid order dated 26.12.2008, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 29.5.2009 has deleted the addition by allowing the appeal of the assessee.
Against the aforesaid order of the Ld. CIT(A), Revenue is in appeal before us.
In this case, Notice of hearing to the parties was sent, in spite of the 5. same, none appeared on behalf of the Department to prosecute the matter in dispute, nor filed any application for adjournment by the Department. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, we are of the view that no useful purpose would be served to issue notice again and again to the Revenue, therefore, we are deciding the present appeal exparte qua Revenue.
On the contrary, Ld. AR of the assessee relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part, hence, the Appeal of the Revenue may be dismissed. Ld. Counsel of the Assessee stated that as regards the ground no. 1 relating to addition on account of estimated net profit of Rs. 32,24,772/- is concerned, the ITAT in assessee’s own case in the previous assessment year 2005- 06 in vide order dated 13.11.2014 has upheld the order of the Ld. CIT(A) and deleted the similar addition, and therefore, respectfully follow the same reasoning, the ground no. 1 in the present appeal may be allowed.
7. We have heard the Ld. Counsel of the Assessee and perused the records. As regards the ground no. 1 is concerned, we find considerable cogency in the assessee’s counsel that this issue has been covered by the ITAT order dated 13.11.2014 in assessee’s own case in the previous assessment year 2005-06 passed in wherein the Tribunal has upheld the order of the Ld. CIT(A) and deleted the similar addition. For the sake of convenience, we are reproducing the relevant portion i.e. para no. 4 to 7 of the Tribunal’s order dated 13.11.2014 as under:-
“4. On a careful consideration of the facts and circumstances of the case and perusal of the papers on record and the orders of the authorities below we hold as follows :-
4.1. The facts relating to the addition of Rs. 32,24,772/- are brought out at para 8.1 and 8.2 of the Ld. CIT(A)’s order at page 15. These are extracted for your ready reference “8.1 It has been observed by the Assessing Officer that during the course of survey operation, various computer sheets were also found in which the assessee has declared his net profit from ticketing business on day-to-day basis. These computer sheets have been arranged according to dates. Thereafter the net profit for the month of July 2005 was calculated after adding the net profit of each day of month of July 2005. This comes to Rs. 2,68,743/-. However, since the assessee is not maintaining his regular books of accounts, his net profit from ticketing business only for the assessment year 2005-06 is calculated as under :- Total Net Profit for the month of July 2005 Rs. 2,68,743/- No. of working days in a month 27 Net profit of one day Rs. 9,953/- No. of working days in a year 324 Total estimated net profit from ticketing business only 9953 X 324 = Rs. 32,24,772/- 8.2. It has further been observed by the Assessing Officer that as the books of accounts have not been produced, the expenditure seems to be unvouched and bogus especially in the head establishment, accounting charges, professional fee etc. which have been claimed on regular basis in the past without being verified.”
After calling for the remand report and considering the contentions of the assessee, the Ld. CIT(A) observed as follows :-
“It is observed that the AO has assessed the net profit for the F.Y. 2004-05 purely on estimate basis, on the basis of some computer sheets relating to the month of July 2005 found during the course of the survey. This, however, cannot be taken as a sufficient ground for making such addition in the absence of any cogent reasons or evidence brought on record. It is also a well established position of law that the AO cannot proceed to make an arbitrary addition and base his conclusion purely on guess work. Determination of income is a serious matter and not merely a mathematical exercise to be made on the whims and fancies of the assessing officer. 10.1 It is observed that the Assessing Officer has taken the net profit for month of July 2005 calculated on the basis of computer sheets as a base for calculating the net profit for the financial year 2004-05, whereby he has calculated the daily net profit on average basis for the month of July 2005 and thereafter calculated the yearly profit by arbitrarily multiplying the daily profit with number of presumed working days in a year. 10.2 It has been submitted by the Ld. Authorised Representative in this regard that while making such an addition, the Ld. Assessing Officer has not only erred in law, but also ignored the following facts : • That for calculating the profit for the F.Y. 2004-05 (A.Y. 2005-06), the Ld. Assessing Officer took the profit earned in the month of July 2005 falling in the F.Y. 2005-06 (A.Y. 2006-07) as a base and completely ignored the profit calculated in various assessments completed u/s 148 for the A.Y. 2000-01 to 2004-05 subsequent to the survey. • That while calculating the profit on alleged basis, the Ld. Assessing Officer completely ignored that the assessee was a travel agent and the months of May, June and July are the peak season for travel agency business and this cannot be made the basis for addition in the entire year. • That the Ld. Assessing Officer has arbitrarily calculated the profit for the F.Y. 2004-05 on daily basis as it is not possible that the assessee would earn under the same trend throughout the year. • That while making the separate addition on the net profit earned during the respective period, the Ld. Assessing Officer has completely ignored and not given any reason for not taking into account the audited accounts, the balance sheet and profit & loss account of the assessee for the respective period and the tax audit report furnished with the return. 10.3. It has further been submitted by the Ld. Authorised Representative that they are unable to make any further comments in this regard, as the documents in question were not made available to them during the course of the assessment proceedings or in the remand proceedings. It is a well established principle of law that any evidence gathered by the assessing officer cannot be used against the assessee without first confronting him with it. 10.4. The Ld. Authorised Representative has also furnished copies of the letters dated 25.8.2008 and 5.9.2008 submitted to the Assessing Officer during the course of remand proceedings, which have been placed on record. It has been submitted that even if the total of entries for July 2005 is Rs. 2,68,743/-, it must be the cost of the airlines/railways tickets received from the parties, which certainly does not constitute the income of the assessee. The assessee only earns a commission on the same. The total commission earned on these tickets is not more than 1 to 1.5% of air tickets and on railway tickets, it is Rs. 20/- per ticket. These incomes are already accounted for in the books of account of the assessee. Copy of profit & loss account which shows total commission and other charges of Rs. 44.56 lakhs has been furnished in support. 10.5. It is also observed that the Assessing Officer has not made any specific comments on this issue in her remand report dated 11.9.2008 except making a general remark that, however, in absence of any reliable evidence in support of the contention of assessee, reply cannot be accepted. The appellant was also not provided or confronted with the copies of computer sheets for the month of July, 2005 and the basis of arriving at a monthly profit of Rs. 2,68,743/- on the basis of which the impugned addition has been made in the assessment order. On calling for further report, it was stated by the Assessing Officer that the addition was made on the basis of survey report as reported by her predecessor. Copy of the survey report dated 21.10.2005 has also been enclosed.
10.6. On going through the survey report, it is observed that the assessment order is an ad verbatim reproduction of the survey report on this point. It is further observed that there is no basis whatsoever given in the survey report for estimating the net profit for the entire year on the basis of some rough calculations for one month only. It is also observed that in the survey report, the estimation of net profits by extrapolation has been done for assessment year 2006-07, and thereafter, the same has been repeated for assessment year 2005-06 without assigning any reasons whatsoever for doing so. 10.7. In view of the above discussion, it is hereby held that the Assessing Officer was not justified in estimating the net profit as above. The addition of Rs. 32.24 lakhs made on this count is, accordingly, hereby deleted.”
6. The Ld. DR could not controvert this factual finding of the Ld. CIT(A). The estimation of profit is not sustainable for the various reasons given by the Ld. CIT(A) in his order. The estimation by the AO is arbitrary and was rightly deleted by the Ld. CIT(A).
In the result this ground of the revenue is dismissed.”
Respectfully following the aforesaid finding of the Tribunal, we uphold the order of the Ld. CIT(A) and reject the ground no. 1 raised by the Revenue.
As regards the ground no. 2 & 3 relating to addition of Rs. 5,04,000/- and Rs. 70,000/- are concerned, we find Ld. CIT(A) has elaborately discussed the issues in dispute and decided the same vide para no. 8 to 8.7 at pages 23 to 25 in his impugned order. For the sake of clarity, we are reproducing herewith the relevant paras as under:-
“8. Determination:
The submissions made by the appellant have been carefully considered in view of the facts and circumstances of the case and the provisions of law. It is observed that the Assessing Officer has made addition u/s 69 of the Act on account of alleged unexplained investment in properties in the absence of supporting documents/evidence. This, however, cannot be taken as a sufficient ground for making such addition in the absence of any cogent reasons or evidence to the contrary brought on record.
8.1. The appellant on the other hand has furnished the relevant details in this regard, which have been placed on record. It has been submitted that the Ld. AO has erred in making the addition of Rs. 5,04,000/- on account of unexplained investment u/s 69, when enough evidences were produced on record to establish that the plot at: Bahadurgarh was purchased by Smt.
Rampati, wife of the assessee, for Rs. 5,04,000/- in the joint names of Rampati and Sh. Ram Niwas Sharma. Copy of bank statement reflecting the payment of Rs. 5,04,0001- submitted during the course of the assessment proceedings vide letter dated 23.12.2008 has been furnished in support which has been placed on record.
8.2. It has been submitted that the Ld. AO has stated in the assessment order that the assessee failed to produce the purchase deed of Bahadurgarh property and the link of Mr. Jagbir Singh with the property. In this regard, it is submitted that Smt. Rampati purchased the plot from Sh. Jagbir Singh. The purchase deed evidencing the fact has now been furnished in support which has been placed on record.
8.3 It has been submitted that it was duly explained during the assessment proceedings that Smt. Rampati Sharma had made the investment out of rental income from Laxmi nagar building and other savings. The Ld. AO in the assessment order has stated that the AIR of the assessee failed to produce ITR of Smt. Rampati Sharma evidencing the, receipt of rental income. The same has now has been furnished in support which has been placed on record. Smt. Rampati Sharma is assessed to Income-tax in Ward 36(1), New Delhi.
8.4. It is, thus, very clear that the plot at Bahadurgarh does not represent the unexplained investment of Sh. Ram Niwas Sharma. In fact, the same belongs to Smt. Rampati Sharma, the payment for the purchase of which was made by her out of her declared source of income duly reflected in her Income-tax return.
8.5. As regards the other property, it has been submitted that the Ld. AO has again erred in making the addition of Rs. 70,000/- uls 69 as unexplained investment in property at Mandhawali, when enough evidences were produced on record to establish the fact that the property was purchased by Sh. Mukesh Sharma, son of the appellant, out of his own explained source of income. Copy of sale deed in the name of Sh. Mukesh Sharma for purchase of shop at Mandhawali, along with his Income-tax return, computation of income and income & expenditure account to establish his source of income for making the aforesaid investment submitted vide letter dated 20.12.2008 during the course of the assessment proceedings have been furnished in support which have been placed on record.
8.6. It is, thus, very clear that the property at Mandhawali does not represent the unexplained investment of Sh. Ram Niwas Sharma. In fact, the same belongs to Sh. Mukesh Sharma, the payment for the purchase of which was made by him out of his declared source of income duly reflected in his Income-tax return.
8.7. In view of the above discussion, it is hereby held that the Assessing Officer was not justified in making addition uls 69 of the Act in the hands of the appellant on account of investment in properties made as above. The additions of Rs. 5,04,000/- & Rs. 70,000/- made on this count are, accordingly, hereby deleted.”
After going through the finding of the Ld. CIT(A), we are of the considered view that AO was not justified in making the addition in the hands of the assesee on account of investment in properties made, hence, the ld. CIT(A) has rightly deleted the additions in dispute, which does not need any interference on our part, hence, we uphold the same and reject the ground no. 2 & 3 raised by the Revenue.
With regard to ground no. 4 relating to admitting of additional evidence is concerned, we find that the appellate proceedings, the assesee has made an application for admission of additional evidence under Rule 46A of the I.T. Rules, 1962. The written submission made by the assessee alongwith the various documents / evidence relied upon were forwarded to the AO vide letter dated 6.5.2009. The Report of the AO has been received vide letter dated 14.5.2009 and assessee in response to the said report has furnished the rejoinder vide his letter dated 26.5.2009. From the records, it reveals that AO has stated that the assessee provided enough opportunities during the course of assessment proceedings and assessee has submitted that he was prevented by sufficient cause from producing the evidence before the AO due to sudden demise of Sh. Ram Niwas Sharma.
Hence, Ld. CIT(A) has rightly observed that the documents filed by the assessee are relevant to the grounds of appeal and go to the root of the matter. Therefore, the Ld. CIT(A) has rightly admitted the additional evidences filed by the assessee under Rule 46A(1)(c) of the I.T. Rules, 1962, which does not need any interference on our part, hence, we uphold the same and reject the ground no. 4 raised by the Revenue.
In the result the appeal of the Revenue stands dismissed.
Order pronounced in the Open Court on 05-09-2016.