2014 (1) TMI 1872 - AT - Income Tax

Reopening of assessment u/s 148 - sales tax evaded as per the Sales tax department - HELD THAT - Sales tax is sub judicious before concerned sales tax tribunal. AO has not justified in making addition based on account of evasion sales tax while the concerned documents were with the CBI. DR did not dispute the fact that the issue of additions based on sales tax evasion is sub judicious before the concerned sales tax department and documents were with the CBI at the relevant point of time. Assessee has not been provided due opportunity of hearing because he was not having the benefit of books of account at relevant point of time as the same were with the CBI at that time. Moreover, the issue of addition based on sales tax evasion is sub judicious before the concerned Sales Tax Tribunal. We are of the view that the assessee has not been provided due opportunity of hearing before making various additions against him on various counts, which is violation of principles of natural justice. CIT(A) and restore the issue to the AO with a direction to decide the same as per fact and law. The assessee will be at liberty to have the benefit of documents claimed to have been seized by the CBI at the relevant point of time and the AO is also at liberty to look into the relevant findings of sales tax department touching the issue before him. The assessee is also directed to cooperate in the proceedings before the AO, so that, the proper adjudication of the matter may be done. Since we are restoring the issue to the AO on a preliminary issue, we are refraining from commenting on the merit of the issue at hand. As a result, the appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Reopening, Natural justice violation, Rejection of books, Non-adjudication of grounds, Estimation of G.P., Addition on account of sales tax evaded, Addition of unexplained purchases, Addition of G.P. on suppressed sales, Addition of profit on account of sale in local market.

Reopening:
The appellant challenged the reopening of the assessment, arguing that the Assessing Officer relied solely on information from the Sales tax department without forming independent findings. The appellant contended that the reopening lacked proper application of mind and should be quashed. The tribunal found that the appellant was not given a fair opportunity to rebut the evidence, leading to a violation of natural justice. Consequently, the tribunal set aside the order and directed the Assessing Officer to reexamine the issue considering all relevant facts and laws.

Natural justice violation:
The appellant raised concerns about the violation of natural justice as the CIT(A) relied on documents obtained without allowing the appellant to respond. The tribunal agreed that the appellant was not provided with a chance to present their side of the case, especially since crucial documents were in the custody of the CBI. This lack of opportunity for the appellant to defend themselves led to a violation of natural justice principles. As a remedy, the tribunal overturned the CIT(A)'s decision and instructed the Assessing Officer to reevaluate the matter ensuring due process.

Rejection of books:
The appellant contested the rejection of books of accounts, highlighting that the documents were unavailable as they were seized by the CBI. The tribunal noted the absence of specific defects pointed out by the Assessing Officer in the books of accounts. Considering the circumstances, the tribunal directed the Assessing Officer to reconsider the issue, emphasizing the need for a thorough examination of the facts.

Non-adjudication of grounds:
The appellant argued that the CIT(A) failed to address several grounds related to the case's merits. The tribunal acknowledged this oversight and instructed the Assessing Officer to adjudicate all relevant grounds to ensure a comprehensive review of the case.

Estimation of G.P.:
The appellant challenged the addition based on the estimation of Gross Profit (G.P.), asserting that the Assessing Officer did not provide sufficient justification for the calculation. The tribunal agreed with the appellant's contentions and directed a reevaluation of the G.P. estimation, emphasizing the need for proper substantiation and comparables.

Addition on account of sales tax evaded:
The appellant disputed the addition related to alleged sales tax evasion, arguing that no such evasion occurred. The tribunal noted that the issue was sub judice before the sales tax tribunal and that the Assessing Officer did not adequately justify the addition based on sales tax evasion. Consequently, the tribunal set aside the addition and instructed a reexamination of the matter.

Addition of unexplained purchases:
The appellant contested the addition of unrecorded purchases, emphasizing that there was no suppressed sale and that the books and documents were with the CBI. The tribunal directed the Assessing Officer to review this addition, considering the lack of suppressed sales and the circumstances surrounding the availability of documents.

Addition of G.P. on suppressed sales:
The appellant challenged the addition of profit earned on unrecorded purchases, highlighting the absence of suppressed sales and the custody of books and documents with the CBI. The tribunal instructed a reevaluation of this addition, taking into account the lack of suppressed sales and the documentary evidence.

Addition of profit on account of sale in local market:
The appellant disputed the addition related to the sale in the local market, arguing that it was based on assumptions without proper evidence. The tribunal agreed with the appellant's contentions and directed a review of this addition, emphasizing the need for factual basis and evidence.

In conclusion, the tribunal allowed both appeals for statistical purposes, setting aside the CIT(A)'s orders and instructing the Assessing Officer to reexamine the issues ensuring due process and comprehensive consideration of all relevant aspects.