2018 (9) TMI 1759 - AT - Income Tax

Tribunal grants opportunity for evidence, emphasizes due process in tax assessment

The Tribunal restored the case to the Assessing Officer for the assessee to substantiate claims with proper evidence, allowing the opportunity to produce ... Estimation of income - net profit estimation - Held that:- CIT (A) granted substantial relief to the assessee by estimating the net profit @ 5% of the turnover and sustained addition. It is the submission of the assessee that due to wrong representation of the then counsel for the assessee, the case was not properly handled and therefore, the assessee should be given an opportunity to substantiate with evidence to the satisfaction of the Assessing Officer regarding various items of the profit and loss account and the balance sheet. We find the order of the CIT (A) in the instant case is not a speaking order. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the matter back to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his case. Assessee is also hereby directed to produce the books of accounts and audit report before the AO and substantiate the various expenses claimed in the profit & loss and sundry creditors and other items shown in the balance sheet to the satisfaction of the Assessing Officer failing which the AO shall pass appropriate order as per law. Needless to say the Assessing Officer shall give due opportunity of being to the assessee. Issues:Assessment of income based on undisclosed sales, disallowances, and additions made by Assessing Officer; CIT(A) order estimating net profit at 5% of turnover; Appeal by revenue challenging CIT(A) order; Cross objection by assessee challenging CIT(A) order and seeking deduction under sections 80C and 80D.Analysis:The appeal was filed by the revenue against the CIT(A) order related to the assessment year 2010-11. The case involved the assessment of an individual engaged in the sale and purchase of Paints & Sanitary stores. The Assessing Officer made various additions and disallowances due to the failure of the assessee to produce books of accounts and audit reports. The CIT(A) deleted a significant amount and estimated the net profit at 5% of the turnover, resulting in a relief for the assessee. The revenue challenged this order on grounds of restricting the addition without reasonable findings. The assessee, in a cross objection, raised issues regarding the representation by the former counsel, non-admission of fresh evidence, and denial of deductions under sections 80C and 80D.The Counsel for the assessee argued that due to the wrong representation by the former counsel, crucial details were not produced before the Assessing Officer, leading to substantial additions. The Counsel requested the matter to be sent back to the Assessing Officer for a final opportunity to substantiate the case. The revenue, however, supported the Assessing Officer's order, stating that adequate opportunities were given to the assessee without compliance. The Tribunal noted the failure of the assessee to provide necessary details and documents, leading to the Assessing Officer's determination of total income. The CIT(A) granted relief by estimating net profit and sustaining a specific addition. Due to the lack of a speaking order by the CIT(A) and in the interest of justice, the Tribunal decided to restore the matter to the Assessing Officer for the assessee to substantiate the case with proper evidence. The Assessing Officer was directed to allow the assessee an opportunity to produce books of accounts and audit reports to justify expenses and other items, ensuring due process.In conclusion, the Tribunal allowed the grounds raised by both the revenue and the assessee for statistical purposes. The judgment emphasized the importance of substantiating claims with evidence and providing opportunities for compliance before making final assessments.