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Facts
The assessee filed a return declaring income including Rs. 70,00,000/- surrendered during a survey. The AO made an addition of Rs. 99,25,000/- on account of unverifiable expenses. The CIT(A) partly allowed the appeal, assessing income at 8% of turnover. This was challenged, and the ITAT directed a fresh de novo consideration by the CIT(A).
Held
The Tribunal held that the CIT(A)'s order was not speaking and failed to provide reasons for adopting the net profit rate of 8%. The Tribunal found that the determination of income by the CIT(A) vide order dated 15.02.2024 was illegal as it was made without issuing a notice for enhancement.
Key Issues
Whether the CIT(A) provided adequate reasoning for rejecting the assessee's books of accounts and adopting a net profit rate of 8%, and if the enhancement of income by the CIT(A) was legal without issuing a notice.
Sections Cited
143(3), 142(1), 143(2), 133A, 250, 251, 254, 131
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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
ORDER
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal of the assessee is against order dated 15.02.2024 of Learned Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 read with section 254 of the Income Tax Act, 1961 (hereinafter referred as “the Act”) arising out of order dated 25.03.2013 of the Learned Assistant ITA No.1721/Del.2024 Commissioner of Income Tax, Circle-38(1), New Delhi (hereinafter referred as “the Ld. AO”) under Section 143(3) of the Act for assessment year 2010-11.
Brief facts of the case are that the assessee filed return of income on 14.10.2010 showing income of Rs.1,40,68,744/-. The return of income included disclosure of additional income of Rs.70,00,000/- at the time of survey under Section 133A of the Act in accordance with statement of Shri Vikram Kumar, partner. The case was selected for scrutiny manually. Notice under Section 143(2) dated 12.09.2011 was issued. Further, notices under Section 142(1) of the Act were issued. Shri Arvind Kwatra, CA/AR attended proceedings and furnished relevant details. On completion of proceedings, Ld. AO vide order dated 25.03.2013 made the addition of Rs.99,25,000/-.
Against the order dated 25.03.2013 of Ld. AO. The appellant/assessee preferred appeal before of Ld. CIT(A) which was partly allowed vide order dated 13.02.2015.
Against order dated 13.02.2015 of Ld. CIT(A), the appellant/assessee preferred before ITAT, New Delhi which was partly allowed vide order dated 21.12.2018 directing fresh consideration by Ld. CIT(A) for a de novo order.
In compliance of directions dated 21.12.2018 of Hon’ble ITAT, New Delhi, Ld. CIT(A) passed order dated 15.02.2024. 6. Being aggrieved, the appellant/assessee preferred present appeal.
ITA No.1721/Del.2024
Learned Authorised Representative for the appellant/assessee submitted that Ld. CIT(A) failed to appreciate that addition of Rs.99,25,000/- on account of unverifiable expenses were made by Ld. AO. Ld. CIT(A) vide order dated 13.02.2015, assessed income of assessee @ 8% of total turnover which already covered unverifiable purchases. Ld. AO vide order dated 03.06.2015 in compliance of order dated 13.02.2015 revised computation of income of assessee as Rs.1,85,32,348/-. Hon’ble ITAT, Delhi vide order dated 21.12.2018 had directed fresh consideration by Ld. CIT(A) for de novo order. Ld. CIT(A) failed to appreciate that Rs.70,00,000/- disclosed at the time of survey was shown in return of income and without any notice, assessed income at Rs.2,10,68,944/-.
Learned Authorized Representative for the for Revenue submitted that Ld. CIT(A) by referring to judgment in case of K.P. verghese Vs. ITO 131 ITR 597 upheld the addition.
From examination of record in light of aforesaid rival contentions, it is crystal clear that a survey under Section 133A of the Act was carried on 17.09.2010 in premises of assessee’s firm at S-11, Greater Kailash-II, New Delhi. Shri Vikram Kumar, Partner in statement offered additional income of Rs.70,00,000/- for assessment year 2010-11. Assessee filed return of income on 14.10.2010 declaring income of Rs.1,40,68,744/- including Rs.70,00,000/- surrendered at the time of survey. Ld. AO vide order dated 25.03.2013, made ITA No.1721/Del.2024 addition of Rs.99,25,000/- on account of unverifiable expenses. Ld. CIT(A) vide order dated 13.02.2015, assessed income of assessee @ 8% of total turnover. Ld. AO vide order dated 03.06.2015, in consequence to order dated 13.02.2015 of Ld. CIT(A) determined total income of assessee as Rs.1,85,32,348/- as per section 250/143(3) of the Act. As per directions of Hon’ble ITAT dated 21.12.2018, Ld. CIT(A) passed de novo order determining income of assessee as Rs.2,10,68,744/-.
Hon’ble ITAT, New Delhi in in para no.4 observed as under: “(4) We have heard both sides patiently. We have considered the materials on record carefully. We find that the Ld. CIT(A) has pointed out several deficiencies/discrepancies in the books of account of the assessee, some of which have been mentioned in the forgoing paragraph 2.1 of this order. The relevant portion of the order of Ld. CIT(A) has also been reproduced for ready reference. In view of these deficiencies/discrepancies, we are satisfied that the Ld. CIT(A) had sufficient materials Page 5 of 8 ITA No.-2707/Del/2015. M/s Dewan Chand. to reject the books of accounts of the assessee. However, we find that there is no discussion, in the order of the Ld. CIT(A), as to why, net profit rate of 8% was adopted by the Ld. CIT(A). The order of Ld. CIT(A) is not a speaking order. On the reason for adopting net profit rate of 8%, the Ld. CIT(A) has merely stated: ”… After considering all the facts as discussed in details above in The assessment order and submissions of the appellant show cause was issued vide order sheet entry dated 13.01.2015, to the appellant as to why his book results should not be rejected and profit rate of 8% not be applied. After considering his reply I have no option but to reject the books of accounts of the appellant and determine income at 8% of the total turnover…”. The order of Ld. CIT(A) is silent on what reply was furnished to her by the assessee; and why it did not find favour with her. The Ld. CIT(A) has also not explained why she has selected 8% as the net profit rate. As the order of Ld. CIT(A) is silent on these important aspects, we are of the view that the entire issue requires fresh consideration by Ld. CIT(A) for a denovo order. Accordingly, we ITA No.1721/Del.2024 restore the issues in dispute to the file of the Ld. CIT(A) for a fresh denovo order. The Ld. CIT(A) is directed to pass a speaking order, after giving opportunity of being heard to the assessee.”
From perusal of above material facts in light of directions dated 21.12.2018, it is evident that Ld. CIT(A) failed to appreciate that the appellant had declared income of Rs.1,40,68,744/-. Ld. AO vide order dated 03.06.2015 had assessed income at Rs.1,85,32,348/- under Sections 250/143(3) of the Act. Without issuance of notice for enhancement under Section 251 of the Act, the addition was made and income of assessee was determined as Rs.2,10,68,744/- by Ld. CIT(A). Therefore, the determination of income of Rs.2,10,69,744/- by Ld. CIT(A) vide order dated 15.02.2024 being illegal is set aside. Grounds of appeal
nos. 1 to 8 are allowed.