2021 (7) TMI 812 - AT - Income Tax

Condonation of 825 days in filing the present appeal - sufficient cause of delay - reason of late filing given was that as the deceased assessee was expired on 12/07/2014 i.e. after filling the appeal and the applicant is being Legal Heir of him was not having any knowledge of any proceedings against the deceased assessee - HELD THAT - There was no default of the legal heir and there was no proper communication by the local counsel and no mala fide intention of the legal heir and there exists a sufficient and reasonable cause. If any person having knowledge that there has been passed an order, due to which a tax liability or penalty has been arose on him/her and in their view it is not correct, for that he is having option or platform to file the appeal to fight against that order with in time period allowed. Then after having knowledge he would not like to delay in filling the same until unless there is no compulsion or circumstances which prevent to him to do so. As also in the present case the legal heir was not having knowledge about the order passed by the CIT(A) being the above reasons and as she came to know she immediately all the exercised which she can do to file the appeal before us. In the case of Vedbai vs. Shantaram Baburam Patil Others 2001 (7) TMI 117 - SUPREME COURT has again reiterated that the expression sufficient cause should receive a liberal construction. The Hon'ble court has also held that advancing of substantial justice should be of prime importance. If we apply the settled principles as laid down by the Hon'ble Supreme Court as well as other courts on the facts of the present case we find that the assessee has explained cause of delay, therefore, in the facts and circumstances of the case, we condone the delay of 825 days in filing the present appeal and admit the appeal for hearing. Trading addition - whether the sales made or fruits or goods supplied to M/s. KOC fruit, New Delhi and other cities are assessee's own sales or Arat sales? - HELD THAT - in the totality of the above facts, documents and material placed before us in the form of Trading, P L account of this and earlier years, diaries of transactions, confirmation of KOC Fruit Company, statements referred in assessment order etc. we are of the considered view that the sales made by the assessee's of farmers outside the cities or Arat sales not own sales and the assessee's has rightly shown commission thereon as no farmers has stated that no Arat sales has been made. Also sales have been made truck to truck not loose or petti as done in his own trading sales. It is also admitted facts that the fruits were sent to M/s. KOC Delhi in bulk i.e. in full truck and assessee had received Arat per Petti and in this business it is not possible to earn 16% Profit on such wholesale commission business on Arat. When in retail business the assessee had declared 7-8% N.P. rate. The Assessing officer has not proved that the assessee has firstly purchased the fruits from farmers, kept in his business place as stock, paid amount to them thereafter sold to M/s. KOC, Delhi. Rather the farmers have send the fruits directly to M/s. KOC Delhi through assessee. It is not the case of the Assessing Officer that the documents or diaries were made after the year or during the course of assessment proceedings. Hence only addition on account of commission is to be added. There may be some defects in the books of accounts but no highly G.P. rate can be applied on the Arat. Thus we hold that the sale made by assessee out of cities are commission As assessee has shown commission of ₹ 83,840/- on the Arat sale of ₹ 67,92,481/- which comes to 1.23%, which appears in odd figure and there may be round figure. Hence looking to the defects pointed by the AO, we apply 1.5% on the Arat sale. Further the AO has taken sales (which is Arat Sales) of out station at ₹ 84,92,858/-, which includes (₹ 72,29,018/- to M/s. KOC, ₹ 12,00,000/- sale in other cities, ₹ 83,840/- Arat). However for ₹ 12,00,000/- sales in other cities the Assessing Officer has brought on record only the evidence of ₹ 1,03,000/- as deposits of ₹ 50,000/-, 50,000/-, and ₹ 3,000/- from these cities and there was no basis to taking the estimated figure of ₹ 12,00,000/- without any evidence, further ₹ 83,840/- has already been taken in to P L account by the assessee. Thus after considering all these the Arat sales is calculated at ₹ 73,32,018/- (₹ 72,29,018/- to M/s. KOC 1,03,000/- to other cities) on which commission @ 1.5% comes to ₹ 1,09,980/- against which the assessee has shown ₹ 83,840/-. Hence the trading addition is sustained at ₹ 26,140/- (109980-83840) and rest of addition of ₹ 13,19,302/- is hereby deleted. Disallowance of various expenses - issue not been raised before the ld. CIT(A) - HELD THAT - As considering the fact that the issue under consideration has not been raised before the ld. CIT(A), therefore, we set aside this issue to the ld. CIT(A) for deciding the same in accordance with law.

Summary

Issues Involved:

1. Jurisdiction and validity of the assessment order under section 143(3).
2. Invoking of section 145(3) and the resultant trading addition of ?13,45,442.
3. Disallowance of various expenses amounting to ?21,803.
4. Ex parte order passed by the CIT(A) without providing adequate opportunity to the assessee.
5. Charging of interest under sections 234A, 234B, and 234C.

Detailed Analysis:

1. Jurisdiction and Validity of the Assessment Order:
The assessee argued that the assessment order dated 15.03.2014 was invalid due to jurisdictional issues and other reasons. However, the tribunal did not specifically address this issue in detail within the judgment, focusing instead on the substantive grounds of appeal.

2. Invoking of Section 145(3) and Trading Addition:
The main grievance was the trading addition of ?13,45,442 due to the rejection of books under section 145(3). The Assessing Officer (AO) rejected the books of accounts, estimating sales at ?1,11,19,528 against the declared ?27,10,510, and applied a gross profit (G.P.) rate of 16%. The AO concluded that the assessee’s sales included unrecorded sales to M/s. K.O.C. Fruit Company and other cities, leading to a significant increase in the turnover and resultant trading addition.

The tribunal observed that the AO failed to provide a show-cause notice before invoking section 145(3), which is against the principles of natural justice. The tribunal also noted discrepancies in the AO’s assumptions, particularly the estimation of sales in other cities and the application of a high G.P. rate without considering the nature of the business and past history. The tribunal emphasized that the sales to M/s. K.O.C. were on an Arat (commission) basis, not own sales, and applied a commission rate of 1.5% on the Arat sales, reducing the trading addition to ?26,140.

3. Disallowance of Various Expenses:
The AO disallowed ?21,803 out of various expenses, but this issue was not raised before the CIT(A). The tribunal set aside this issue to the CIT(A) for fresh adjudication in accordance with the law.

4. Ex Parte Order by CIT(A):
The assessee contended that the CIT(A) passed an ex parte order without providing adequate opportunity for a hearing, violating the principles of natural justice. The tribunal acknowledged the delay in filing the appeal due to the death of the original assessee and the lack of communication from the counsel. The tribunal condoned the delay of 825 days, allowing the appeal to be heard on merits.

5. Charging of Interest under Sections 234A, 234B, and 234C:
The assessee contested the charging of interest under sections 234A, 234B, and 234C. The tribunal noted that the charging of interest is consequential and does not require separate adjudication.

Conclusion:
The tribunal partially allowed the appeal, reducing the trading addition to ?26,140 and setting aside the issue of disallowed expenses to the CIT(A) for fresh adjudication. The appeal was admitted after condoning the delay of 825 days due to sufficient cause shown by the legal heir of the deceased assessee.