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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: DR. A.L.SAINI, AM & SHRI K. NARASIMHA CHARY, JM
O R D E R
Per Dr. Arjun Lal Saini, AM:
1. The captioned appeal filed by the assessee, pertaining to the assessment year 2009-2010, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-Durgapur, in Appeal No.166/CIT(A)/DGP/2011-12, dated 29.04.2013, which in turn arises out of an order passed by the Assessing Officer (AO) Under Section143(3) of the Income Tax Act 1961, (in short the ‘Act’), dated 19.12.2011.
Brief facts of the case qua the issue are that the assessee filed its return of income through E-filing on 30.09.2009 disclosing total income at nil. The case was processed u/s.143(1) on 28.10.2010. Thereafter, the case was selected for scrutiny with the prior approval of CIT, Durgapur. The AO completed the assessment after making addition of Rs.15,04,317/-, on account of difference in estimated gross profit.
3. Aggrieved from the order of AO, the assessee filed appeal before the ld. CIT(A), who has confirmed the addition made by the AO by observing the followings :-
“These grounds are adjudicated together because common issues are involved. In these grounds the appellant is disputing the A.O's action in rejecting its book results and estimating its income. The facts of the case are that in course of assessment proceedings the A.O. had called for books of accounts which were not produced though it is seen from the assessment order that audit report and certain other documents had been submitted. In the absence of books the A.O. had rejected the book results and had proceeded to estimate the appellant's income on the basis of a comparable case. The appellant disputes the A.O's assertion that books of accounts were not produced. However, it is seen that the A.O. has also initiated penalty proceedings u/s.271A. Furthermore, I do not see it to be the appellant's case that it is in a position to produce books of accounts now also. Under the circumstances, in my opinion, there are substantial grounds to hold that the books of accounts were indeed not produced. In that event it is entirely logical for the A.O. to hold that the book results cannot be relied upon. The A.O. is seen to have done so and in my opinion that action cannot be faulted. Once the book results are rejected there remains the issue of estimation of income. Perusal of the assessment order reveals that the A.O. has adopted a method the logic of which is not being challenged by the appellant. What it is seen to be challenging in its submission is the percentage adopted by the A.O. However, it is noted that the appellant is not in a position to produce books of accounts. Given those circumstances I do not see any need to interfere with the A.O's action. The case laws cited by the appellant deal with the concept of application of mind by the A.O. when making a best judgment assessment. In this case, in my opinion, the A.O. is seen to have applied his mind. The income estimated by rejecting the book results is confirmed. These grounds of appeal are dismissed.”
4. Not being satisfied with the order of CIT(A), the assessee is in further appeal before us and has taken the following grounds of appeal :-
For that your petitioner dealer did not get reasonably opportunity of being heard.
2. That the order is non-speaking, bad in law and many of the observations passed by the Ld. AO are not correctly stated. Whatever explanation given by your assessee has not correctly come into records therefore the order is bad in law, should be quashed and cancelled and a fresh order in accordance with law should be made.
Your assessee maintains all books of accounts as required and the same have at all material times been produced before the auditor for preparation of balance sheet. auditor has admitted that books of accounts i.e. cash book, ledger book, purchase and sales register, voucher file etc. are maintained by the firm and the same have been produced before the auditor for examination as admitted in the audit report. The Ld. AO has alleged that quantitative details were not reflected in the audit report. The auditor has stated reason as 'lack of papers and information'. Then on being asked to produce documents the assessee firm had submitted the same before the Ld. AO. Just on the basis of a comment made by the auditor in the audit report your assessee firm has been judged and huge taxes liability has been imposed on your assessee which is bad in law, biased and which should be quashed and cancelled.
It is a fact that if sale prices do not rise and the purchase prices rise then the gross profit and the net profit shall be poor. Your assessee tried to explain this fact to the Ld. AO again and again but the Ld. AO did not accept the explanation. Ld. AO has estimated higher gross profit at the rate of 7% then why no expenses shall be allowed from the estimated gross profit and how this whole increase in gross profit can be added to the net profit and how tax can be charged on the whole gross profit increase.
5. For that your petitioner dealer craves leave to adduce further points, facts, grounds and evidential circumstances at the hearing stage of the appeal petition.
For that in the circumstances your petitioner mostly prays:-
i) Perpetual order for set asideing order of Ld. A.O and consider the same and restraining the C.I.T (Appeal), Durgapur for doing such non speaking order against the dealer. ii) For that an order of demand is quashed as your petitioner is a good assessee and had shown income truly and honestly and as such the Hon'ble court may deem feet and proper which shall not be detrimental for petty assessee. iii) An order for quashing of notice on penalty initiated as the facts and transaction was absolutely bonafide. iv) An order for quashing of addition of Rs.1504317/- to the net profit is baseless biased and did not maintain any nexus of law so should be deleted in full. v) An order for quashing the interest u/s 234B imposed on your assessee is fully incorrect and should be quashed in full. vi) An order for quashing the interest u/s 244A imposed on your assessee is fully incorrect and should be quashed in full. vii) An order for quashing the interest u/s 234D imposed on your assessee is fully incorrect and should be quashed in full. viii) An order for the entire demand amount of Rs.654630/- should be stayed till final disposal of the matters. ix) For that such further order to be made or direction to be given as 'lour afford complete would suffer irrevocable loss and injury. x) For that unless order as prays for are passed your petitioner assessee would suffer irrevocable loss and injury. xi) For that your petitioner prepared and made an appeal well within the time of 60 days and well within the jurisdiction of Hon'ble members of ITAT, Kolkata, West Bengal. xii) For that this application is made bonafide and in the interest of justice as a partnership firm.
Although, in this appeal, the assessee has raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee has been confined to the issues that the ld. CIT(A) did not give adequate opportunity of being heard to the assessee. The AO has adopted higher gross profit rate @7%, without incorporating the explanations given by the assessee and without giving proper opportunity to the assessee.
5.1. Ld. AR for the assessee has submitted that assessee has submitted explanations and the documents to justify the lower profit but the same has not been considered by the AO. Ld. AR for the assessee also pointed out that the assessee’s books of accounts are written in Devnagari language, therefore, there should be proper person to explain the Devnagari language to the AO. The presumption of the AO that the assessee is not maintaining books of account is wrong. In fact the assessee is maintaining books of accounts but because of a certain un- intentional mistake done by the tax auditor in the tax audit report, the assessee should not suffer. The assessee`s accountant, who knows the Devnagari language, was absent when the assessment proceedings was going on. Therefore, assessee could not explain books of accounts properly before the AO. Merely because the books of accounts are written in Devnagari language, does not mean that the books of accounts of the assessee are wrong and not reliable. Therefore, the assessee should be given adequate opportunity to explain the books of accounts and the financial statements. Ld. AR for the assessee, therefore, requested the bench to send/remit the case back to the AO to examine the books of accounts of the assessee.
5.2. On the other hand, ld. Departmental Representative for the revenue has primarily reiterated the stand taken by the AO, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
Ld. DR for the revenue even agreed to send/remit the case back to the AO to examine the books of accounts and documents and make the assessment afresh.
5.3. Heaving heard the rival submissions, pursed the material available on record, we are of the view that there is merit in the submissions of the assessee, as the proposition canvassed by the ld AR for the assessee are supported by the facts narrated by him above. As ld AR pointed out that books of accounts of the assessee are written in Devnagri language and the Accountant who knows the Devnagri Language was absent when the assessment proceedings were going on. Therefore books of accounts were not properly understood by the Assessing Officer. This could be a reason, the assessing officer had not considered the explanations and submissions of the assessee. In view of the above factual position, we are of the view that this issue requires a fresh examination at the end of the AO. Accordingly, we send/remit the case back to the file of AO to make assessment afresh after considering the books of accounts, explanations and documents submitted by the assessee. 5.4. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on this 05/12/2016. Sd/- Sd/- (NARASIMHA CHARY) (DR. A.L.SAINI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक Dated 05/12/2016 �काश �म�ा/Prakash Mishra,�न.स/ PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant-M/s Shakti Oil Mill 2. ��यथ� / The Respondent.-ITO Ward-1(4), Kolkata 3. आयकर आयु�त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु�त / CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 5. 6. गाड� फाईल / Guard file. स�या�पत ��त //True Copy// आदेशानुसार/ BY ORDER,