IN THE INCOME TAX APPELLATE TRIBUNAL DELHI `G' BENCH
BEFORE SHRI G.C. GUPTA,VP AND SHRI A.N. PAHUJA,AM
ITA no.4598/Del./2011
Assessment year: 2008-09
Assistant CIT,Sonepat Circle, Shri Subhash Chander,
Vs.
Sonepat 99, T.P. Scheme, Delhi
Road, Sonepat
[PAN AGNPC 7984 J ]
(Appellant) (Respondent)
Assessee by None
Revenue by Smt. Veena Joshi, . DR
Date of hearing 04-06-2012
Date of pronouncement 22-06-2012
ORDER
A.N. PAHUJA :- This appeal filed on 17.10.2011 by the Revenue against an
order dated 08.08.2011 of the CIT(A), Rohtak, raises the following grounds:-
1) "On the facts and in the circumstances of the case, the ld. CIT(A)
has erred in law and in facts in deleting the addition of ``11,523/-,
which was made by the AO u/s 144 of the I.T. Act on account of
profit on sale of ``2,30,460/- by applying rate of profit 10%. The
learned CIT(A) has applied the rate of 5% which is not justified.
2) The ld. CIT(A) has erred in law and in facts in deleting the addition
of ``4,25,075/- which was made by the AO on account of
commission of trading of shares as the assessee had not declared
any commission income in his return.
3) The ld. CIT(A) has also erred in law and fact in deleting the addition
of ``2,00,000/- and `5,06,170/- out of ``58,55,500/- which was
made by the AO on account of cash deposit in the bank account
which the assessee failed to furnish the justification and source of
the same before Assessing Officer as well as CIT(A)."
2 ITA no.4598/Del./2011
2. At the out, none appeared on behalf of the assessee nor any
request for adjournment has been filed Considering the nature of issue and
findings of the ld. CIT(A), the Bench proceeded to dispose of the appeal after
hearing the ld. DR.
3. Adverting first to ground no.1 in the appeal, facts, in brief, as per
relevant orders are that return declaring income of ``5,06,170/- filed on
31.07.2008 by the assessee, was selected for scrutiny with the service of a
notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act).
In response, Shri Sanjeev Chaudhary, AR on behalf of the assessee, sought
adjournment to 16.10.2009, when again adjournment was sought for 30th
October, 2009. On that date none attended nor submitted any reply. Even the
notice u/s 143(2) of the Act, fixing the hearing for 29.12.2009 and subsequent
notice u/s 143(2) of the Act issued on 11.5.2010 went unresponded.
Subsequently, in response to a notice u/s 142(1) of the Act issued on 4.8.2010
along a with a questionnaire, the ld. AR sought adjournment for 20.8.2010,when
again none attended nor submitted any reply. Another notice issued on
24.9.2010 u/s 143(2) of the Act and notice u/s 142(1) of the Act ,issued on
8.10.2010,also went unresponded nor the assessee submitted any reply. In view
of the persistent non compliance of various notices as aforesaid ,the Assessing
Officer[AO in short] proceeded to complete the assessment u/s 144 of the Act.
4. On perusal of profit and loss account annexed with the return for
the preceding year, the AO that the assessee declared closing stock of glass-
``2,30,460/- in the preceding year ,but in the year under consideration,
corresponding opening stock was not reflected. Accordingly, the AO concluded
that the assessee sold the goods without accounting for these in the books of
accounts for the year under consideration and added 10% of the amount,
resulting in addition of ``23,046/-.
3 ITA no.4598/Del./2011
5. On appeal, the learned CIT(A) reduced the addition by 50% in the
following terms:-
"5. Regarding ground No.4 of appeal, the AR submitted
that the business of trading in glass was discontinued and the
whole stock was sold for lump sum amount of `2 lacs. Even if the
Assessing Officer were to estimate the income, it should not be
more than 5% as per the provisions of section 44AF of the Act.
5.1 I have considered the issue and conclude that the
ends of justice would be met if the income on sale of glass is
estimated at 5% considering that it was old stock and therefore the
ground of appeal is partly allowed."
6.. Ground no.2 in the appeal relates to addition of ``4,25,075/- on
account of commission from trading in shares. The AO noticed during the course
of assessment proceedings that the assessee received an amount of `4,00,998/-
from M/s Best Bull Stock (P) Ltd., 6/79, WEA, Padam Singh, Karol Bagh, Delhi
on account of commission on trading in shares; TDS of `24,077/- had also been
deducted from the commission. Since the assessee has claimed credited of TDS
in the return of income but no corresponding commission income had been
declared, accordingly addition of ``4,25,075/- was made to the income of the
assessee.
7. On appeal, the ld. CIT(A) deleted the addition on the ground that
commission income of ``1,14,286/- was duly reflected after deducting the
expenses. Accordingly, the ld. CIT(A) deleted the addition, without even
examining the nature & genuineness of the various expenses.
8.. Ground no.3 in the appeal relates to deletion of addition of ``2 lacs
and ``5,06,170/- out of ``58,55,500/- made by the AO on account of cash
deposited in the bank account. During the course of assessment proceedings on
perusal of bank account no. 06121000004675 of the assessee with HDFC Bank
it was noticed that the assessee deposited following amount in cash:-
4 ITA no.4598/Del./2011
[In ` ]
03,07.2007 Cash deposited 3,60,000
09.07.2007 cash deposited 1,00,000
08.10.2007 cash deposited 2,84,500
18.10.2007 cash deposited 3,50,000
21.01.2008 cash deposited 10,00,000
14,02.2008 cash deposited 2,00,000
19.02.2008 cash deposited 10,000
22.02.2008 cash deposited 1,50,000
18.07.2008 cash deposited 2,00,000
05.08.2008 cash deposited 8,85,000
11.10.2008 cash deposited 5,00,000
16.10.2008 cash deposited 6,00,000
06.11.2008 cash deposited 5,00,000
Total 51,39,500
8.1 The assessee further maintained bank accounts
no.01911000119218 with HDFC Bank Adrash Nagar, New Delhi, wherein
he deposited cash of `7,16,000/- during the year under consideration as
detailed hereunder:
[In` ]
06.04.2007 cash deposited 49,000
11.04.2007 cash deposited 40,000
09.05.2007 cash deposited 1,20,000
21.05.2007 cash deposited 3,00,000
22.05.2007 cash deposited 7,000
19.06.2007 cash deposited 2,00,000
Total 7,16,000
8.2 Since the assessee did not explain the source of deposit of cash in the
bank, the AO added the amount of ``58,55,500/- ,treating the same as
investment out of undisclosed sources.
9. On appeal, the ld. CIT(A),without allowing any opportunity to the
AO, concluded as under:-
"7. Regarding ground No.6 of appeal, the AR drawing
attention to page 2 of the assessment order submitted that the
deposits totaling ``51,39,500/- in a/c no.0612000004615 with
5 ITA no.4598/Del./2011
HDFC Bank pertain to the period 3.7.2007 to 6.11.2008. The cash
deposits during the year under consideration are only ``24,54,500/-
but the Assessing Officer has added the entire amount, even
pertaining to the subsequent year. Therefore, addition of
`26,85,000/- (51,39,500 24,54,500) in the year under
consideration is erroneous. Further, the Assessing Officer has not
given any set off for the sources of cash deposits from sale of old
stock, current income, sale/acquisition of agriculture land and out of
earlier withdrawals from bank.
7.1 I have carefully considered the issue and the
submissions made by the AR. It is evident from the assessment
order itself that cash deposits of ``26,85,000/- do not pertain to the
year under consideration and therefore addition to this extent is
deleted. On the issue of giving credit for the withdrawals made
earlier, current income etc., no case has been made out in this
regard by the AR and further no details alongwith evidence have
been furnished to entertain such claim. However, it would be fair
and reasonable to allow the set off for sale of old stock of glass of
``2.00 lacs and income declared declared of ``5,06,170/-. Since
the appellant did not discharge the onus as to how the withdrawals
made earlier have been utilized for subsequent cash deposits, no
benefit on this account is given. In the result, the appellant gets
relief of ``33,91,170/- on account of this addition and the ground of
appeal is partly allowed."
10.. The Revenue is now in appeal before us against the aforesaid
findings of the ld. CIT(A).The ld. DR supported the order of the AO while
contending that the assessee did not produce any books of account before the
AO. In the absence of books of accounts and the details as to whom such stock
of glass was sold, the ld. CIT(A) was not justified in reducing the addition by
50% while applying rate of 5 % on the sale of glass ,or deleting the addition on
account of commission, without giving any opportunity to the AO. .Even the set
off of 2 lacs and income returned by the assessee, allowed by the ld. CIT(A)
against unexplained cash deposited in the bank, is not in accordance with law,
therebeing no evidence of any nexus between the amounts and even when the
AO had not been allowed any opportunity.
6 ITA no.4598/Del./2011
11.. We have heard the ld. DR and gone through the facts of the case.
Indisputably, the assessee did not produce any books of account before the AO
despite number of notices issued by the AO, seeking various details and
documents. As a result, assessment was completed u/s 144 of the Act and
findings of the AO in that connection have been upheld by the ld. CIT (A).
Thereafter, the AO attributed 10% of the stock of glass sold outside the books by
way of profit while the ld. CIT(A) without giving an opportunity to the AO reduced
the addition by 50% on the ground that the business of trading in glass was
discontinued. There is nothing to suggest as to whom the stock was sold and
what was the margin. Despite being fully aware that assessment was completed
in this case u/s 144 of the Act, the ld CIT(A) did not allow any opportunity to the
AO before reducing the addition by 50% or deleting the addition on account of
commission from trading in shares or allowing telescoping the income on sale of
glass and returned income, against unexplained cash deposited in the bank.
Even though , the assessee raised an additional ground, there is nothing to
suggest as to whether or not the AO was confronted this additional ground before
its admission nor any report of the AO is referred to in the impugned order. The
ld. CIT(A) while allowing set off of amount of ``2 lacs on account of sale of old
stock of glass and returned income of ``5,06,170/- did not refer to any evidence
that sale of old glass or returned income had any nexus with the cash deposited
in the bank account ,especially when the assessee did not produce relevant
books of account before the AO or the ld. CIT(A). It is well established that
unless there was a connection between the unexplained investment by way of
cash and sale of old glass or returned income , it would be difficult to accord set
off of the two figures as held in the case of CIT v. Devi Prasad Viswanath
Prasad [1969] 72 ITR 194(SC) and CIT Vs. Jhaverbhai Biharilal & Co.160 ITR
634(Patna). As is apparent from the aforesaid facts narrated in the
impugned order, the assessee did not appear before the AO nor
produced the relevant books of accounts before the AO or even
before the ld. CIT(A). Even before us none appeared on behalf of
the assessee despite service of the notice. There is nothing to
7 ITA no.4598/Del./2011
suggest as to whether or not the assessee preferred any appeal
against the findings of the ld. CIT(A).. W e are of the opinion that
under the scheme of s. 144 of the Act itself and on the statutory imperative that
even an assessment under s. 144 must be done only to the best of the officer's
judgment and after taking into account all relevant materials which had been
gathered . In our judgment, the proper thing for the ld. CIT(A) to have done would
have been to ascertain the relevancy and validity of the materials on the basis of
which the AO added the amounts instead of deleting/reducing the additions . If
the ld. CIT(A) found that any of those so-called materials in the assessment
order were not in fact supported by any evidence, it would be his duty to find out
to what extent the estimate already made by the AO would be affected thereby.
Even otherwise, the ld. CIT(A) did not allow any opportunity to the AO before
reducing/deleting the disallowances. There is nothing to suggest that the
ld. CIT(A) undertook any independent enquiries or even called for
any report from the AO in the light of his findings in the assessment
order, even while being fully aware that assessment had been
completed u/s 144 of the Act. In these circumstances, especially
when the ld. CIT(A) have not ascertained the complete facts nor recorded his
specific findings on the relevancy of material gathered by the AO while there
appears to be no apparent basis for reducing the addition on sale of glass or
deleting the addition on account of commission, without giving any opportunity to
the AO or even allowing the set off of `2 lacs and income returned by the
assessee, against unexplained cash deposited in the bank ,without referring to
any evidence, establishing nexus between the amounts and especially when
the AO had not been allowed any opportunity, we are of the opinion that issues
raised in ground nos.1 to 3 in the appeal before us, require reconsideration by
the ld. CIT(A). The application of mind to the material facts and the arguments
should manifest itself in the order. Section 250(6) of the Act mandates that the
order of the CIT(A) while disposing of the appeal shall be in writing and shall
state the points for determination, the decision thereon and the reason for the
decision. As is apparent from the impugned order, in our opinion, the order
8 ITA no.4598/Del./2011
passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of
the rules of natural justice, namely, that every judicial/quasi-judicial
body/authority must pass reasoned order which should reflect application of mind
by the concerned authority to the issues/points raised before it. The requirement
of recording of reasons and communication thereof has been read as an integral
part of the concept of fair procedure and safeguard to ensure observance of the
rule of law. We may point out that a `decision' does not merely mean the
`conclusion'. It embraces within its fold the reasons forming basis for the
conclusion.[Mukhtiar Singh Vs. State of Punjab,(1995)1SCC 760(SC)]. In view
of the foregoing, we consider it fair and appropriate to set aside the order of the
ld. CIT(A) and restore the issues raised in ground nos.1 to 3 in the appeal to
his file for deciding the matter afresh in accordance with law, after allowing
sufficient opportunity to both the parties. Needless to say that while redeciding
the appeal, the learned CIT(A) shall pass a speaking order, keeping in mind, inter
alia, the mandate of provisions of sec. 250(6) of the Act. With these
observations, ground nos. 1 to 3 are disposed of.
12. In the result, appeal is allowed but for statistical purposes.
Order pronounced in open Court
Sd/- Sd/-
(G.C. GUPTA) (A.N. PAHUJA)
VICE PRESIDENT ACCOUNTANT MEMBER
NS
Copy of the Order forwarded to:-
1. Assessee
2. Assistant CIT,Sonepat Circle,Sonepat
3. CIT concerned
4. CIT(Appeals), Rohtak.
5. DR, ITAT,'G' Bench, New Delhi
6. Guard File.
By Order,
Deputy/Asstt.Registrar
ITAT, Delhi
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