Income Tax Appellate Tribunal - Chandigarh
M/S Pardeep Kumar Jain & Sons Huf, ... vs Ito, Ludhiana on 3 January, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, 'SMC', CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
ITA No. 787/CHD/2016
Assessment Year : 2007-08
M/s Pardeep Kumar Jain & Sons(HUF), Vs. The ITO,
B-1/976, Rajpura Road, Ward-VII(4),
Civil Lines, Ludhiana. Ludhiana.
PAN No. AAKHP8901M
(Appellant) (Respondent)
Appellant by : Shri S.K.Maingi, ITP
Respondent by : Shri Pawan Kumar Sharma,DR
Date of hearing : 24.10.2017
Date of Pronouncement : 03.01.2018
ORDER
The present appeal has been filed by the assessee assailing the correctness of the order dated 31.03.2016 of ld. CIT (Appeals)-3 Ludhiana pertaining to 2007-08 assessment year on the following grounds :
1. The Hon'ble CIT(A) erred in enhancing the income to Rs. 11,83,750/-
under the provisions of section 251(l)(a) of Income Tax Act resulting in addition of Rs. 10,95,500/- .
2. The Hon'ble CIT(A) erred in utilizing it's power by crossing it's limitations as provided in sub-section (2) of section 251 of the Income Tax Act.
3. The Hon'ble CIT(A) could not issue show cause in proper way but mentioned it-in it's order ( para 3.4 of page 8 of the order ) that show cause was issued whereas it had never been issued.
4. The Hon'ble CIT(A) erred in writing order sheet not in routine and regular way but it was written after thought and afterclap just to cover the provisions of show cause for enhancement of income.
5. The Hon'ble CIT(A) in not following Rule 6F(5) of Income Tax Rules by demanding documentary evidences for investments in machinery-from financial year 1986-87 to 2006.
6. The Ld. AO erred in making addition of Rs. 3,50,000/- without basis and the Hon'ble CIT(A) confirmed by enhancing the same, though on same facts, the AO accepted the sources of improvement till 31st March, 2000.
2. Addressing the grounds raised, specifically ground No. 3, it was submitted by the ld. AR that no specific notice for enhancement has been issued by the CIT(A). Referring to brief facts of the case filed alongwith the appeal running into three pages filed by the assessee, it was submitted that although the CIT(A) in para 3.4 page 8 of his order has mentioned ITA787/CHD/2016 A.Y 2007-08 Page 2 of 3 that a Show Cause Notice has been issued. The fact was strongly disputed by the assessee who has sought inspection of the record and noticed from the order-sheet entry dated 16.03.2016 that there has been an over- writing therein and the word "partly" has been inserted by different ink presumably to overcome the shortcoming. Accordingly, it was his submission that on this specific point, the assessee was not heard. For ready reference, this objection posed in the brief facts filed by the assessee in para 5 are reproduced hereunder :
5. On inspection of the file on 27/05/2016, it is observed that the CIT(A) made the order sheet entries on 16/03/2016 after the case was finally discussed and the counsel of the assessee signed the entry which reads as under:
" Present Sh. Vijay Garg CA filed reply, case discussed."
CA
-Sd-
The Ld. CIT(A) has made overwriting in order sheet by writing the words partly which is after thought as ink used for word partly is changed. Had it been done at the same time, the same ink would have been used for the word partly and closing entry would not have been signed by the CA as mentioned above. 2.1 Accordingly, relying upon Goel Die Cast Ltd. Vs Commissioner Of Income-Tax 297 ITR 72 (P&H), it was his submission that the impugned order may be set aside directing the said authority to hear the assessee and thereafter pass an order.
3. The ld. Sr.DR though placed reliance upon the order, however, in the face of the categoric statement made by the assessee in the three paged brief facts of the case under the signatures of the assessee which has not been upset and it was fairly agreed that the issue may be restored back.
4. The relevant facts of the case are that in the scrutiny order passed u/s 143(3) read with Section 147(a), the claim of cost of machinery sold for Rs. 16lacs was taken at Rs. 12,50,000/- (which the assessee had shown at Rs. 12,78,700/- as on 31.03.2000) and the AO computed the profit of sale of machinery at Rs. 3,50,000/-.
4.1 The assessee carried the issue in appeal before the CIT(A) wherein the issue was decided by the CIT(A) in the following manner :
"3.4 Therefore, during appeal proceedings, a show cause was issued and the Ld. Counsel appearing for the appellant was required to give copies of return of income filed with the Department to establish the cost of asset i.e machinery sold by it and also to submit supporting evidence regarding cost of improvement of machinery, failing which it may be explained why the assessment made by the assessing .officer be not enhanced as per details submitted in the case of Sh. Pardeep Kumar Jain value of machinery transferred is Rs.4,16,250/- only. Why not cost of machinery transferred should be taken at Rs.4,16,250/- case Adj to 29.03.2016 at 10.00 am.
ITA787/CHD/2016 A.Y 2007-08 Page 3 of 3 On the given Date the Ld. Counsel explained that repairs were made to the machinery by the appellant from year to year on the basis of income earned. The details of income earned are already on record. Further it was explained that returns of income of the appellant were not filed for these years as the income was below taxable limit.
Further from the order of the Ld. CIT in the case of Sh. Pardeep Jain, it is apparent that M/s Pardeep kumar Jain & Sons (HUF) filed return of Income A.Y 87-88. As per this return, the declared value of the machinery is Rs.4,16,250/-. M/s Pardeep kumar Jain & Sons HUF has never filed return of Income after A.Y 87-88. There is no corroborating proof in the form of return of income, bank account or any other details, which could explain and establish the income earned by the appellant or the repairs improvement made to the machinery from year to year and enhancement in the value of machinery.
Therefore, the cost of machinery transferred is taken at Rs.4,16,250/-as declared in the last return of income filed by the appellant. The machinery was sold for Rs.16,00,000/-. Thus, the appellant earned profit of Rs.11,83,750 (16,00,000-4,16,250/-) on the sale of machinery. The appellant has declared income of Rs.88,250/- in the return of income filed by it. The income declared by the appellant is enhanced to Rs.11,83,750/- as per provision of sec 251(1)(a) of the I.T. Act 1961, resulting in addition of Rs.10,95,500/- to the returned income of the assessee."
4.2 In the light of the submissions of the assessee that for the resultant enhancement, no specific notice was issued and taking note of the fact that even as per the impugned order itself, the opportunity to respond was on 29.03.2016, on which date it was provided, the order is silent. The record shows that the order has been passed on 31.03.2016 and considering the claim of the assessee that on inspection of the file as on 27.05.2016 as per statements made in para 5 of the brief facts of the case, the lack of opportunity has been asserted. The impugned order, accordingly, is set aside and the issues are restored back to the file of the CIT(A) with the direction to decide the same in accordance with law after providing the assessee a reasonable opportunity of being heard. Said order was pronounced in the Open Court at the time of hearing itself.
5. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 03.01.2017.
Sd/-
(DIVA SINGH) JUDICIAL MEMBER 'P o o na m' Co p y to :
1. T he Ap p el la nt
2. T he Re sp o nd e n t
3. T he CI T
4. T he CI T ( A)
5. T he D R Asstt. Registrar ITAT/Chandigarh