2015 (6) TMI 478 - AT - Income Tax

Unexplained low gross profit rate - CIT(A) deleted the addition - Held that - Considering the judicial precedent laid down by the ITAT in assessees own case wherein the M.A. filed by the Revenue stands allowed on similarity of facts wherein held as Tribunal did not consider this contention of the Revenue based on the findings in the assessment order that assessee failed to justify the market rate vis- -vis the purchase price paid to sister concern and this was one of the main reasons for fall in GP. we find that the impugned order deserves to be set aside. Ordered accordingly. The issue is restored back to the file of the CIT(A) with the direction to decide the issue again after considering the relevant points brought out by the AO in his order. Needless to say that the assessee shall be afforded a reasonable opportunity of being heard. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
- Appeal against order deleting addition on account of unexplained low gross profit rate.
- Mistake in original order by ITAT not considering the contention of the Revenue regarding purchases from sister concern.
- Non-representation of the assessee during the proceedings.

Analysis:

Issue 1: Appeal against order deleting addition on account of unexplained low gross profit rate
- The appeal challenged the correctness of the order dated 29.12.2007 of CIT(A)-Faridabad in 2000-01, specifically focusing on the deletion of the addition of Rs. 19,24,207 on account of unexplained low gross profit rate. The Revenue sought permission to amend the grounds of appeal. The Co-ordinate Bench had dismissed the Revenue's appeal against the said order, leading to the filing of a Miscellaneous Application (MA) by the department, highlighting a prima facie mistake in the original order by ITAT for not considering the issue of purchases made from the sister concern. The MA was allowed, recalling the order under challenge.

Issue 2: Mistake in original order by ITAT not considering the contention of the Revenue regarding purchases from sister concern
- The department filed an MA, emphasizing the failure of ITAT to address the contention that the assessee failed to justify the market rate vis-a-vis the purchase price paid to the sister concern, resulting in a fall in gross profit. The Co-ordinate Bench allowed the MA, recognizing the mistake of fact in the original order and recalled it for reconsideration. The Revenue's appeal was decided after the assessee remained unrepresented despite notices, with the Sr. DR highlighting the failure of the assessee to justify the purchase price paid to the sister concern, leading to the fall in gross profit.

Issue 3: Non-representation of the assessee during the proceedings
- Despite multiple notices and opportunities, the assessee remained unrepresented during the proceedings. The order was pronounced after considering the material available on record and the submissions made by the Sr. DR. The ITAT found that the findings in the impugned order did not reference the relevant facts from the assessment order, leading to a decision to set aside the order and restore the issue to the file of the CIT(A) for reconsideration.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented, and the decisions made by the ITAT in response to the appeal.