Income Tax Appellate Tribunal - Delhi
Pankaj Kumar Sharma, Baghpat vs Department Of Income Tax on 10 June, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F', NEW DELHI
Before Sri G.D. Agarwal, Hon'ble V.P. And Sri C.M.Garg, JM
ITA No. 3999/Del./2015 : Asstt. Year : 2007-08
Pankaj Kumar Sharma
S/o. Devdutt Sharma, Prop. M/s. Baghwati Textiles,
Uttar Pradesh
Vs
ITO
Bhagwan Mahavir Marg,
Baraut, Distt. Baghpat
Uttar Pradesh
(APPELLANT)
(RESPONDENT)
PAN No. AJBPS7893K
C.O. No. 3876/Del/2013 : Asstt. Year : 2007-08
ITO
Bhagwan Mahavir Marg,
Baraut, Distt. Baghpat
Uttar Pradesh
Pankaj Kumar Sharma
S/o. Devdutt Sharma, Prop. M/s. Baghwati Textiles,
Uttar Pradesh
(APPELLANT)
(RESPONDENT)
PAN No. AJBPS7893K
Assessee by : Sh. Sandeep Sapra, Adv.
Revenue by : Sh. R.S.Negi, Sr. DR
Date of Hearing : 01.06.2016
Date of Pronouncement : 10.06.2016
ORDER
PER C.M.Garg, J.M.
These cross appeals by the Assessee as well as by the Reveue have been filed against the order of the Commissioner of Income-tax against the order of the Commissioner of Income-tax (Appeals), Meerut dated 25.03.2013 passed in first appeal no. 34/2011-12 for AY 2007-08.
Assessee's ground in ITA no. 3999/Del/2013 :
That on the facts and under the circumstances of the case, the learned CIT(A) has erred in law as well as on the facts of the case by directing the assessment of total income of the appellant at a rate of 8% of total sales of Rs. 12432806/- i.e. at Rs. 994624/-, ignoring the net profit rates earned by the appellant in earlier and subsequent yeas, which have duly been accepted by the Department and the action of the learned CIT(A) to rely upon the provisions of section 44 AD is totally unjust and unwarranted as the provisions of that section are not applicable to the appellant as his sales were more than the monetary limits prescribed under that section.
That, without prejudice to the above, the learned CIT(A) has erred in law by invoking the provisions of section 145(3) of the income tax act, 1961without affording any opportunity of being heard to the appellant.
Without prejudice to above grounds, on the facts and under the circumstances of the case, the assessment of appellant's total income at Rs. 994624/-, as directed to be made by the learned CIT(A) is highly excessive, unreasonable, unrealistic and unjust."
Revenue's ground in ITA no. 3876/Del/2013 :
" 2. Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law and in facts in rejecting the books of accounts & applying the N.P. @ 8% in determining the income of the assessee under his best judgment assessment inspite of endorsement by him of the finding of AO that the purchases worth Rs. 51,95,720/- were bogus on the one hand and simultaneously putting assessee in a beneficial position by applying net profit of 8% on total sales leading to reduction of addition from Rs. 51,95,720/- to Rs. 8,36,294/- on the other hand, which is quite illogical."
2. Briefly stated the facts giving rise to these appeals are that the assessee's engaged in the business of manufacturing and trading handloom cloth. The assessee filed return of income on 31.10.2007 and the case was selected for scrutiny and the Assessing Officer framed assessment roder u/s 43(3) of the Income-tax Act, 1961 (for short the Act) at Rs. 53,54,050/- as against the return income of Rs. 1,58,330/- by making at disallowance on account of purchases disallowed. Aggrieved assessee preferred an appeal before CIT(A) which was partly allowed. However, the CIT(A) rejected the books results of the assessee u/s 145(3) of the Act and estimated the net profit @ 8% of turnover of the assessee i.e. Rs. 9,94,624/-. Now the assessee has filed appeal challenging the first appellate order that provisions of section 44(AD) of the Act are not applicable to the assessee's case as sales were more than the monetary limits viz Rs. 40,00,000/- prescribed under that section for AY 2007-08. The assessee has challenged the action of the CIT(A) invoking the provisions of section 145(3) of the Act by alleging that the book results of the assessee were rejected without affording of opportunity being heard for the assessee. At the same time, the revenue has also challenged action of the CIT(A) wherein the first appellate authority after rejecting book results of the assessee estimated the net profit of the assessee at the rate of 8% total sales turn over by alleging that the CIT(A) ignored the fact that the purchases of Rs. 51,95,720/- were bogus. Therefore, reduction of addition from 51,95,720/- to Rs. 8,36,294/- was quite in logical.
3. We have heard argument of both the sides and carefully perused the relevant material available on the record. From the assessment order, it reveals that the assessee filed affidavits of the alleged parties confirming the transactions with the assessee and the AO also received confirmation letters and copies of the purchase bills by post. However, the AO not feeling satisfied with these affidavits and other documents and deputed an Inspector of Income Tax to get the verifications personally from the three creditors of Khekhara but the Inspector reported that no such persons could be found at the given address. The AO without allowing any opportunity to the assessee to explain his case proceeded to hold that the total purchases made from alleged four parties was considered as fictitious and added to the return income to the assessee as the amount at purchase disallowed. From the first appellate order we furhter note that the CIT(A) proceeded on a hyper technical approach and rejected books of accounts of the assessee by invoking books results of the assessee by invoking provisions of section 145(3) of the Act without affording any opportunity of being heard to the assesse which is not a proper and justified approach. It is pertinent to mention that the CIT(A) after rejection of book results of the assessee proceeded to estimate net profit of the assessee @ 8% of sales turnover as per provisions of section 44(AD) of the Act which is also not apropriate approach because the total sale turnover as noted by the AO and CIT(A) was 1,24,32,806/- as per Clause 2(ii) of Explanation (b) of section 44AD of the Act for applicability of this provision the definition of " elegible business" means a business whose total turnover or gross receipts in the previous year does not exceed an amount of 40,00,000/- for AY 2007-08.
4. In view of abvoe noted facts and circumstances, on specific query from the bench, the Ld. DR did not submitted that the revenue has no serious objection if the case is restore to the file of AO to the assessment stage for framing of a fresh de novo assessment.
5. On careful consideration on abvoe facts, circumstances and submissions of both the sides, we are of the view that the AO made addition without taking the case to logical conclusion and the CIT(A) proceeded to estimate net profit @ 8% of total turn over of the assessee as per provisions of section 44AD of the Act which is not applicable to the case of assessee as the total turn over of the assessee for relevant financial period FY 2006-07 was more than prescribed limit of 40,00,000/-. It is also pertinent to mention that the CIT(A) rejected books results to the assessee without affording due opportunity of hearing for the assessee which is also not a correct approach for a quasi judicial authority. Therefore, In our considered opinion, the case was not adjudicated by the lower authorities in a proper and justified manner. Therefore, we find it appropriate to restore the case to the file of AO to assessment stage with a direction that the AO shall pass re-assessment order afresh after affording due opportunity of hearing for the assessee and without being prejudiced from the earlier assessment and impugned order of the CIT(A). We order accordingly.
6. In the result appeal of the assessee as well as revenue are allowed for statistical purposes.
Order Pronounced in the Court on 10/06/2016.
Sd/- Sd/-
( G.D.Agarwal ) (C.M.Garg)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 10 / 06/2016
*Binita*
Copy forwarded to:
Appellant
Respondent
CIT
CIT(Appeals)
Date
Initial
1.
Draft dictated on
03.06.2016
2.
Draft placed before author
03.06.2016
3.
Draft proposed & placed before the second member
JM/AM
4.
Draft discussed/approved by Second Member.
JM/AM
5.
Approved Draft comes to the Sr.PS/PS
PS/PS
6.
Kept for pronouncement on
PS
7.
File sent to the Bench Clerk
PS
8.
Date on which file goes to the AR
9.
Date on which file goes to the Head Clerk.
10.
Date of dispatch of Order.
PAGE 6
ITA No. 3999/Del/2013
ITA no. 3876/Del/2013
Sh. Pankaj Kr. Sharma