2022 (6) TMI 578 - AT - Income Tax

Tribunal Decision: Appeal Partly Allowed, Upholding 3% Estimation. Book Rejection Challenges Dismissed.

Base Industries Ltd. Versus I.T.O., Ward-1, Vapi.

The Tribunal partly allowed the appeal by quashing the gross profit enhancement by the CIT(A) but upheld the Assessing Officer's estimation at 3%. The ... Rejection of books of accounts - estimating gross profit @ 3% against gross profit of 0.81% shown by the assessee - HELD THAT:- So far as estimation of profit by assessing officer we find that the assessee has not filed any document or evidence that the estimation by ld CIT(A) is not justify or the profit margin in the line of business of assessee is not more than the profit shown by the assessee. The assessee has not file a single document to substantiate his working of profit or comparable instances in the region cum industry. The assessee claimed that fire took place in the factory of the assessee, not a single piece of evidence in the form of report from fire department or from Police station was filed. Thus, in absence of any evidence to substantiate the books profit, we do not find any reason to disturb the estimation of profit estimated by assessing officer. in the result the assessee gets part relief as we affirm the estimation of profit estimated by assessing officer. In the result, ground No. 2 &3 are partly allowed. Jurisdiction of AO - We find that the ITO, Ward-1, Vapi/Assessing Officer assumed the jurisdiction on the basis of valid transfer order issued by the CCIT, Surat dated 23/07/2012 passed under section 127 of Income Tax Act. Notice issued u/s 143(2) by the ACIT, Vapi Circle for initiating the assessment in the present case - In Jindal SteeHRI SATISH KUMAR SINHA VERSUS INCOME TAX OFFICER, WARD 4 (1) HYDERABAD [2021 (9) TMI 174 - ITAT HYDERABAD] there was no order from Commissioner of Income Tax for conferring power on JCIT to exercise jurisdiction and no order for transferring the case from one assessing officer to other officer. In ITO Vs NVS Builder [2018 (4) TMI 381 - ITAT DELHI] first notice under section 143(2) was issued by ITO Faridabad on 23.10.2007, who was not the assessing officer having no jurisdiction of assessee in that case. The assessee informed the assessing officer that he has filed return of income at Delhi, then ITO ward- 10(1) New Delhi issued notice under section 143(2) on 23.07.2008 which was beyond the statutory period. In Cosmat Trader Pvt Ltd Vs ITO [2021 (4) TMI 1020 - ITAT KOLKATA] the jurisdiction over the assessee was of ITO-ward -7(1) Kolkata and notice under section 143(2) was issued by ITO-ward-6(1) Kolkata, who has no jurisdiction over the assessee. Finally, in Harvinder Singh Jaggi [2016 (3) TMI 114 - ITAT DELHI] no order under section 127 was passed by CIT for transferring case to assessing officer/ Add CIT. Thus, facts of all the case laws cited by ld AR for the assessee is not help full to him. Therefore, additional ground of appeal being ground no. 9 to 11 is also dismissed. Issues Involved:1. Rejection of Books of Accounts under Section 145(3) of the Income Tax Act.2. Estimation of Gross Profit by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)].3. Enhancement of Assessment by CIT(A) without giving an opportunity to the appellant.4. Jurisdiction of the Assessing Officer and validity of the assessment order.5. Validity of notice under Section 143(2).Issue-wise Detailed Analysis:1. Rejection of Books of Accounts under Section 145(3) of the Income Tax Act:The appellant challenged the rejection of its books of accounts by the AO, which was upheld by the CIT(A). The AO issued multiple show cause notices to the appellant to furnish various details and documents, including bank statements, lorry receipts, and octroi receipts, but the appellant failed to comply. Consequently, the AO rejected the books of accounts and estimated the gross profit at 3%. The CIT(A) concurred with the AO's decision, noting the appellant's non-compliance and lack of evidence to support its claims. The Tribunal found no submissions from the appellant challenging the rejection of books of accounts, thus treating this ground as not pressed and dismissed it.2. Estimation of Gross Profit by the AO and CIT(A):The AO estimated the gross profit at 3% of the total turnover, resulting in an addition of Rs. 1,57,93,920/-. The CIT(A) enhanced the gross profit estimation to 7.88% based on the appellant's gross profit in the assessment year 2009-10, without issuing a show cause notice as required under Section 251(2) of the Act. The Tribunal quashed the enhancement by CIT(A) due to the lack of a show cause notice but upheld the AO's estimation of gross profit at 3%, citing the appellant's failure to provide any evidence to substantiate its lower gross profit margin.3. Enhancement of Assessment by CIT(A) without Giving an Opportunity to the Appellant:The CIT(A) enhanced the gross profit estimation from 3% to 7.88% without issuing a show cause notice to the appellant. The Tribunal held that the enhancement was not in accordance with the mandate of Section 251(2) of the Act and quashed the enhancement made by the CIT(A).4. Jurisdiction of the Assessing Officer and Validity of the Assessment Order:The appellant raised additional grounds challenging the jurisdiction of the ITO, Ward-1, Vapi, who passed the assessment order, arguing that the ACIT, Vapi Circle, initially issued the notice under Section 143(2). The Tribunal found that the case was validly transferred from the ACIT to the ITO under an order issued by the CCIT, Surat, under Section 127 of the Act. The Tribunal dismissed the additional grounds related to the jurisdiction of the AO, noting that the transfer order was valid and the appellant had not raised any objections during the assessment or appellate proceedings.5. Validity of Notice under Section 143(2):The appellant argued that the notice under Section 143(2) issued by the ACIT, Vapi Circle, was invalid as the ITO, Ward-1, Vapi, who passed the assessment order, did not issue a fresh notice. The Tribunal held that once the case was transferred under a valid order, no fresh notice under Section 143(2) was required, as the initial notice was issued and served within the statutory period. The Tribunal dismissed the additional grounds related to the validity of the notice under Section 143(2).Conclusion:The Tribunal partly allowed the appeal, quashing the enhancement made by the CIT(A) but upholding the AO's estimation of gross profit at 3%. The Tribunal dismissed the grounds related to the rejection of books of accounts, jurisdiction of the AO, and validity of the notice under Section 143(2).