Income Tax Appellate Tribunal - Amritsar
Hazari Lal Om Parkash vs Ito on 30 October, 2002
Equivalent citations: (2004)90TTJ(ASR)963
ORDER
N.K. Saini, A.M. :
This is an appeal filed by the assessee against the order of the Commissioner (Appeals), Bhatinda, dated 20-10-1994, relating to assessment year 1990-91.
2. The assessee has raised following grounds in this appeal "1. That the learned Commissioner (Appeals), Bhatinda, has erred both in law as well as in respect of facts of the case while upholding the below-noted additions made by the assessing officer alleging the same to be as diversion of profits -.
(a) M/s. Shri Mahalaxmi Poly Plast (P) Ltd. Rs. 1,06,712
(b) Smt. Nimmi Tayal Smt. Neeru Tayal Smt. Surekha Tayal Rs. 1, 19,626
2. That the learned Commissioner (Appeals), Bhatinda, erred in ignoring the affidavits of the respective parties and also failed to appreciate their statements judiciously.
3. That the learned Commissioner (Appeals), Bhatinda, further omitted, to consider the lapse on the part of the assessing officer in not summoning the said parties under section 131 of the Income Tax Act, 1961.
4. That the business transactions conducted in the normal course of business have been arbitrarily disbelieved. All the comments passed by the assessing officer in support of his alleged additions are based on surmises and conjectures only, without bringing forward even a single evidence on record, to support and substantiate his case.
5. That the appellant craves leave to add, amend or withdraw any grounds or new grounds of appeal before or at the time of hearing/disposal of the appeal."
3. The only grievance of the assessee vide this appeal relates to the confirmation of addition of Rs. 2,26,338.
3.1 The relevant facts relating to the issue in brief are that during the year relevant to the assessment year under consideration, the assessee was engaged in the business of ginning of Narma and trading in Sarson, cotton seeds, etc. The return of income was filed on 16-11-1990, declaring an income of Rs. 1,74,472. During the assessment proceedings, the assessing officer noted that the assessee claimed that the following profits have been earned on behalf of the parties mentioned herembelow "1. M/s. Shri Mahalaxmi Poly Plast (P) Ltd. Rs. 106,712
2. Smt. Nimmi Tayal Smt. Neeru Tayal Smt. Surekha Tayal Rs. 1,19,626"
The assessing officer required the assessee to prove the genuineness of those transactions and to prove that those were done on behalf of the third parties. The assessee could not lead any evidence nor could produce any Sauda Behi or contract forms. Therefore, the assessing officer required the assessee to produce all the aforesaid parties personally so that genuineness as well as capacity could be verified. The assessing officer also asked the assessee to produce written correspondence with the aforesaid parties settled at Muzzafarnagar (UP) and also required to produce telephone bills so that telephonic conversation with the above parties could be verified. The assessee informed that neither it had any written correspondence with the above parties nor had any proof of telephonic talk with them. In the meantime, the assessing officer deputed his Inspector to Muzzafarnagar and issued him necessary instructions for recording the statements of the above parties. The Inspector recorded the statements of two ladies, namely, Nimmi Tayal and Neeru Tayal. However, no statement of Smt. Surekha Tayal was recorded as she was not available at the residence at that time. The Inspector deputed by the assessing officer could not contact the directors of the company, M/s Shri Mahalaxmi Poly Plast (P) Ltd., but contacted one of the accountants of the aforesaid company who stated that he was not aware of the affairs of the company and that the directors who were aware of the affairs of the company were away to Mussorrie. The assessing officer, therefore, arrived at a conclusion that the profits amounting to Rs. 2,26,338 had actually been earned by the assessee and that profit was transferred to the aforesaid persons in order to reduce the taxable income. In this manner, the aforesaid addition was made to the income of the assessee.
4. In the first appeal before the learned Commissioner (Appeals), it was stated that Smt. Nimmi Tayal, Smt. Neeru Tayal, Smt. Surekha Tayal and M/s. Shri Mahalaxmi Poly Plast (P) Ltd., Muzzafarnagar, had sent advances of Rs. 6,000, Rs. 8,000, Rs. 8,000 and Rs. 10,000, respectively, to the assessee and thereafter the assessee made transaction on their behalf and the profits earned on the transactions are remitted to them. It was stated that the assessee purchased Sarson and Taramira at Rs. 350.20 qtls. amounting to Rs. 1,92,579.16 and cotton weighing 377.36 qtls. amounting to Rs. 6,95,513.80 on behalf of M/s. Mahalaxmi Poly Plast (P) Ltd., Muzzafarnagar, and the same were sold at Rs. 1,92,579.16 and Rs. 8,58,206.02 respectively. It was stated that the expenses and interest related to the aforesaid transactions were deducted from that party and the remaining amount was sent through draft. Regarding transactions undertaken on behalf Nimmi Tayal, it was stated that the assessee purchased and sold 224.52 qtls. of cotton seed on her behalf and a profit of Rs. 24,320 was earned which was remitted to her. In respect of Smt. Neeru Tayal, it was stated that the assessee purchased and sold 100 bales of cotton and 90 bales of cotton seed on her behalf and she earned the profit of Rs. 54,337. Similarly, in respect of Smt. Surekha Tayal, it was stated that on her behalf the assessee purchased and sold 221 qtls. of cotton seed and 57 bales of cotton, on those transactions a profit of Rs. 41,809 was earned on her behalf. The assessee admitted that the aforesaid persons could not be produced because all those persons were residents of Muzzafarnagar (UP) and were assessed to income-tax there. However, copies of account from their books as well as their affidavits duly sworn were furnished before the learned Commissioner (Appeals). The assessee also challenged the jurisdiction of the assessing officer under section 124(1) of the Income Tax Act and stated that the Income-Tax Inspector had no authority to record the statement and to make enquiry outside the area of jurisdiction of the Income Tax Officer. Accordingly, it was stated that the statements recorded by the Inspector were not reliable. It was claimed before the learned Commissioner (Appeals) that all the parties in question had confirmed the transactions and were assessed to income-tax, as such, there was no justification in treating the profits as ingenuine.
5. The learned Commissioner (Appeals) after considering the submissions of the assessee observed that although the advances given by the aforesaid parties had been accounted for by the assessee in its books, but admittedly there was no evidence whatsoever that those parties had placed any order in purchasing cotton and cotton seed on their behalf. It was further observed that the advances received were negligible as compared to the purchases and sales made. The learned Commissioner (Appeals) stated that the assessee neither produced any written order nor any proof of telephonic or oral orders placed by the parties in question. The learned Commissioner (Appeals) further stated that there was no bar on the assessing officer to authorise his Inspector under section 131(d) to record any statement of a witness residing beyond jurisdiction. The learned Commissioner (Appeals) also noted that the assessing officer wrote several letters to the Dy. Director of IT (Inv.), Meerut (UP), and Asstt. Director of IT (Inv.) for getting relevant evidence collected and for getting statements recorded but they did not respond. So, there was no alternative left with the assessing officer except to depute his own Inspector to ascertain the truth. According to the learned Commissioner (Appeals), the assessee could not lead any evidence and did not offer any comments on the statements recorded by the Inspector, as such, the additions made by the assessing officer were confirmed.
As regards to the affidavits and the copies of accounts from the books of these parties, the learned Commissioner (Appeals) observed that the assessee had not mentioned that those were being submitted as an additional evidence and no reason had been given for submission and admission of additional evidences. According to her what had been submitted during the appellate proceedings were only copies of some affidavits which were never filed before the assessing officer. She, therefore, refused to consider those additional evidences for the following reasons :
"(a) The copies of some affidavits have been submitted which are stated to be filed before the Income Tax Officer on 4-6-1992. The affidavits are relevant only for being produced before the Income Tax Officer as at the top of the affidavit it has been categorically mentioned 'Shreeman Ayakar Adhikari, Abohar (Bhatinda), Punjab ke samakash' These affidavits have not been prepared for being submitted before the Commissioner (Appeals). The originals were never submitted to the Income Tax Officer upto the date of assessment and have never been produced during appellate proceedings also before me.
(b) The ladies had categorically stated before the Inspector who had been duly authorised to record their statements that they were neither aware of the amount of the profit earned nor aware of the fact where and how any draft was prepared for sending the advance. They did not even know the name of the appellant. Therefore, these photocopies of some alleged affidavits cannot be relied upon, nor can these be admitted as additional evidence."
Similarly, the learned Commissioner (Appeals) had given the following reasons for not entertaining the additional evidence in respect of M/s Mahalaxmi Poly Plast (P) Ltd.
"(a) The original affidavit has been prepared only for being submitted before the Income Tax Officer, Abohar (not before the Commissioner (Appeals)), and it is allegedly prepared on 15-11-1991. The assessment in this case had been completed on 30-9-1991, and thus the original affidavit was never submitted before the Income Tax Officer. Therefore, the copy cannot be relied upon.
(b) This affidavit has not been signed by principal officer of the company. No director of the company was willing to submit any such affidavit and that is why they had to authorise an accountant to make any correspondence or to give any affidavit on behalf of the company. Even this authorisation has been given on 13-11-1991, i.e., much after the date of completion of the assessment.
(c) More than sufficient opportunities had been allowed by the Income Tax Officer and there are no reasons for admitting any additional evidence at this stage. In view of these facts it is held that the assessing officer had rightly come to the conclusion that profit amounting to Rs. 1,06,712 was earned by the appellant and it belonged to the appellant. The addition made is, therefore, upheld."
In view of the aforesaid discussions, the addition made by the assessing officer was confirmed by the learned Commissioner (Appeals).
6. Now, the assessee is in appeal. The learned counsel for the assessee reiterated the submissions made before the authorities below and vehemently argued that the assessing officer had not given due and reasonable opportunity of being heard to the assessee. It was stated that the assessee co-operated during the assessment proceedings but could not produce the concerned parties as the proper time was not given by the assessing officer. Even the necessary documents could not be produced due to lack of time. The learned counsel for the assessee emphasised that on 13-8-1991, the assessing officer adjourned the case to 26-8-1991, but without waiting for the said date, he deputed his Inspector to record the statements of the concerned parties settled at Muzzafarnagar on 31-8-1991, which shows that the assessing officer was in haste to complete the assessment.
As regards to the additional evidence produced before the learned Commissioner (Appeals), it was submitted that the same was produced because the assessee was unable to get those documents during the assessment proceedings. It was vehemently argued that the learned Commissioner (Appeals) was not justified in rejecting the additional evidence which she ought to accept as per section 261 of the Income Tax Act which empowered the learned Commissioner (Appeals) to accept the additional evidences which goes to the root of the issue involved. Accordingly, it was submitted that the learned Commissioner (Appeals) was not justified in rejecting the claim of the assessee without appreciating the facts on record.
7. In his rival submissions, the learned Departmental Representative strongly supported the orders of the authorities below and also submitted that proper time was given by the assessing officer but the assessee did not co-operate, as such, there was no alternative left with the assessing officer except to make the addition, when the assessee failed to produce the necessary documents in support of its claim.
8. We have heard the learned representatives of both the parties at length and carefully gone through the material available on the record. In the instant case, it seems that the assessing officer has not given due and reasonable time to the assessee to defend its case which is evident from his order sheet placed at pp. 3 to 9 of the paper book. It is evident that on 13-8-1991, Sh. Om Parkash, partner of the assessee, appeared before the assessing officer along with the accountant and the advocate of the assessee. The assessing officer recorded the statement of Sh. Om Parkash, partner of the assessee and directed to produce the parties of Muzzafarnagar and adjourned the case to 26-8-1991. However, he deputed his Inspector to record the statements of the concerned parties at Muzzafarnagar even without waiting for the reply of the assessee. It is also noted that the books of account of the assessee were impounded on 13-8-1991, under section 131(3) of the Income Tax Act. It is also noted from the record that the assessing officer had written a letter No. 288, dated 26-7-1991, to the Dy. Director of IT (Inv.), Meerut (UP), for getting the information in the case of M/s. Mahalaxmi Poly Plast (P) Ltd. Muzzafarnagar. A similar letter was also written vide No. 299, dated 14-8-1991, which was in continuation of the earlier letter dated 26-7-1991, and the assessing officer requested to get the information in respect of Smt. Nimmi Tayal, Smt. Neeru Tayal and Smt. Surekha Tayal. But while framing the assessment, the assessing officer did not bother to wait for the necessary information asked for by way of the aforesaid letters which also shows that the assessment was framed in a hasty manner. In the instant case, it is also noted that the assessee furnished an affidavit dated 15-11-1991, of Sh. Dev Raj, manager of M/s. Mahalaxmi Poly Plast (P) Ltd., Muzzafarnagar (UP), and also affidavits dated 4-6-1992, of Smt. Nimmi Tayal, Smt. Neeru Tayal and Smt. Surekha Tayal before the learned Commissioner (Appeals). It is true that the aforesaid affidavits were furnished after the completion of the assessment which was framed under section 143(3) on 13-9-1991, but the learned Commissioner (Appeals) was not justified in not accepting those affidavits. The powers of the learned Commissioner (Appeals) are very wide and it is also well-settled that an appeal is merely continuation of original assessment proceedings, therefore, the first appellate authority, i.e., the Commissioner (Appeals) has the same powers as does the original authority. In other words, the scope of powers of the learned Commissioner (Appeals) is co-terminous with that of the assessing officer but the appellate authority being a superior authority to the assessing officer cannot only do what the assessing officer can do but also can direct the subordinate authority to do what he was supposed to do. But in the instant case, the learned Commissioner (Appeals) had not considered the documents produced by the assessee which were very vital to reach at a just conclusion. It is well-settled that the learned Commissioner (Appeals) has to make the right order which is just -and meaningful. It may take into account, and in certain cases it must, the subsequent events that may have taken place between the passing of assessment order and completion of the appellate proceedings. However, in the instant case, the learned Commissioner (Appeals) had not considered the documents which were produced by the assessee after the completion of assessment but before the completion of the appellate proceedings. We, therefore, considering the totality of the facts and circumstances of the present case as discussed above, deem it appropriate to remand the issue back to the file of the Commissioner (Appeals) to decide the same afresh with the direction to him to afford due and reasonable opportunity of being heard to the assessee.
9. In the result, the appeal of the assessee is allowed for statistical purposes.