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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
O R D E R
Per Arun Khodpia, AM :
The revenue has filed this appeal against the order passed by the ld. CIT(A)-II, Raipur, dated 22.02.2019 for the assessment year 2012- 2013, on the following grounds :-
1. Whether in law and on facts and circumstances of the case, the ld.CIT(A) has erred in allowing the assessee's appeal on the ground that the assessee could not produce books of accounts while under judicial custody.
2. Whether in law and on facts and circumstances of the case, the Id.CIT(A) has erred in allowing the assessee's appeal though the assessee had never produced his books of accounts or other documents during the period of one year before the arrest of the assessee. Later on after arrest the plea of being arrested and expressed his inability to produce the same before the A.O.
3. Whether on the facts and in the circumstances of the case, the Id.CIT(A) was justified in ignoring the fact that the assessee has been running his business for the past many years and he could have easily produced the said bills, vouchers etc. through his counsel from the dealers, people etc with whom he has been dealing for so many years.
4. Whether in law and on the facts and circumstances of the case, the Id.CTT(A) has ignored the fact that sufficient number of opportunities were provided to the assessee which is evident 2 from the office copies of the various notices issued to the assessee which is placed on record.
5. Whether in law and on the facts and circumstances of the case, the ld.CIT(A) was justified in admitting additional evidence u/r 46A of the Income Tax Rules, 1962.
6. Whether in law and on the facts and circumstances of the case, the ld.CIT(A) was justified in observing that the assessee was prevented by good and sufficient cause to produce books of account by ignoring the fact that the Director of the assessee company was under judicial custody before passing final order but he was available from date of issue of notice u/s 143(2) of the Act from 06-08-2013 to 15-08-2014, but didn't produce the books of accounts.
7. The order of the ld.CIT(A) is erroneous both in law and on facts.
8. Any other ground that may be adduced at the time of hearing.
Brief facts of the case are that the assessee is a limited company engaged in the business of manufacturing of Iron & Steel Rolled Products with finished goods as TMT Bars & Rods and Heavy Structural Items and Raw material as Ingots & Billets, doing conversion work for SAIL BSP & others and transportation income etc. The assessee filed its return of income for the assessment year 2012-2013 on 25.09.2012 declaring total loss at Rs.47,60,00,474/-. The case of the assessee was selected for scrutiny under CASS. A notice u/s.143(2) of the Act was issued on 06.08.2013 and served upon the assessee. Further, notice u/s.142(1) of the Act along with questionnaire was issued on 28.07.2014 but neither the assessee nor AR of the assessee attended the proceedings. Subsequently, notice u/s.142(1) of the Act was issued fixing the case for hearing on 05.01.2015 but the same was also remained not responded. Thereafter a summon u/s.131 of the Act was also issued and served on the assessee asking to attend before the AO but again no compliance.
3 The ld. AO thereafter has proceeded to frame the assessment u/s.144 of the Act, after rejecting the books of accounts of the assessee u/s.145(3) of the Act. During the course of assessment proceedings, a letter was received from Shri Charanjeet Singh Saini, Managing Director of the Company stating therein that he had been arrested by the Police Officers on 14.08.2014 and had been retained in Judicial Custody. His bail application was rejected by the Hon’ble Chhattisgarh High Court vide order dated 12.01.2015. It was also stated that he is a key person, who manages day to day affairs of the company and also that the police seized the documents/papers relating to the company, therefore, no documents/papers were available with him to reply the queries raised in the questionnaire. In absence of books of accounts and response from the assessee, the ld. AO has prepared a comparative chart on the basis of income tax returns filed by the assessee for the relevant period and immediately preceding two years and assessment was culminated u/s.144 of the Act. Ld. AO has observed that that the assessee has shown profit @ 8.7% of the sales in the return if income for the immediately preceding assessment year 2011-2012. The same ratio was applied by the AO for the year under consideration and arrived at a profit of Rs.15,69,99,648/- (8.7% of sales of Rs.180,45,93,658/- shown by the assessee) and treated the same as taxable income of the assessee.
Aggrieved with the above findings of the AO, the assessee filed appeal before the ld. CIT(A) and the ld. CIT(A) has disapproved the findings of the ld. AO and has held that the return as shown by the 4 assessee at Rs.(-) 47.67 crores is accepted and deleted the addition made by the AO in this regard.
Now, the department is in appeal before the Tribunal to challenge the decision of the ld. CIT(A).
At the outset, ld. CIT-DR, apart from the other grounds, specifically drew our attention to the ground No.5 challenging the admissibility of additional evidence under Rule 46A of IT Rules, 1962, which were wrongly admitted by the ld. CIT(A). Ld. CIT-DR further drew our attention to para 2.3 of the ld. CIT(A)’s order wherein it has been observed that the director of the company was in judicial custody and office premises were sealed in which books of account, invoices vouchers and supporting documents were kept. During the appellate proceedings paper book was filed containing monthly excise return, half yearly service tax return, quarterly VAT return, year Income Tax Return along with Tax Audit report were filed by the AR of the assessee, the same were sent to the AO for a report. The ld. AO has objected accepting the documents filed by the assessee, however, no comment was made on the merits of those documents. Ld. CIT-DR further observed that since the assessee was in judicial custody, he has a reasonable cause for not producing the books of accounts before the ld. AO and, therefore, estimation of income made by the ld. AO on the ground just because books were not produced, is not justified. Ld. CIT(A) further observed that the assessee’s books of accounts were audited on 18.05.2005 much before the passing of the assessment order, therefore, the assessee’s turnover of Rs.205.51 crores 5 and net loss of Rs.47.67 crores should be accepted, and the addition made by the ld. AO is to be deleted. Ld. CIT-DR on the observation of the ld. CIT(A) has submitted that the books of accounts and other addition evidences submitted before the ld. CIT(A) were accepted and remand report of the AO objecting to acceptance of such additions evidence was not considered favourably by the ld. CIT(A). The observation that books of accounts are audited, therefore, the same should be accepted in toto, is a mistaken belief of ld. CIT(A). Ld. CIT(A) has accepted the objection of the ld. AO on admissibility of additional evidence but has not given another opportunity to the ld. AO to look into the merits of those documents and simply rejected the contention of the ld. AO. Since no assessment on merits was done in the case of the assessee, the matter should be restored back to the file of ld. AO for de novo assessment of the same.
Ld. AR contrary to the submissions made by the ld. CIT-DR above, submitted that since the key person of the assessee was in judicial custody production of books of accounts and other documents or any response was not possible for the assessee, thus, there was a reasonable cause for not producing the requisite details before the ld. AO. Ld. CIT(A) has very reasonably understood the circumstances of the assessee and allowed the additional evidence under entire compliance of rule 46A of IT Rules, 1962 and, therefore, he has very judiciously decided the appeal in favour of the assessee. It is further submitted by the ld. AR that proper opportunity was given to the ld. AO to furnish a remand report and also observation on merits of the documents /evidence additionally submitted