TaxTMI 
TaxTMI 
2013 (10) TMI 1334
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.... specific order for charging the interest. 4. That under the facts the Ld. CIT(A) was required to decide the issue of interest u/s 234B himself against remanding the same to the Ld. Assessing officer." 2.1. Revenue"s appeal (ITA no. 2934/Del/2001): "Based on facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 35,23,115/- after holding that AO has exceeded her jurisdiction by adopting the income at Rs. 7,06,885/- for the first period which was the figure as originally determined since the decision of Ld. CIT(A) for the second period has not been accepted by the Department and second appeal has been filed before the ITAT." 3. Brief facts are : The assessee M/s Zohra Emporium was a partnership firm which came to be dissolved on 19-7-1993. A new firm in similar name was constituted by a new partnership deed comprising of of different partners of same family from 19-7-1993. However, the same set of books of accounts was continued by partners. Thus for A.Y. 1994-95 in the same name there existed two distinct partnership firms for following periods : (i)1-4-1993 to 18-7-1993; and (ii) 19-7-1993 to 31-3-1994. 3.1. Two separate ....
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....d after reducing the returned loss of Rs. 98,530/- the total income to be assessed in the hands of the assessee ought to have been at Rs. 1,83,770/-. 3.6. Assessing officer, however, refused to carry out the directions of the CIT(A) while giving the appeal effect order and made the assessment for the first period at Rs. 37,06,885/- by following observations: "The successor CIT(A) at the time of passing the order was satisfied that the accounts were neither correct nor complete and therefore invoked the provisions of section 145(2) and rejected the books of accounts. The CIT(A) was thus satisfied that books of account are not correct and went forward with making the best judgment assessment u/s 144. In order to cover various errors and discrepancies in the account the CIT(A) estimated the sales at Rs. 2.5 crores and increased the gross profit by applying G.P. of 25.11% on enhanced sales of Rs. 37,64,730/-. The point to be noted is that at this stage the CIT(A) has not mentioned as to how he has arrived at a figure of Rs. 2.5 crores. In a case where special audit has already taken place and assessment ha been made accordingly, such approximations is not called for. Thus as p....
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....ppeal, which relates to the first period for the assessment year 1994-95, is dated 31-1-2001 and thus passed after the date of appellate order dated 4-2-2000. In the light of this fact, the ld. A.R. argued the determination of income for the first period at Rs. 37,06,885/- is absolutely incorrect since this is the figure which was determined in the original assessment order dated 7-11-1997 and the said assessment order stands merged in the appellate order dated 4-2-2000, according to which the income for the first period stands determined at Rs. 1,83,770/-. The ld. AR strongly objected to the determination of income at Rs. 37,06,885/- by contending that the A.O. was duty bound to follow the findings of ld. CIT(A) and was not legally competent to again frame the assessment at the same income, which already stands demolished by the ld. CIT(A)-xv. The ld. AR has further submitted that the A.O. has totally overlooked and discarded the findings of the CIT(Appeals) which she was not legally competent to do. The ld. AR pointed out that the Department has already filed an appeal before the ITAT against the appeal order dated 4.2.2000 and the income for the first period will automatically s....
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....account of any request from the assessee. Therefore, in terms of decision in the case of Bishan Saroop Ram Kishan Agro Pvt. Ltd. (supra), there is no validity of the order granting extension between 01.08.1997 to 12.09.1997. In other words, the books of account had to be audited on or before 31.07.1997. Further under clause (iii) of Explanation 1 of section 153, the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under the aforesaid provision and ending with the last date on which the assessee is required to furnish a report of such audit, shall be excluded in computing the limitation period for making the assessment. Thus, according to this provision, period of four months and 13 days starting from 18.03.1997 to 31.7.1997 has to be excluded in reckoning the limitation period for making the assessment. If the extended time of four months and 13 days is taken into account, the last date for making the assessment was 13.07.1997. As against the aforesaid, the assessment has been completed on 07.11.2011. Thus, the assessment is clearly barred by limitation uls 153 of the Act. In view thereof, it is held that the order of a....
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.... and (v) charging of interest u/s 234B of the Act. ...... 2. The ld. counsel submitted synopsis on 01.07.2010. This write up was read out as arguments of the assessee on the issue that the order of assessment is barred by limitation. It is submitted that the period of limitation for assessment year 1994-95 expires on 31.3.1997. The Commissioner of Income- tax approved the proposal of the Assessing Officer for getting the case audited u/s 142(2A) m his letter dated 18.03.1997. This is evidenced by the finding of the ld. Cl'T(Appeals) in paragraph no. 5.2 at page no. 13 of the impugned order that the proposal was accepted by the Commissioner of Income-tax under his letter dated 18.03. 1997, whereby M/s Garg Brothers & Associates were appointed special auditors. The terms of reference have also been reproduced in this paragraph. The original time limit fixed by the assessing officer is not ascertainable. The date of completion of audit was extended by an order dated 14.04.1997 on account of involvement of the auditor in an accident. The extension was granted up to 31.07.1997. This is evidenced by the finding of the ld. CIT(Appeals) on page no. 15 to the effect that Shri K.P.....
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....TA no. 3708/Del/2000 - AY 1996-97): "1. That on the facts and in the circumstances of the petitioner firm's case, the learned Commissioner of Income-tax (Appeals) is wrong in upholding the action of the Assessing officer for rejecting its accounts for the year ended 31-3-1996 by invoking the provisions of section 145(2) of the Income-tax Act, 1961. 2. That on the facts and in the circumstances of the petitioner firm's case, the learned Commissioner of Income-tax (Appeals) is wrong in estimating the sales for the year ended 31.3.1996 at Rs. 2,60,00,000 against Rs. 2,43,79,650/- as declared by the petitioner firm. 3. That on the facts and in the circumstances of the petitioner firm's case, the learned Commissioner of Income-tax (Appeals) is wrong in making an addition of Rs. 4,07,355/- for the year ended 31-3-1996 by applying a gross profit rate of 25.14% on the enhanced sales of Rs. 16,20,350/- for the year ended 31-3-1996. 4. That on the facts and in the circumstances of the petitioner firm's case, the learned Commissioner of Income-tax (Appeals) for enhancement of sales by Rs. 16,20,350/- and gross profit by Rs. 4,07,355/- for the year ended 31-3-96 wit....
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....exed as Annexure I to the assessment order. 13.2. Assessing officer vide letter dated 18-3-1996 pointed out that assessee was not able to following amounts to its purchases: Head office Rs. 70,45,541/- Branch office Rs. 12,80,227/- Total: Rs. 83,25,768/- 13.3. Assessee in reply contended that purchases and stock inventories have various issues like plain saries & lehngas etc., in which the firm is buying as raw material, they are converted into finished goods after copious artisan work like dying, embroidery is done by various karigars which results into final product i.e. embroideried sari and lehenga. Thus, there is heavy value addition on the finished product and the items of purchases cannot be identically shown....
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....year 1994- 95. In para 10.5 of my order dated 4.2.2000 (supra) it has been inter alia held as under:- "coming specifically to the first addition of Rs. 80,76,441/- which relates to unaccounted purchases made by the head office and branch office I find that the special auditors have made a fundamental mistake in arriving at this conclusion. They have not understood that he appellant firm purchases cloth and unfinished dress material, including sarees, and thereafter incurs substantial expenditure on job work by way of embroidery etc. and so the finished goods come into existence. The special auditors failed to appreciate that the identity of these finished goods is not similar to the identity of the cloth and dress material purchased by the firm. The learned AR's contention in this regard holds water that while the purchases are of raw material, after the job work is done the shape, style, name, identity and specification of the garment undergoes a sea change. Therefore, there cannot be any question of matching these finished goods with reference to opening stock inventory or the purchases made. The appellant firm has incurred expense of approx. Rs. 58 lakhs on embroidery ....
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....14%. Keeping in view the past history of the case and the facts and circumstances prevalent in the previous year 1995-96, relevant to assessment year 1996-97, to my mind, it would meet the ends of justice if the sales of Rs. 2,43,79,650/- are enhanced to Rs. 2.60 crores and the gross profit increased by applying a G.P. rate of 25.14% a disclosed by the appellant firm, to the total sales. This would mean a gross profit addition of Rs. 4,07,355/- at 25.14% of Rs. 16,20,350/- (Rs. 2,60,00,000/- - Rs. 2,43,79,650/- ). Therefore, out of the total addition of Rs. 20,93,098/- made by the A.O. an addition of Rs. 4,07,355/- is sustained. The appellant is entitled to a relief of Rs. 16,85,743/- (20,93,098 - 4,07,355). at 25.14%. (iii) Embroidery charges: "Ground no. 4 deals with the disallowance of embroidery charges of Rs. 87,429/- out of total embroidery charges of Rs. 54,96,139/- claimed by the appellant-firm. I find that the facts and circumstances on this count are similar to the facts and circumstances of the case for assessment year 1994-95. These payments have all been made to old karigars through banking channels. Just because these parties did not respond to the summons u/s 1....
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....separately. The assessee then makes value addition to the plain cloth/ sarees with matching colours, embellishment, embroidery, stitching and adding colourful stones or zari material. Therefore, it will be virtually impossible to pin point which finished saree was made out of which invoice of sari and material exactly . Assessee's bona fide explanation has not been given any credence. Thus the market practice and the common parlance test have been given a go bye without any rhyme and reason. After summarily rejecting the assessee's explanation random check ratio has been extrapolated to the entire closing stock. 15.1. Thus, the rejection of books of account has been resorted on flimsy ground and not on valid considerations. Therefore, assessee's books have been unjustifiably rejected, they deserve to be accepted. CIT(A) has referred to his order for A.Y. 1994-95 to emphasize the findings that no worthwhile discrepancies existed to uphold the rejection of books. Though the original assessment for A.Y. 1994-95 has been technically annulled however the merits of the order of CIT(A) remain. 15.2. Alternatively, it is pleaded that even if rejection of books is upheld, in ....
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.... non allowability of such unrecorded purchases as expenditure w.e.f. 2000-01. The assessee's case is for A.Y. 1996-97 which falls in the prior period. Thus, in any case these purchases are to be allowed as expenses to assessee. Reliance is placed on : ITAT order dated 28-10-2004 in MA no. 131/Del/04 (ITA no. 1907/Del/99 & CO 44/Del/03) for AY 1989-90 in the case of Shri Padam Chand Jain vs. DCIT DGP Windsor India Ltd. 74 TTJ (Mum) 291. Krishna Textiles Vs. CIT 310 ITR 227 (Guj.) - holding that proviso to Sec. 69C inserted w.e.f. 1-4-1999 therefore not applicable to AY 1987-88. Raj Sons Jwellers Vs. ITO 86 TTJ (Del.) 1106 - holding that restriction placed u/s 69C on allowing such expenditure is not applicable to AY 1998-99. DCIT Vs. Radhe Developers India Ltd. & Ors. 329 ITR 1 (Guj.) - holding that proviso below sec. 69C is effective from 1-4-1999 and thus applicable from AY 1999-2000. 15.7. Apropos addition on account of sales and GP it is pleaded that assessing officer and CIT(A) both have accepted the GP rate of 25.14% to be correct. The addition is not a result of G.P. addition but on estimation of sales presumed to be out of books. The fact of the matter i....
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....jection of books - whether material exists on record to hold that assessee made huge unrecorded purchases; its addition u/s 69C and allowability as expenditure to assessee; justification of estimation of sales as alternatively claimed its gross profit when no material is brought on record. 17.2. As the facts emerge, the GP rate of 25.14% declared by the assessee has been held to be acceptable and satisfactory. The books of account of assessee are audited and in this year they have not been referred to special auditor so no adverse comments exist on record about veracity of record. No irregularity, inconsistency or infirmities have been pointed out in the maintenance of books of a/cs. 17.3. The assessing officer's suspicion starts qua the trading results of the assessee as mentioned above on a presumptive basis that the assessee's sales were nearly the opening stock. Inventory of closing stock filed by the assessee was verified by assessing officer on test check basis. Assessing officer then required the assessee to precisely identify the item mentioned in the closing stock and tally it with the purchase vouchers with exactly same description. The assessee in detail ex....