TaxTMI 
TaxTMI 
2022 (5) TMI 1527
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....2-13):- 2. At the threshold the Ld. A.R. argued on the maintainability of appeal. Since it goes to the root of the matter we have decided to address the same first. 3. There is a delay of 774 days in filing the Cross Objection before us. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the impugned order passed by the Ld. CIT(A) was of 02.04.2019. Though the department has filed appeal on 01.07.2019 the assessee could file the Cross Objection only on 31.01.2022. He has drawn our attention to the affidavit affirmed by the assessee on 31.01.2022 explaining the delay in filing the instant Cross Objection. While justifying the delay in filing such Cross Objection Ld. Counsel submitted before us that the assessee was travelling out of the country for export dealing for his business during that period the appeal memo was received by the accountant of the appellant. After his return to India the said accountant forgot to handover the said copy to the assessee and the appeal could not be filed in due time. Immediately thereafter, in the month of March, 2020 the Covid pandemic 2019 in India started due to which the entire....
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....lable therein. Since there is no formation of opinion made by the Ld. AO in the original proceeding under Section 143(3) of the Act the question of change of opinion does not and cannot arise. He, therefore, supports the reopening of assessment under Section 147 of the Act. 8. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 9. The reason recorded by the ITO, Ward-1(2)(3) reflecting at Page 67 of Paper Book filed before us reads as follows: "Reasons recorded for re-opening of assessment in the case of Shri Md. Arif Ibrahimbhai Shaikh, PAN : AHEPS2816H for A.Y. 2012-13. Assessee is an individual engaged in export of live animals (goats & sheep) mainly to UAE. He is doing his business in the name of style of a proprietorship entity M/s. I K International. Assessee filed his return of income for A.Y. 2012-13 on 30.09.2012 declaring income of Rs.9,67,616/-. The same was assessed u/s. 143(3) and income was determined at Rs.9,92,620/- vide order dated 21/01/2015 During the verification of case records, it was noticed from cash book that assessee has made the payment in ....
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....11.08.2014 filed by the assessee. Thus, it is a case of mere "change of opinion". It is a fact that the Ld. AO has no power to review but he has the power to re-assess. Even reassessment is based on fulfillment of certain criteria and if the concept of "change of opinion" is removed in the garb of reopening the assessment, review would take place. Furthermore, it is a settle position of law that after 01.04.1989 the AO has the power to reopen provided there is tangible material. On this aspect we have considered various judgment relied upon by the assessee including the judgment passed by the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd., reported in (2010) 187 taxman 312 (SC). While dealing with the identical issue the Hon'ble Apex Court has been pleased to observe as follows: "4. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987 , re- opening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1-4-1989], they....
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....f court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989 , has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." [Emphasis supplied] 5. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." 12. Thus, it appears that the power of the Ld. AO of reopening of assessment can be exercised only with the availability of "tangible material". But we repeat that we do not find any tangible material in possession of the Ld. AO which could lead to the reason to believe that payment made by the assessee is in contravention to the provision of Section 40A(3) of the Act and further to come to a conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief culminating....
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....ecause of this, the disallowance u/s 40A(3) of the I.T. Act, 1961 made by the Assessing Officer was justified. (4) Without prejudice to the above, the Ld. CIT(A) has erred in law and on facts by restricting the disallowance to Rs. 8,10,000/- out of Rs. 4,62,50,000/-, being profit element calculated @ 10% of Rs. 81,00,000/-[unverified purchases], which is perverse and bad in law as there is no such provision for taking profit element while making disallowance u/s 40A(3) of the IT Act, 1961. (5) The ld. CIT(A0 has erred in law and/or on facts by restricting the disallowance to Rs.5,00,000/- from Rs.35,72,673/- (out of total expenditure of Rs.1,78,63,369/-) in absence of any documentary evidences with regard to expenses claimed. (6) On the facts and circumstances of the case, the ld. CIT(A) ought to have upheld the order of the Assessing Officer. (7) It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored." 15. The Revenue has come up in appeal challenging the order dated 05.03.2019 passed by the Ld. CIT(A) in restricting the disallowance made by the Ld. AO under Section 40A(3) of the A....
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....never there is any intention of sale livestock the assessee generally appoints a broker who, in turn, on behalf of the assessee approaches the nearby area, verifies the livestock, carries out the sorting depending on the quality of live stock, breed etc. and finally decides the live stock to be purchased. The assessee maintains a register which keeps the detail of number of sheep/goats and the detail of the party from whom these are purchased. The broker in turn charges commission from those shepherd/farmers, who intend to sale their live stock. Some times when it becomes impossible to get the required quantity of live stock to be exported from the surrounding farmers/shepherds these are purchased directly from the trader's payments whereof was made through A/c payee crossed cheque. The appellant further maintains a ledger of such broker in his books for the purpose of identification of the person through whom live stock is purchased. Under each such ledger the assessee maintains sub-ledger of all shepherds from whom the live stock is purchased in the form of register of total sheeps/goats purchased through such broker; party wise breakup of the person from whom the same is purchas....
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.... real income as 10% of the turnover and restricted addition to Rs. 8,10,000/-. The Ld. A.R., therefore, relied upon the order passed by the Ld. CIT(A). 22. The Revenue's case is this that the assessee before the Ld. AO has not filed any details and therefore, the Ld. AO rightly made addition keeping in view of the cash payment made exceeding Rs. 20,000/- in a day to the parties. According to the Revenue the parties from whom livestock was purchased were not the producer of livestock for the purpose of Rule 6DD(e) and therefore, the addition made by the Ld. AO is justified. The Ld. D.R. further submitted that number of self-made vouchers were produced by the assessee. It was pointed out by the Ld. DR that total turnover of the assessee's business is of 7 crore per year whereas the profit element has been shown only about 9 lakhs. It is a clear case of inflated expenses made by the assessee which could be restricted to 50% as fair and reasonable as contended by the Ld. D.R. With the above argument the Ld. DR finally relied upon the order passed by the Ld. AO. 23. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials ....
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....n such type of business that payments are always required to be made in cash to the owner of the livestock (animal). 25. Perusal of records revealed that during the pendency of the appellate proceeding the assessee submitted certain additional evidences in the form of shipping bills, export invoices, copies of charges paid to the port authorities for shipment etc. and the bank statement showing payments receipt for export made in order to establish livestock been exported by the assessee. The same were duly considered and supplied to the Assessing Officer and Remand Report was sought for on the basis of those additional evidences adduced by the assessee upon verification of the export sales made by the assessee. 26. The AO issued summons on 04.07.2018 under Section 131 of the Act to those 34 parties from whom appellant purchased livestock as per addresses furnished by the assessee in order to verify the genuineness of the transaction and also to ascertain the fact that whether the livestock purchases were made from purchaser/shepherds in connection with applicability of Rule 6DDE(ii). Seven persons did not appear before the AO in compliance to the said summon. As per the repr....
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....ow: "11. Decision: I have examined the assessment order and submission made by the appellant. The appellant submitted certain additional documents and the matter were remanded to Assessing Officer on 04/05/2018. The Assessing Officer has submitted remand report on 03/08/2018 after making necessary inquiries. After considering all the facts and circumstances, the additional evidence submitted by the appellant is admitted as there was a reasonable cause for not producing the evidences before the A.O. and the same is considered necessary to go to the root of the controversy involved. Therefore, same are admitted for adjudication to provide natural justice to appellant and such admission is supported by following case laws: Kamlaben S Bhatti 44 Taxman.com 459 (Guj.) Dharmamdev Finance Pvt. Limited 43 taxman. Com 395 (Guj.). ACIT vs. Jogindersingh (ITA No. 2942/Delhi/2011) ITAT, Delhi Anmol Colour India Pvt. Ltd. vs. ITO 31 SOT 18 (JP) 121 ITJ 269: ITAT, Jaipur. CIT vs. Khanpur Cool Synthicate (1964) 53 ITR 225 (SC): I have examined the contents of remand report and the rejoinder filed by the....
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..... v. Addl. CIT, TPO[2010] W.P. (C) 6876 OF 2008, has opined that non-issue of proper show-cause notice can be fatal to the proceedings under the Income-tax Act, 1961 Also, Hon. Apex court in case of Uma Nath Pandey v. State of UP AIR 2009 SC 2375, inter alia, observed as under: 'Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him' Thus, in the present case, it is argued that assessing officer has clearly failed in issuing appropriate show cause notice and has clearly vitiated principles of natural justice by making addition of Rs. 4.625 crore as against Rs. 1.25 crores as stated in the show cause notice. The appellant is of the opinion as to how the initial amount as stated in show cause notice of Rs. 1.25 crore was derived and how the ....
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....f clarity. The word "live stock" clearly appears in exception as stated in Rule 6 DD (e)(ii) and hence there may not be any need to refer to any circular. However, CBDT Circular No. 4/2006 dated 29/03/2006 which clarify the meaning of the word "the produce of animal husbandry" used in sub clause (ii) of clause (f) of rule 6DD. According the clarification, the word "produce of animal husbandry" includes "Live Stock &Meat". This further confirms the stand taken by appellant. Now, referring to CBDT Circular No 8/2006, DATED 6-10-2006 which further clarifies the meaning of the word "produce of animal husbandry". Point 3 of the circular clearly mentions as under:- "3. The Board after examination of the issue is of the view that any person, by whatever name called, who buys animals from the farmers, slaughters them and then sells the raw meat carcasses to the meat processing factories or to the traders/retail outlets would be considered as producer of livestock and meat." Appellant being in the business of trading of live stock, only the emphasis as supplied above, is applicable since the later part of the circular would be applicable in case of purchase of meat and hen....
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.... not appear before Officer to attend the summons, one was deceased and others were those who were not residing nearby. In the remand report, Assessing Officer has proposed to restrict the addition to the tune of Rs. 81,00,000/- (Rs. 67,00,000/- paid to the persons who did not attend the summons and Rs. 14,00,000/- paid to the persons who appeared before Assessing Officer but possessing and operating their bank accounts). The relevant portion of remand report is as under: "3.7 To sum up, (a) Out of 38 persons, the names of 04 persons are repeated. (b) Out of 34 persons, on verifying the 26 persons on summons issued, it is revealed that they are shepherds and had sold livestock to the assessee and received cash payments during the year under consideration. However, in respect of 02 persons/entities viz, (i) Arif Sajid & Co. & (ii) Sultan & Co., out of 26 persons, it is revealed that they are operating their business from Ahmedabad and they might be used to banking system. Further, on verification, it is also noticed that the assessee has made payments of purchase of live stock through banking channel. Copy of ledger a/cs. of these 02 persons/....
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....preciating the fact that the assessee fad not kept day-to-day stock register, In the absence of which production of finished goods received, the shortage arrived, goods sent for processing, goods received from processing, etc., on a particular day could not be verified ? (ii) Whether the Income-tax Appellate Tribunal erred in law by not appreciating the fact that in the absence of day-to-day stock register, in the absence of which production of finished goods received, the shortage arrived, goods sent for processing, goods received from processing, etc., could not be verified and thus cannot be considered as evidence for purchase of goods ? (iii) Whether the income-tax Appellate Tribunal had erred in law by not appreciating the fact that the purchase made as claimed by the assessee, was not substantiated by any circumstantial evidence? (iv) Whether the Income-tax Appellate Tribunal had erred in law by not appreciating the fact that the parties, from which purchases were made, as claimed by the assessee, could not be found out by the Department and that the burden was on the assessee to prove the genuineness of the parties?" 2. Though the question....
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....the profit margin embedded in such amount would be subjected to tax. The Tribunal relied on its earlier decision in the case of Sanket Steel Traders v. ITO [IT Appeal Nos. 2801 & 2937 (Ahd.) of 2008, dated 20-5-2011] and also made reference to the Tribunal's decision in the case of Vijay Proteins Ltd. v. Asstt. CIT[1996] 58 ITD 428 (Ahd). 6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed." T....
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....transactions should be added which is estimated as 10% of the impugned amount and the same is considered to have taken care of the discrepancy involved. Hence, I hereby restrict the addition u/s 40A(3) to Rs. 8,10,000/- (10% of Rs. 81,00,000/-). The above decision is taken in view of following findings: (i) The amendment in IT rules (6DD) of 2008 is more relevant than the CBDT circular No.8/2006 and 4/2006. Hence, it would be considered as 'Executive overreach' if provisions u/s. 40A(3) are invoked. (ii) The show cause issued by Assessing Officer is not as per CBDT mandate prescribed vide instruction No. 20/2015. (iii) The total export sales are brought to tax in this case. Therefore expenditure incurred to effect such sales is required to be allowed. Any Shortcoming noticed in purchases by the AO can be considered for taxing the profit content therein on Adhoc basis as per ratio laid down by various judgments. The Assessing Officer is directed to restrict the disallowance to Rs. 8,10,000/- so made in assessment order u/s. 40A(3). The Ground No.1 is party allowed." 29. From the above it appears that while considering the matte....
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.... mentions as under:- "3. The Board after examination of the issue is of the view that any person, by whatever name called, who buys animals from the farmers, slaughters them and then sells the raw meat carcasses to the meat processing factories or to the traders/retail outlets would be considered as producer of livestock and meat." Appellant being in the business of trading of live stock, only the emphasis as supplied above, is applicable since the later part of the circular would be applicable in case of purchase of meat and hence, appellant is not required to fulfill the conditions specified in para 4 of the circular which is applicable to producer of meat only and not in case of trader of live stock. Hence, the case of appellant being squarely covered by Rule 6DD, therefore there is no case of additions." Once the business of the assessee of livestock has been confirmed and approved by the Revenue as per the conditions specified in Para 4 of the Circular the appellant is not required to fulfill the conditions specified in the Circular which is applicable to the producer of meat and not in case of trader of livestock and therefore, the case of the assessee ha....
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....be just and proper without any ambiguity in restricting addition to Rs. 8,10,000/- under Section 40A(3) of the Act so as to warrant interference. We, therefore, confirm the same. The Revenue's this ground of appeal is, thus, found to be devoid of any merit and thus dismissed. 32. Ground No. 5:- Restricting disallowance to Rs. 5,00,000/- from Rs. 35,72,673/- (out of total expenditure of Rs. 1,78,63,369/-) is the subject matter before us. 33. It appears from the order passed by the Ld. AO that in support of the total expenditure of Rs. 1,78,63,369/- the appellant did not produce any concrete evidence / confirmations whereupon show-cause notice dated 07.12.2016 was issued. However, in the absence of any details submitted by the assessee Ld. AO disallowed Rs. 35,72,633 i.e. 1/5th of the total expenditure of Rs. 1,78,63,369/- which was restricted on estimated basis to Rs. 5 lakhs by the CIT(A) in appeal preferred by the assessee. Hence, the instant appeal before us. 34. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 35. During the year under consideration the assessee has incurred vario....