SHRI HARBANS LAL SHARMA,KATHUA vs. INCOME TAX OFFICER WARD- 1 ( 4 ), KATHUA

Per Dr. M. L. Meena, AM:

This appeal has been filed by the assessee against the order of the

Ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 11.01.2023 in respect of Assessment Year: 2012-13.

2 I.T.A. No. 69/Asr/2023 Harbans Lal Sharma v. ITO 2. The assessee has raised the following grounds of appeal:

“1. That the assessment order passed by the Assessing Officer as well as the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi thereby confirming the order of the Assessing Officer are both against the facts of this case and are untenable under the law. 2. That no reasonable and proper opportunity of being heard was allowed by the Assessing Officer before passing the said order. As such the assessment order passed is bad in the eyes of law and the same is liable to be cancelled and further the order passed by the worthy CIT(A) thereby confirming the order of the AO is also bad in the eyes of law and the same is liable to be cancelled. 3. That the Ld. CIT(A) has grossly erred in confirming the addition of Rs.9,75,489/- made by the AO without applying his mind and without appreciating the facts of this case. The authorities below did not appreciate that the assessee was dealing in recharge of prepaid telecom coupons and merely earned commission on recharge which is about 1-2% of the sale proceeds. 4. That the reopening u/s 147/148 is illegal, invalid and void abinitio and the assessment completed is liable to be cancelled. 5. That the AO was not justified in applying a rate of 8% on sales receipts/receipts and the worthy CIT(A) has grossly erred in confirming the same without appreciating the facts of this case and without applying his mind. As such the order confirming the assessment made at Rs.9,75,489/- is not called for and the same may be cancelled. Alternatively the rate applied @ 8% on the total receipts is very high & excessive looking into the nature of business carried on by the assessee. 6. That any other grounds of appeal which may be argued at the time of hearing of the appeal.”

the assessee has not been granted reasonable and proper opportunity of

being heard by the AO before passing the assessment order and therefore,

3 I.T.A. No. 69/Asr/2023 Harbans Lal Sharma v. ITO the impugned ex-parte order passed by the CIT(A) confirming the said

assessment order passed by the AO, is bad in law.

the return of income for the relevant financial year, however, he has paid

an advance tax of Rs.6,580/-. The appellant has further submitted that he

deals in recharge of prepaid telecom coupons and merely earns

commission on recharge which is @ 1- 2% of the sale proceeds. Therefore,

the AO has erred in taxing the gross profit @8% of the gross receipts. He

also submitted that the demand raised by the AO is unjust and not valid in

the eyes of the law. He further submitted that the worthy CIT(A) has grossly

erred in confirming the same without appreciating the facts of this case and

rejecting grounds of appeal without application of mind. He has reiterated

the relevant part of brief note filed before authorities as under:

It is further relevant to point out that I have also given a chart in written submissions before CIT(A), copy of which is placed at Page No.3 to 5 of the paper-book wherefrom it is clear that net profit in this line of business is very nominal. In this connection, it may be pointed out that the relevant figures of comparison are given from AY 2012-13 to 2016-17.

S.No. Description Asstt. Year Asstt. Year Asstt. Year Asstt. Year Asstt. Year 2012-13 2013-14 2014-15 2015-16 2016-17 Turnover 11006902.83 12014822.00 18533645.00 1251 1582.00 6872189.00 1. Gross Profit 446030.11 394902.00 650036.00 710401.00 270816.00 2. 3. Net Profit 143806.00 103289.33 130298.00 294544.00 173075.00 4. GP % 4% 3.29% 3.51% 5.6% 3.94% 5. NP % 1.3% 0.85% 0.70% 2.3% 2.51%

4 I.T.A. No. 69/Asr/2023 Harbans Lal Sharma v. ITO

From the perusal of the same, your honour will find that the rate of profit shown during the year under consideration is 1.3% against accepted rate of 0.85% for the AY 2013-14. Furthermore, it may be pointed out that the department while applying the rate of 8% on the total receipts has not allowed any opportunity of being heard and furthermore the department has not quoted any comparable case before applying this rate of 8%. It may be submitted that the history of this case is very relevant and the AO should not ignore the same before applying the rate of 8%. Thus, viewed from all the angles, the rate applied is not at all justified and accordingly the addition made may be deleted as it has got no basis, reasons and justification.

Under the circumstances, he pleaded that the orders of Revenue

Authorities are against the facts on record and hence untenable under the

law.

order and written submission by the appellant. Admittedly, the revenue

authorities passed orders ex parte qua the assesse. The Ld. AR argued

that the worthy CIT(A) decided the case exparte without granting

opportunity of the hearing against the ex parte assessment order passed

under section 144/147 of the act and that while deciding the case ex-parte,

the Ld. CIT(A) has not appreciated the facts of the case and arbitrary

confirmed the assessment order passed u/s 144 r.w.s. 147 of the I.T. Act

on 12.12.2019 assessing the total income at Rs.9,75,489/-, under the head

5 I.T.A. No. 69/Asr/2023 Harbans Lal Sharma v. ITO ‘Income from Business or Profession' which is contrary to the facts on

record that the appellant assessee was dealing in, recharge of prepaid

telecom coupons and merely earned commission on such recharges which

is about 1-2% of the sale proceeds.

these transactions during the assessment proceedings as well as during

the appellate proceedings. The explanation of the appellant that he could

not furnish the return of income due to his prolonged hospitalization and

that he was dealing in recharge of prepaid telecom coupons seems to be

without any concrete basis. However, neither the AO nor the Ld. CIT(A)

has addressed the relevant issue regarding appellants claim that he is

dealing in, recharge of prepaid telecom coupons and merely earned

commission on such recharges which is about 1-2% of the sale proceeds.

The lower authorities ought to have disproved the claim of the assesse that

he earned only commission in recharging prepaid coupons which is about

1-2% of the sale proceeds in order to arrive at the conclusion of business

receipts with corroborative evidence before applying gross profit rate if any,

as per law. In our view, the authorities below have acted in violation of

principles of natural justice, and against the spirit of law.

6 I.T.A. No. 69/Asr/2023 Harbans Lal Sharma v. ITO 8. The Hon’ble Supreme Court of India in the case of Tin Box Company

vs. CIT reported in 249 ITR 216 in which their Lordships of Supreme Court

of India observed as under:

“Assessment - Opportunity of being heard - Setting aside of assessment - Assessment order must be made after the assessee has been given reasonable opportunity of setting out his case - Same not done - Fact that the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is assessment order that counts — Assessment order set aside and matter remanded to assessing authority for fresh consideration.”

to the file of the Ld. AO to pass de novo assessment after considering the

written submission and evidences filed on record and may be filed before

him during the fresh proceedings after granting sufficient opportunity of

being heard to the assessee. The assessee shall co-operate in the

assessment proceedings before the AO.

purpose.

Order pronounced in the open court on 12.05.2023 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr./P.S.* Copy of the order forwarded to: (1)The Appellant

7 I.T.A. No. 69/Asr/2023 Harbans Lal Sharma v. ITO (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order