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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-II’ NEW DELHI
Before: SMT DIVA SINGH
ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 11.03.2015 of CIT(A)-4, New Delhi pertaining to 2009–10 assessment year on the following grounds:-
1. “That the learned CIT (Appeals) 4, N. Delhi has erred in law as well as on facts of the case in enhancing addition of Rs.1301726/- made by assessing officer to Rs.2648648/-. Thus the Appellate order enhancing addition of Rs. 2648648/- is totally wrong, illegal and excessive in nature.
That the learned CIT (Appeals)-4 has further erred in law and facts of the case in not serving any mandatory show cause notice to the appellant regarding enhancement of income. Thus the appellate order passed in violation of principle of natural justice is totally wrong and illegal. 3. That the learned Commissioner of Income Tax (Appeals) have wrongly estimated G.P Ratio of goods traded on "Retail Basis" ignoring the actual facts that goods traded are on "wholesale Basis" Thus estimate made and confirmed on incorrect facts are totally wrong and illegal. 4. That the learned CIT (Appeals)-4 has further erred in confirming the action of assessing officer in rejection on books u/s 145(3) of I.T Act without any valid and legal reason. Thus appellate order confirming rejection of books is totally wrong and illegal as having been passed on whims and guesswork ignoring actual audited books of accounts. 5. That learned CIT (Appeals)-4 has wrongly assessed/invented new source of income as Income from other sources which is not permissible under law as new source of income was never referred in assessment order. Thus the appellate order is totally wrong, illegal and incorrect. 6. That learned CIT (Appeals)-4 has further erred in law and facts of the case in wrongly observing that no written submission, account books and bills/vouchers produced by appellant, though all documents and account books were duly produced. Thus the basis appellate order is totally wrong and incorrect. 7. That the appellant craves leave to add, delete or amend any ground or grounds of appeal
at the tune or before time of hearing.”
2. At the time of hearing, an adjournment application was moved on behalf of Mr. U.S.
Aggarwal. Since as per record, the assessee has not executed any Power of Attorney the I.T.A .No.-3276/Del/2015 Indus Protein Ltd. vs ITO
Page 2 of 4 person present in support of the adjournment application was required to address why it should not be rejected. Mr Rajeev Goel identified himself as a Director of the assessee company. In the circumstances, he was required to address the grievance of the assessee posed in the grounds raised for which adjournment was stated to be moved. It was seen that one of the challenges posed by the assessee in the present proceedings, is the non-issuance of enhancement notice by the CIT(Appeals). The Ld. Sr.DR, Mr. F.R.Meena appearing on behalf of the Revenue, was required to address whether he also needed time or the appeal can be argued on the basis of material on record. Accordingly, in order to give time to the parties the appeal was passed over. In the second round, Mr Rajeev Goel, Director of the assessee company submitted that complete books of accounts were produced before the Assessing Officer and were available and despite that the addition has been made. The order it was submitted has been passed under section 143(3). Addressing the issues in the appellate order, it was submitted that books of accounts of the assessee have been audited and the enhancement was carried out by the CIT(A) without issuing any notice to the assessee. The said action it was submitted is contrary to law and facts.
The Ld. Sr.DR, Mr. F R.Meena referring to Page 6 para 6.5 of the impugned order, submitted that it appears that the CIT(A) has issued notice to the assessee on 21.11.2013 however in view of the fact that despite availing the opportunities given to the assessee, the assessee failed to produce the books or the invoice/vouchers nor any written submissions before the CIT(A) hence the enhancement made was justified.
A perusal of the record shows that the Assessing Officer in the course of the assessment proceedings, issued show cause notice to the assessee requiring it to explain why for non-production of books of accounts, bills/vouchers in respect of purchases and sales, they should not be rejected under section 145 (3). Presumably, the explanation offered was found to be not acceptable, an addition of Rs.13,01,726/- was made by him holding as under:-
I.T.A .No.-3276/Del/2015 Indus Protein Ltd. vs ITO
Page 3 of 4 “In the instant case, the assessee company has shown gross profit at Rs.29,40,274/- which is 2.25% of sales of Rs.13.05,23,100/- during the year under consideration. In the normal retail business, the GP is normally between 3 to 4%, however, considering the nature of the business & other relevant factors viz perishable natures of goods & climatic factors, I estimate gross profit at Rs.42,42,000/- @ 3.25% of sales of Rs.13,05,023,100/-. The assessee has shown gross profit of Rs.29,40,274/-. Therefore, the difference of Rs.13,01,726/- (being difference between Rs.42,42,000 and Rs.29,40,271/-) is added to the income of the assessee……….”
The CIT(A) considering the fact that the total turnover of the assessee was Rs.13.03 crores in respect of 2 commodities namely Atta and Tata Salt wherein purchase of 52,195 bags of Atta were claimed and the assessee had sold 52,450 bags of Atta. Similarly for Tata Salt it was noted 1,33,000 bags were claimed to have been purchased as against sales of 1,35,000 bags. It was noted that the assessee claimed to hold closing stock of 1,129 bags of Tata Salt. It was also noticed that the purchases in the case of Atta were made from outside parties and the sales were to sister concern M/s Indus Chemitex Limited. In the case of Tata Salt, the purchases were found to be made from the same sister concern and sales were primarily made to outside parties. Accordingly, the assessee was required to produce purchase bills, evidence of transportation, storage etc. From the P&L Account, it was noticed that selling and distribution expenses of Rs.2,40,000/- had been incurred and whereas in the previous year “transportation and other charges” of Rs.1,98,000/- were claimed. Payment for godown rent of Rs.1,68,000/- as compared to Rs.1,81,500/- was found to have been claimed vis-à-vis last year. In the circumstances with the paltry transportation and godown rent the claimed turnover of Rs.13 crores, was doubted. In the absence of any explanation, it was held that no expenses other than the auditors fee of Rs.10,000/- and bank charges of Rs.84,850/- claimed in the P&L Account were held to be allowable. The trading profit of Rs.29,40,274/- was considered as income from other sources.
In the above background, the Ld.AR submitted that no specific notice for enhancement was given.
The Ld. Sr.DR relies upon the following extract of the impugned order:-
6.5. “……………The appellant was asked on 21.11.2013 to explain as to why demand may not be enhanced u/s 251(2) accordingly. However, despite several I.T.A .No.-3276/Del/2015 Indus Protein Ltd. vs ITO
Page 4 of 4 opportunities, the AR and Director could not produce books or invoice/vouchers nor any written submission in this regard. In view of the above, the total addition to this income is made to the extent of Rs.26,48,648/-…………..” (emphasis supplied) 8. The Director, Mr. Rajeev Goel submitted in reply that it is a case of harassment as complete books of accounts, bills and vouchers were available and were not taken into consideration by the tax authorities. Considering the fact that the impugned order is dated 11/03/2015 and reference in para 5 of the impugned order is made to various opportunities though no specific dates are found mentioned and in para 6.5 which was relied upon by the Ld.Sr.DR the only date mentioned is 22.11.2013 as extracted hereinabove accordingly, based on the claims made by the Director, Mr Rajeev Goel for want of relevant discussion in the impugned order, the benefit of doubt is given to the assessee and the impugned order is set aside and the issue is restored back to the file of the Ld. CIT(A) with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. While so directing, it was made clear to the Director, Sh. Rajeev Goel who it is seen has appeared before the Assessing Officer and the CIT(A) also that the opportunity so provided should not be abused and it is in the best interests of the assessee to place its full facts and supporting evidences before the CIT(A) as directed as failing which it is made clear that the Ld. CIT(A) would be at liberty to pass a speaking order on the basis of material available on record and it is in the interests of the assessee to ensure that complete and proper representation is made on its behalf.