ITO 9(1)(1), MUMBAI vs. AUREUS JEWELS P. LTD, MUMBAI

These cross appeals are directed against the order dated 26.3.2010 passed by the ld. CIT(A)-19, Mumbai and they relate to the assessment year 2006-07.

The AO has estimated the income of the assessee at 10% of the total sales and the same was reduced by the ld.CIT(A) to 1%. The Revenue has filed this appeal challenging the reduction of income and the assessee has filed this appeal challenging the confirmation of income to the extent of 1%.

The ld. Counsel appearing for the assessee submitted that the assessment was completed by the AO u/s 144 of the Income Tax Act, 1961, since the assessee could not comply with the notices issued by the AO. Before the ld. CIT(A), the assessee placed reliance on a comparable case to challenge the gross profit rate adopted by the AO to estimate the income. However, the same was not found to be a comparable case by the ld. CIT(A) and hence, the ld. CIT(A) estimated the income of the assessee at 1% of the total sales turnover. The ld. AR, referring to the paper book filed by the assessee, submitted that the assessee is having all the materials and evidences to support the return of income filed by it. The ld. AR submitted that the assessee has stopped its business operation in the month of October, 2008 and the Accountant of the assessee who was looking the income tax matters left the assessee company and hence, proper representation could not be made before the AO by furnishing the books of account. Accordingly, the Ld A.R submitted that the assessee could not co-operate with the AO for the reasons beyond its control. He

On the contrary, the ld. D.R strongly objected to the plea put forth by the ld.AR. The ld. D.R submitted that the assessee did not avail opportunity to produce books of account before both the tax authorities and hence, the plea of the assessee should not be accepted.

We heard the rival contentions of the parties and perused the record. The assessee is engaged in the business of manufacturing and export of jewellery. It has filed its return of income for the year under consideration on 30.11.2006 declaring total loss of Rs.13.94 lakhs. We notice from the assessment order that the assessee had declared the total turnover at Rs.4.42 crores. The ld. A.R submitted that the assessee stopped its business operation in the month of October, 2008 and the Accountant of the assessee, who was looking the income tax matters, has left the assessee company and hence proper representation could not be made before the AO by furnishing the books of account. The ld.AR further submitted that the Representative who appeared before the ld.CIT(A) also did not think it fit to produce the books of account before the First Appellate Authority and instead placed reliance on a comparable case in order to challenge the rate of gross profit estimated by the AO..

However, the ld. AR appearing before us submitted that the assessee is having all evidences relating to accounts of the assessee. We also notice that the assessee has also filed a voluminous paper book to support its contentions. In view of the foregoing discussions, we are of 4 4570/M/2010 and 5083/M/2010 the view that there is some merit in the plea put forth by the ld.AR. Accordingly, we are of the view that the assessee, in the interest of natural justice, should be provided with one more opportunity to represent its matter. However, since the assessee has failed to produce evidences before the lower authorities, we are of the view that plea of the ld.AR should be accepted upon some terms. Accordingly, we impose a cost of Rs.10,000/- upon the assessee and direct the assessee to remit the same to the account of Income tax Department on or before 30.1.2016. Subject to the payment of cost referred above, we set aside the order of the ld. CIT(A) with regard to estimation of profit and restore the same to the file of the AO with a direction to examine the said issue afresh by considering various information and explanations that may be furnished by the assessee. The assessee is also directed to fully co-operate with the AO by furnishing all the details and information that may be called for the AO in this regard.

In the result, the appeal of the revenue as well as the appeal filed by the assessee is allowed for statistical purposes.