Income Tax Appellate Tribunal - Lucknow
Zaz Fashions , Kanpur vs Department Of Income Tax on 13 August, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL,
B - BENCH, LUCKNOW.
Before Shri H.L.Karwa, Hon'ble Vice President and
Shri N.K.Saini, Accountant Member
I.T.A.No.662(LKW.)/2010
A.Y. : 2007-08
The ACIT- I, vs. M/s.Zaz Fashions,
Kanpur 201/193,Sheetla Bazar, Jajmau,
Kanpur.
PAN AAAFZ0439N
(Appellant) (Respondent)
C.O.No.54(LKW.)/2010)
( In I.T.A.No.662(LKW.)/2010)
A.Y. : 2007-08
M/s. Zaz Fashions, vs. The ACIT-I,
Kanpur. Kanpur.
(Cross Objector) (Respondent)
Department by : Shri Anadi Verma, Sr.D.R.
Assessee by: Shri Sudhindra Kumar Jain, C.A.
O R D E R
PER N.K.SAINI, ACCOUNTANT MEMBER
The appeal by the department and the Cross Objection by the assessee are directed against the order dated 13.8.2010 of the ld.CIT(A)-II, Kanpur. First, we will deal with the appeal of the department in I.T.A.No.662(LKW)/2010.
2. Following grounds have been raised in this appeal:
"1. That the Ld. Commissioner of Incometax (Appeals)-II, Kanpur 2 has erred in Law and on facts in rejecting the estimation of gross profit @ 28% made by the Assessing Officer without appreciating the fact that estimate was based on the G.P. rate declared in the immediate previous year as well as the G.P. rate declared in earlier assessment year.
2. That the Ld. Commissioner of Incometax (Appeals)-II, Kanpur has erred in Law and on facts in restricting the addition of Rs.24,36,000/- to Rs.5,00,000/- on account of additional profit without given any basis for restricting the addition.
3. That the Ld. Commissioner of Incometax (Appeals)-II, Kanpur has erred in Law and on facts in deleting the addition of Rs.22,58,277/- under section 40(a)(ia) of the Income Tax Act, 1961 on account of non-deduction of Tax on freight paid by holding that there is no contravention of provisions of section 194C of the Income Tax Act, without appreciating the fact that the statutory Auditor of the assessee had made adverse qualifications in respect of this amount in the Statutory Tax Audit Report in Form No.3CD.
4. In doing so, Ld. Commissioner of Income Tax (Appeals)-Il, Kanpur has failed to appreciate the fact that during the assessment proceedings the assessee could not give any evidence in support of having deducted the TDS and payment thereof in the Government Account as it was mandatory on the part of the assessee as per the provisions contained under section 194C of the Income Tax Act, 1961.
5. That the Ld. Commissioner of Incometax (Appeals)-lI, Kanpur has erred in Law and on facts and circumstances of the case in deleting the addition of Rs.22,58,277/- made under section 40(a)(ia) with the direction to the Assessing Officer to verify the facts of deduction of TDS without giving any direction in the appellate order to the effect that/if the TDS is not found deducted whether the relief allowed to the assessee would be withdrawn or not.
6. That the order of the Ld. CIT (A)-II, Kanpur dated 13.08.2010 needs to be quashed and the order passed by the Assessing 3 Officer dated 04.12.2009 be restored.
7. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so."
3. Grounds No.1 and 2 of the appeal are correlated and relate to the addition on account of gross profit.
4. The facts of the case, in brief, are that the assessee is a partnership firm and was engaged in the business of manufacturing and export of leather shoes and shoe uppers. The assessee filed the return of income on 31.10.2007 declaring an income of Rs.33,37,590, which was processed under Section 143(1) of the Income-tax Act,1961. Later on, the case was selected for scrutiny. During the assessment proceedings, the AO noticed that the assessee declared a gross profit of Rs.261.74 lacs at the gross profit rate of 25.61% on the gross turnover of Rs.1,021.80 lacs. The AO found that the trading results declared during the last three years were as under :
A.Y. Turnover (Sales & Gross profit G.P. rate
other income)
2005-06 1140.07 Lacs 278.72 Lacs 24.44%
2006-07 224.51 Lacs 149.33 Lacs 66.64%
2007-08 1021.80 Lacs 261.74 Lacs 25.61%
4.1 The AO asked the assessee to produce the books of accounts and to
explain as to why the stock register was not produced before the Statutory Auditor during the course of their audit which led them to make qualifications in the audit report. The assessee did not produce the books of accounts, however, submitted that it was 100% manufacturer and exporter 4 of designer shoes and shoe uppers and solely dependent upon prices accepted by buyers. As regards to the trading results, the assessee submitted that the said requirements could be compared with the assessment year 2005-06, wherein export turnover of shoe uppers was Rs.10.35 Crores as against Rs.6.61 Crores in the assessment year under consideration and that the gross profit rate in the assessment year 2005-06 happened to be 24.44%, which was less by 1.17% as compared to the assessment year 2005-06 and therefore, it was reasonable and comparable with other exporters. The AO was not satisfied with the explanation of the assessee and made the addition of Rs.24,36,000 by observing as under :
"3.1 I have gone through the facts and circumstances of the case and written reply filed by the assessee firm. But I do not agree with the assessee. The assessee has not produced stock register for purchase of adhesive, leather purchase, consumable stores, TRR sole, etc. for verification before the under signed and also not maintained manufacturing records for day to day manufacturing activity. Further the assessee has not produced complete bills and vouchers for job work expenses, sales promotion expenses, repair & maintenance expense, Factory expenses, etc. The assessee has also admitted that it has not maintained stock of major items or raw material, stock of leather, lining, shoe uppers, finished goods and stock in process and stock of petty numerous consumable items. It is stated that the inventory is being inspected and verified by the Bank Officers every month. The assessee has also not produced any certificate given by any such Officer in support of his claim. In the absence of complete records of manufacturing activities and their supporting bills and vouchers and also in absence of supporting bills and vouchers for the expenses debited on a/c of sales promotion, job work expenses, repair & maintenance exps., etc., the income disclosed by the assessee firm can not be said to be correct and complete in all respect. I am, therefore, not satisfied with the correctness or completeness of the accounts of the assessee claimed to have been maintained by it during the relevant previous year. I, therefore, proceed to complete the assessment u/s 144 of the Income Tax Act, 1961 for the below mentioned specific findings of facts:-5
A. The assessee has not maintained day-to-day Stock Register which has been duly commented upon by the Statutory Auditor of the assessee in col.3(a)(i) of Form 3CB and in col. 28(b) of Form 3CD.
B. The assessee has not produced the aforesaid before the undersigned during the course of assessment proceedings despite availing reasonable opportunities of being heard, C. The assessee has not maintained supporting vouchers of expenditures of revenue nature which have been adversely commented upon by the Statutory Auditor of the assessee in paras 3(a)(2) of Form 3CB and pars 17(e)(iii)(h) and 21A of Form 3CD, and D. The assessee has not produced the supporting vouchers before the undersigned during the course of instant proceedings despite availing sufficient opportunities.
3.2 Further it is pertinent to mention that in the assessee's own case for A.Y. 2005-06, the book result was rejected by invoking the provisions of section 145(3) of the Act for failure to produce complete of books of accounts, manufacturing records, bills and vouchers, etc. and GP rate of 27% was taken by taking average rate of GP of 27% on the basis of last three years' trading result as under:-
A.Y. Sales & other Gross profit G.P. rate
income
2003-04 519.81 Lacs 172.10 lacs 49.4%
2004-05 687.82 lacs 218.75 lacs 31.8%
2005-06 1140.07 lacs 271.33 lacs 23.8%
3.3 The assessee firm has disclosed GP rate of 25.61 % during the year consideration as against the gross profit of 66.64% in the immediately preceding year. The GP declared in last year is on sales of Rs.224.51 lacs which is quite below in comparison to the turnover declared during the year. Looking to the entire facts of the case and discrepancies pointed out in para 3.1 above, I hereby reject its book version by applying provisions of section 145(3) of the Act and considering its past result for higher turnover, a gross profit rate of 28% is applied on turnover of RS.1021.80 lacs as against a GP rate of 6 25.61 % declared during the year. Thus, the gross profit is estimated at Rs.286.10 lacs as against gross profit of Rs.261.74 lacs declared by the assessee. This resulted into an addition of Rs.24,36,000/- which is being made on a/c of extra profit. It is also mentioned that no separate addition on a/c of unverifiable expenses for not producing books of accounts, bill and vouchers, etc. are being made separately. Since the assessee has concealed the particulars of its income by not producing the books of accounts, penalty proceedings u/s 271(1)(c) read with section 274 of the Act is being initiated on this account."
4.2 The assessee carried the matter to the ld.CIT(A) and the submissions of the assessee as mentioned in paras 3.2 and 3.3 by the ld.CIT(A) in the impugned order are reproduced verbatim as under :
" 3.2 In this regard, the appellant's Ld.A.R has submitted that the appellant assessee is a 100% manufacturer/exporter of shoes. Comparative detail in respect of Gross Profit was as under :
A.Y. Sales & other G.P. on sales G.P. rate on sales
income
A.Y.2005-06 1140.07 Lacs 278.72 Lacs 24.44%
A.Y. 2006-07 224.51 Lacs 149.33 Lacs 66.64%
A.Y. 2007-08 1021.80 Lacs 261.74 Lacs 25.61%
3.3 There has been increase in turnover by 356% i.e. from 224.51
lacs to 1021.80 lacs but a fall in G.P. rate by 41.61% as compared to the assessment year 2006-07. Ld. Counsel of the Appellant has pointed out that A.O. has himself admitted that the book version of assessment year 2006-07 is not comparable (para 3.3 of the order). It has also been submitted that while rejecting the book version, the A.O. has referred to discrepancies noticed during examination of books of accounts and various observations/comments and disclaimer stated in the Auditors Report and Form 3CD filed alongwith Tax Audit Report. In this regard it was explained by the Ld.AR that these discrepancies, comments/disclaimer in the Auditors Report in the Form 3CD cannot be a basis for invoking provisions of section 145 as scope of section 145 is applicable only when assessee is not employing permitted method of accounting, in absence of which 7 correct profit can not be worked out. Other situation would arise only when the A.O. is not satisfied with the correctness and completeness of the account. Comments in Auditors Report and Form 3CD are mere disclaimers and not qualification for taking adverse view since such comment do not make impact on the book version. All discrepancies as relied upon by the A.O. is of theoretical exercise. Further, it was submitted that correct facts have not been stated in Assessment Order, which are:
(a) It is wrongly stated in assessment order that Assessee does not maintain stock record but stock records were produced for examination on 11.11.2009.
(b) Fact is that assessee maintains stock record of major items of raw material i.e. stock of leather shoe uppers, finished goods, material in process i.e. semi finished or cut component which has consisted of 74.24% of total purchases but it does not maintain stock of petty consumable store i.e. Eyelet, Thread, Laces, cotton cloth, Adhesive, Sand paper, Skin lining, Buckles, Eyelet Buttons, Punches, Stiffner, Toebuff and thermo rod etc. value of those store is not significant and do not make material impact as compared with volume of operation. Since stock of all items were not produced before the Auditors, Auditors have made disclaimer remark in the Auditors Report.
Merely because these stock records were not again produced for re-examination, it is incorrect to state that Assessee does not maintain stock record.
(c) Copy of stock statement alongwith valuation duly verified by the Bank officials as on 31.3.2007 was filed during the course of assessment proceedings A.O. has denied this fact.
(d) Books of account alongwith vouchers particularly of job work expenses, manufacturing expenses were produced for examination on 11.11.2009. Detailed copy of accounts of above expenses were filed and are on the record. A.O. has denied this fact.
e) Monthwise purchases and sales and other details alongwith books of accounts, vouchers etc. were produced as evident 8 from para 2.3 stating 'During the course of examination of books of accounts various discrepancies were noticed and show cause notice u/s 142(1) dt. 26.11.2009 was issued."
4.3 The assessee in respect of comments/observations in Auditors' report, explained as under:
"(i) Auditors remarks in Col.3A(1)and statement in Col.28B of Form 3CD are mere disclaimers. However quantitative details were stated as per Annexure in Form 3CD hence it not adverse remark.
(ii) Comment in para 3A(ii) of 3CB in respect of supporting evidence of expenses and revenue nature Auditors have not made any adverse comment nor quantified any amount inadmissible and do not make any impact on book version.
(iii) As regard comment in para 17(e)(iii) (h) of 3CD, para 17A in Form 3CD i.e. expenditure' inadmissible under section 40A(3) and comment in Col. 21A of Form 3CD there is no adverse comment or nor any amount has been quantified hence can not be taken as discrepancy.
(iv) Appellant has made complete compliance of section 143(2) annexed with the notice U/s 142(1) and also show cause notice U/s 142(1) dated 26.11.2009. 'Specifically finding of facts' 'justifying addition as no nexus with material on record and from books of accounts' and these remarks and disclaimers do not make any impact on book version."
4.4 It was further submitted that the comments/observations in Auditors' report and Form No.3CD are mere opinion and have no force unless corroborated/have nexus with the books of accounts. It was further submitted that the low profits and absence of variety-wise regular stock register were not sufficient reasons or material on the strength of which 9 accounts of the assessee could be rejected and that the action to invoke section 145 of the I.T.Act was outside the cope and parameter laid down in the said Section. It was also stated that none of the clauses i.e. (1), (2) and (3) were applicable, hence Section 145 had wrongly been invoked. Reliance was placed on the following case laws:
(i) Indian & Eastern Newspaper Society vs. CIT,(1979) 119 ITR 996(S.C.),
(ii) S.Veeriah Reddiar vs. CIT, Travancore-Cochin, (1960) 38 ITR 152(Ker.).
4.5 As regards to the estimation made by the AO, the assessee submitted to the ld.CIT(A) that it was wild one and pure guess work and had no nexus with the material on record nor comparable with other assessees. It was further submitted that the basis of estimation should be speaking one and facts in assessment year 2005-06 were quite different inasmuch as the assessment made in that year was ex parte order under Section 144 for non- attendance. However, for the year under consideration, the assessee has made full compliance as required under Section 142(1) and that the method adopted ;for applying Section 145(3) in assessment year 2005-06 for making estimation could not have been mechanically followed and be taken as precedent.
4.6 On the merits of the case, it was submitted that the fall in gross profit was because average export sale price per shoe pair was slashed to Rs.356.37 from Rs.516.23 and increase in volume of export to 185518 shoe pairs from merely 39511 in the assessment year 2006-07. It was further submitted that the assessee had exported shoe uppers of Rs.2.93 Crores as against Nil in assessment year 2006-07 and that the margin of profit in shoe 10 uppers is limited to 15%- 20% only. It was also stated that detailed invoice
-wise sale of shoe pairs and shoe uppers were on record and there had been reduction by 2.16%. of duty draw back and assessee had also to bear the burden of non-reimbursed freight of Rs.22,58,277 and that all factors had made impact in the gross profit rate.
5. The ld.CIT(A), after considering the submissions of the assessee, sustained the addition to the extent of Rs.5 lacs by observing as under :
" After having gone through all the facts on record and submissions made by the Ld .AR, I am not convinced with the reasons given by the appellant in respect of the stated fall in gross profit rate. Though the assessee has stated that all purchases and sales are vouched, but the auditor themselves in the tax audit report at para 28(b) have stated: "We were unable to verify the quantitative details in absence of relevant records." This comment was for both - The Raw Materials and also the Finished Goods. This necessarily implies that no stock records had been maintained by the appellant, and there was no correlation between the consumption and the production especially in the case of the assessee, who is a manufacturer of shoes where there is no easy correlation between the production and consumption. Thus, maintenance of stock register is important to give the details of consumption. In this regard I draw support from the decision of the Hon'ble Allahabad High Court in the case of Omax Shoe Factory v/s CIT [281 ITR 268] wherein it was held:-
"Held, that admittedly the assessee was a manufacturer and exporter of leather shoes. Therefore, it was necessary to maintain a production register a day-to-day record of production and a consumption register of raw material. Unless the consumption register for raw material and the production register relating to the manufactured goods are maintained, the production could not be verified Apart from non-maintenance of the production register and the raw material consumption register, the assessing authority also found that proper accounts relating to the payment of wages had not been maintained.11
These reasons were sufficient to invoke the proviso to section 145(1) of the Income Tax Act, 1961."
4.1 This leads to the conclusion that the books of accounts of the assessee are not correct and /or complete and that the true profit can not be determined. Therefore, there is no alternative but to reject the books under section 145(3) of the Act and make an estimation of the book results. The Assessee has further not maintained stock of petty consumable items nor value of those stock has been shown in closing stock. In view of the aforesaid infirmities in the accounts and also considering the fact that the appellant has partly substantiated the reasons for fall in gross profit, I estimate an additional lump sum extra profit @ Rs.5,00,000/- which would cover all the aforesaid infirmities in the accounts."
6. Now, the Department is in appeal.
7. The ld.D.R. strongly supported the order of the AO and further submitted that the assessee did not maintain the stock register and the gross profit declared for the year under consideration was very low in comparison to the gross profit of earlier year, therefore, the estimate of the gross profit at the rate of 28% applied by the AO was reasonable and the ld.CIT(A) was not justified in reducing the addition on account of gross profit to the extent of Rs.5 lacs only. It was further submitted that the ld.CIT(A)has not given any basis while reducing the addition made by the AO. He, therefore, prayed to restore the addition made by the AO.
8. In his rival submissions, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO made the addition purely on guess work and without establishing the nexus with the material on record and even did not cite any comparable case while making the arbitrary addition. It was further 12 submitted that the ld.CIT(A) after appreciating the facts in right perspective, was justified in reducing the addition made by the AO.
9. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, there were certain discrepancies in the books of accounts maintained by the assessee and even quantitative details were not mentioned in the books of accounts. The stock register was also not maintained to substantiate that there was no difference in the quantity relating to purchases and finished product. In the instant case, the Auditors in their Auditors' Report had made disclaimer remark that stock records of all items were not produced before them. Since the trading results were not fully verifiable from the record produced by the assesee, the provisions of Section 145(3) were rightly invoked by the AO. Now, the question arises as to whether the estimate of the AO while determining the income of the assessee was justified or the action of the ld.CIT(A) was correct ? In the present case, it is true that the gross profit rate in the immediately preceding year was 66.32%, while in the year under consideration it was at 25.61%. However, there was tremendous increase in the turnover of the assessee which increased to Rs.1021.80 lacs in the year under consideration as compared to Rs.224.51 lacs in the earlier year, that can be a factor for decline in the gross profit rate as the turnover increased by 356% in comparison to the earlier year. In the instant case, the explanation of the assessee for decline in gross profit rate was that the export sale price of show pairs was slashed to Rs.356.37 from Rs.516.23,which clearly shows that the said factor mainly contributed for low gross profit. Another explanation given by the assessee was that in the year under consideration a new product in the shape of shoe uppers was introduced and the export sale was of Rs.2.93 Crores for shoe uppers, 13 wherein profit margin was limited to 15% - 20% only. It was also explained that there had been reduction by 2.16% in duty drawback and that the assessee had to bear the burden of non-reimbursed freight amounting to Rs.22,58,277. From the above explanation of the assessee, which has not been rebutted, it appears that there was a plausible explanation for decrease in the gross profit rate for the year under consideration in comparison to the earlier year. However, the fact remains that the assessee did not maintain stock register and quantitative tally in respect of many items and few other discrepancies were also pointed out by the AO. Therefore, the trading results shown by the assessee were not fully verifiable from its record. In these circumstances, some addition is required. In the present case, it is true that the AO while applying the gross profit rate of 28% did not bring on record any comparable case, as such, the gross profit rate applied by him was without any basis. At the same time, the ld.CIT(A) also while sustaining the addition to the extent of Rs.5 lacs out of the addition of Rs.24,36,000 made by the AO has not given any cogent reason. We, therefore, considering the totality of the facts and to meet the ends of justice, deem it fair and reasonable to sustain the addition to the extent of Rs.7 lacs. Accordingly, these grounds are partly allowed in favour of the department.
10. The next issue vide grounds no.3 to 5 relates to the deletion of addition of Rs.22,58,277 made by the AO by invoking the provisions of 194C read with Section 40(a)(ia) of the I.T.Act on account of non-deduction of tax on freight.
11. The facts relating to this issue, in brief, are that the AO made the impugned addition by observing in para 4 of the assessment order dated 4.12.2009 as under :
14"4. The assessee has paid a sum of Rs.22,58,277/- on behalf of his overseas buyer which are covered by the provisions contained u/s 194C of the Income Tax Act, 1961. The Statutory Auditor of the assessee has made adverse qualifications in respect of the same in his statutory audit report in para 3(a)(iii) of Form 3CB and in col. 17(a) of Form 3CD. During the course of assessment proceedings, the assessee was confronted from this fact and was required to justify non- deduction of income tax on this sum. In response the assessee vide written reply dated 4.12.2009 stated that since the overseas buyer have not reimbursed this sum to the assessee, no TDS has been made. I have considered the facts of the case. The provisions contained u/s 194C of the Income Tax Act, 1961 are mandatory in nature and the assessee being a person who has paid/credited the aforesaid sum, was statutorily liable to deduct income tax at source at the prescribed percentage and to remit the same to the Central Govt. account within due time. Since he has failed to do so, the provisions contained u/s 40a(ia) of the Income Tax Act, 1961 are squarely applicable in his case. Accordingly the sum of Rs.22,58,277/- is disallowed u/s 40a(ia) of the Income Tax Act, 1961 and added to the total income of the assessee."
12. The assessee carried the matter to the ld.CIT(A) and submitted that the addition had been made by the AO without verifying the material on record and the submissions made by the assessee. It was stated that the addition had been based on the wrong statement/remark made by the Auditors in the Auditors' Report. The facts, as submitted by the assessee before the ld.CIT(A) were as under :
Total freight paid during the year Rs.79,05,724.32 Less: Amount paid to Government account and custom duty on which TDS is not deductable 1109540.28 Less: TDS Not deducted on obtaining exemption certificate 216196 (-) Rs.13,25,726.28 Freight paid on which TDS required to be deducted u/s 194C Rs.65,79,,988.04 15 TDS deducted and deposited on freight of Rs.65,79,988.04 Rs.1,25,037.00 10 (ten)copies of challans evidencing deposit of TDS of Rs.1,25,037 within stipulated time were filed alongwith submission."
12.1 It was further submitted that the assessee had not committed any default under Section 194C of the I.T.Act and had deducted TDS on all the amount of freight irrespective of the fact as to whether the same had been reimbursed or not. It was further submitted that the amount of Rs.22,58,277 which was required to be reimbursed by foreign buyers was not reimbursed by them and this fact was wrongly understood by the Auditors while making the remark in the Auditors' Report as pointed out by the AO. It was explained that instead of 'non-deduction of deposit of TDS on un-
reimbursed freight of Rs.22,58,277', it should have been stated that 'TDS amount of Rs.50,224 together with freight of Rs.22,58,277 has not been reimbursed to the assessee'. It was stated that the AO solely relied on the comments made by the Auditors in the Auditors' Report without verifying the full facts. In support of the above, the assessee furnished following documents to the ld.CIT(A):
"(a) Detail of TDS on freight of Rs.65,79,988.04
(b) Copies of 10 (ten) challan evidencing the deposit of TDS of Rs.1,25,037.00
(c) Detail of freight and TDS amount reimbursed/unreimbursed partywise/billwise."
13. The ld.CIT(A), after considering the submissions of the assessee, observed that there was no contravention of the provisions of Section 194C 16 of the I.T.Act, hence provisions of section 40(a)(ia) of the I.T.Act were not applicable to the assessee's case as the TDS had been deducted by the assessee on the entire amount of freight paid in accordance with the provisions of Section 194C of the I.T.Act. He accordingly deleted the addition made by the AO. At the same time, he directed the AO to verify this fact and if he finds that TDS has been duly deducted on the freight paid, no deduction u/s 40(a)(ia) would survive.
14. Now, the Department is in appeal.
15. We have considered the submissions of both the parties and carefully gone through the material on the record. In the instant case, it appears that the AO while framing the assessment under Section 144 of the I.T.Act relied on the comments of the Auditors in their Auditors' Report. The assessee explained before the ld.CIT(A) that TDS was deducted in accordance with the provisions of Section 194C of the I.T.Act on the total amount of the freight paid and there was no contravention of the provisions of Section 194C of the I.T.Act. Considering the above facts, we are of the view that this issue requires verification at the level of the AO because the assessment was framed under Section 144 of the I.T. Act. If the assessee had deducted the TDS in accordance with the provisions of Section 194C of the Act, and there is no violation of the provisions of the said Section, then no addition was called for and in case it is found that the assessee has violated the provisions of the said Section, then the AO is free to take the action in accordance with law. Accordingly, this issue is restored to the file of the AO for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
17C.O.No.54(LKW)/2010
16. In the assessee's Cross Objection, following ground has been raised:
"The appellate order as passed by learned CIT(A),where by the has sustained the action of learned AO u/s 144 and 145(3) of the Act, is unjustified and unwarranted under law in the facts and circumstances of the case."
17. The Registry pointed out that the Cross Objection is barred by limitation by three days. During the course of hearing, the ld. Counsel for the assessee stated that he has the instruction not to press the Cross Objection and gave in writing as under :
"Not pressed.
Sd. Sudhindra Jain.
Counsel F.C.A."
18. In view of the above, the Cross Objection of the assessee is dismissed as not pressed.
19. In the result, appeal of the Department is allowed partly and partly for statistical purposes and the Cross Objection of the assessee is dismissed.
(The order pronounced in the open Court on 14.3.11. ) Sd. Sd.
(H.L.Karwa) (N.K.Saini) VICE PRESIDENT ACCOUNTANT MEMBER March 14th , 2011. Copy to the :
1. Appellant 2. Respondent 3. CIT(A) (4) CIT 5.DR.
A.R.,ITAT, Lucknow.
Srivastava.