Patel Fibres, Surat vs Department Of Income Tax

The Asstt. Commissioner M/s. Patel Fibres, of Income Tax, Circle-9, G.T. Patel Estate, Opp. Surat (Appellant) Vs Anjana Industrial Society, A.K. Road, Surat PAN: AADFP2640N (Respondent)

Revenue by: Smt. Sonia Kumar, Sr. D.R. Assessee by: Shri M.R. Shah, A.R.

Date of heari ng : 16-06-2015 Date of pronouncement : 24-06-2015

आदेश /ORDER

PER : RAJPAL YADAV, JUDICIAL MEMBER:-

Revenue is in appeal before us against the order of Ld. Commissioner of Income Tax (Appeals) dated 28th February, 2011 passed for Assessment Year 2008-09.

I.T.A No. 1637/Ahd/2011 A.Y. 2008-09 Page No 2 ACIT vs. M/s Patel Fibres

2. The revenue has raised three grounds of appeal, out of which ground 3 is a general ground of appeal which does not call for recording of any specific finding, hence it is rejected.

3. Ground no. 1 & 2 are interconnected with each other. The Assessing Officer has rejected book result of the assessee and made an addition of Rs. 26,93,568/- by estimating the GP @ 14% of the total turnover. The ld. Commissioner of Income Tax (Appeals) has set aside the finding of Assessing Officer and held that Assessing Officer has erroneously rejected the book result. Consequently, the ld. Commissioner of Income Tax (Appeals) has deleted the addition made by the Assessing Officer.

4. Aggrieved with this action of the Commissioner of Income Tax (Appeals), revenue is in appeal before us.

5. The brief facts of the care are that asessee has filed its return of income on 27-08-2008 declaring total income of Rs. 43,09,790/-. The case of the assessee was selected for scrutiny assessment and a notice u/s. 143(2) of the income tax act was issued on 26-08-2009. The assessee at the relevant time was engaged in the business of manufacturing of yarn. On scrutiny of the accounts, it revealed to the Assessing Officer that there is a drop in gross profit from 16.95% last year to 11.57% this year. He accordingly called for various details including the books of accounts but according to the Assessing Officer the books of accounts were not produced. In the absence of the details and books of accounts, the ld. Assessing Officer has applied section 145(3) of the income tax act. He computed the income of the asssessee by estimating the gross profit @ I.T.A No. 1637/Ahd/2011 A.Y. 2008-09 Page No 3 ACIT vs. M/s Patel Fibres

14% of the total turn-over. The brief finding recorded by the Assessing Officer in para no. 4.1 reads as under:-

"4.1 The assessee was required to produce its books of accounts vide order sheet entry dated 24-09-2010 along with the relevant bills and vouchers. Even in its reply to fall in G.P. the assessee has not produced the relevant bills, vouchers and books of accounts. Since, the assessee has failed to produce the books of accounts during the course of assessment proceedings, the books of accounts is rejected u/s. 145(3) of the I.T. Act and the G.P. The G.P. is estimated @ 14%, as per which an additional G.P. of Rs. 26,93,568/- is added back to the total income. Initiate penalty proceedings u/s. 271(1)(c) of the I.T. Act for furnishing inaccurate particulars of income."

6. Dissatisfied with the finding of the Assessing Officer, the assessee carried the matter before Commissioner of Income Tax (Appeals). It contended that assessee had submitted details on 16 counts which include purchases, name and address of the party from whom purchases were made, bank account, capital accounts of partners, copies of ledger accounts, quantitative and qualitative details, stock details, photocopy of purchase invoices. Ld. Commissioner of Income Tax (Appeals) has observed that Assessing Officer has not analyzed the details and had erred in estimating the profit. Accordingly, ld. Commissioner of Income Tax (Appeals) deleted the addition.

7. With the assistance of ld. representatives, we have gone through the record carefully. We are confronted with a peculiar situation. On the one hand, Assessing Officer has recorded a categorical finding (extracted supra) that assessee has not produced books of accounts. On the other hand, ld. first appellate authority has observed that Assessing Officer has failed to point out defects in the details. Before we embark upon the veracity of the finding of ld. Commissioner of Income Tax (Appeals) in this I.T.A No. 1637/Ahd/2011 A.Y. 2008-09 Page No 4 ACIT vs. M/s Patel Fibres

regard, we deem it appropriate to take note few observations from his order.

"6. I have gone through the assessment order as well as the submissions filed by the ARs. During the appellate proceedings the case was discussed elaborately and the ARs also presented complete details which were produced before the AO and I have gone through the same. It is observed that the appellant had submitted all the details like details of purchase with names and address of parties, bank account details, source of capital, various copies from ledger account, confirmation from creditors, details of opening and closing sock, details of loans and advances and month- wise details of purchase and sale of two years along with invoices etc. From the Assessment Order it is clear that not a single defect is pointed out by the AO from amongst the large volume of details submitted and not a ray of suspicion is raised by the AO to doubt the correctness and completeness of books of accounts. When there is no defect pointed out by the Assessing Officer, I do not find any reason for involving section 145(3) of the Act. It is also observed from the copy of letter submitted by the appellant on 13.12.2010 that only a part of the submission was considered by the AO and the explanation given by the appellant for fall in gross profit was totally ignored by him."

8. A perusal of the above would reveal that ld. Commissioner of Income Tax (Appeals) has not recorded a finding that he has verified the assessment record and found these details on the record. No doubt, details have been submitted by the assessee before the Commissioner of Income Tax (Appeals). Ld. Commissioner of Income Tax (Appeals) has gone through those details and then observed that Assessing Officer has not pointed defects in these details. The first appellate authority failed to note the fact, whether these details were actually available with the Assessing Officer or not? Whether the assessment record was called for by the Ld. First Appellate Authority or analyzed the details submitted by the assessee only. If these details are submitted by the assessee only, then, these cannot be used unless an opportunity is being granted to the I.T.A No. 1637/Ahd/2011 A.Y. 2008-09 Page No 5 ACIT vs. M/s Patel Fibres

Assessing Officer as per sub-rule 3 of rule 46(a) of income tax act rules, 1962. One thing is clear that ld. Commissioner of Income Tax (Appeals) has not called for a remand report and the Assessing Officer had no occasion to comment on the merits of these details. We could appreciate the stand of the Commissioner of Income Tax (Appeals), its a finding of fact is being recorded that these details were actually submitted by the assessee and they are available on assessment record, then probably the opportunity of hearing to comment on these details would not be required to be given to ld. Assessing Officer. Thus, with this situation without commenting on merit, we set aside the both orders and restore this issue to the file of Assessing Officer for re-adjudication. The ld. Assessing Officer shall take an independent opinion about the reliability of the books of accounts after going through these details. The assessee will be at liberty to submit any other details before the Assessing Officer. Our observation will not impair or injure the stand of the Assessing Officer or will not cause any prejudice to the defense/explanation of the assessee.

9. In the result, the appeal of the revenue is allowed for statistical purposes.

Order pronounced in the open court on 24-06-2015

Sd/- Sd/-

(G.D. AGRAWAL) (RAJPAL YADAV) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 24/06/2015 ak आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad I.T.A No. 1637/Ahd/2011 A.Y. 2008-09 Page No 6 ACIT vs. M/s Patel Fibres

6. Guard file.

By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद