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TMI Blog2007 (9) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... firming the addition of Rs. 17,89,488 on sale of vehicles and Rs. 5,01,132 on account of sale of spare parts without appreciating that the Assessing Officer has not pointed out any defect in the books of accounts maintained in the regular course of business and duly audited by chartered accountant and has not been rejected by the Assessing Officer. 2. That the learned CIT(A) has erred in law and on facts in confirming the addition of Rs. 22,90,620 on the basis of information received from third party by the Assessing Officer without confronting the same to the assessee appellant and thereby not affording a reasonable and proper opportunity to the assessee appellant. 3. The addition confirmed of Rs. 22,90,260 be deleted." 4. In the cross objection filed by the revenue, the following three grounds have been taken :- "1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,01,132 by reducing the GP rate from 15 per cent to 2.63 per cent and excluded the figure of 8.8 per cent being sales-tax in the GP rate applied by the Assessing Officer at 23.63 per cent when the books were rejected under section 145(1) and particularl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d India Insurance Co., Bhatinda. The Assessing Officer observed that such information revealed that the assessee had understated its sales of MUL vehicles and spare parts. The information collected by the Department revealed that MUL had shown sales of vehicles to the assessee at Rs. 29,80,02,650 and as per books, the assessee had shown purchases amounting to Rs. 23,05,55,956. Thus, the Assessing Officer observed that the assessee had understated sales of vehicles to the tune of Rs. 6,79,53,883. Similarly, the Assessing Officer observed that as per MUL, the assessee had purchased spare parts amounting to Rs. 3,33,45,488 as against the purchases shown by the assessee in the books at Rs. 1,43,63,165. The difference in this account worked out to Rs. 1,89,82,323. The Assessing Officer also observed that margin of profit on sale of spares was 15 per cent. In addition, the assessee had also collected sales-tax at the rate of 8.8 per cent. which was not paid to the Sales-tax Department. Thus, the net gain to the assessee on sales of spare parts was at the rate of 23.8 per cent (i.e., 15 per cent + 8.8 per cent). The Assessing Officer observed that since the assessee had suppressed the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n liable to be made on this account worked out to Rs. 13,33,000 against which the assessee had already declared additional income of Rs. 16 lacs in the revised return. It was also argued that the findings of the sales-tax authorities that the assessee had not made sales to registered dealers and thereby evaded the sales-tax are being contested before the appellate authority and the appeal was pending for adjudication. Moreover, the assessee was a dealer on wholesale basis and not on retail basis. Therefore, the margin of profit to be applied in this case should be of a wholesaler. It was also submitted that the addition of Rs. 28,47,948 made on account of service charges was arbitrary and unreasonable. These submissions were considered by the CIT(A). The learned CIT(A) observed that the judgment of Hon'ble Supreme Court in the case of Jain Hawala case V.C. Shukla (supra) was not applicable to the facts of the present case because the entries on which the CBI built up a case did not pertain to regular books of account but a simple diary and loose paper entries. He also observed that there was no merit in the plea of the assessee that it was not allowed an opportunity to cross-examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich could contradict the information in the possession of the Department. On the similar lines I disagree that the reliance of the appellant on the cases like Chiranji Led Steel Rolling Mills v. CIT and that of Pawan Kumar Sham Led Bhikhi (Tribunal Amritsar). Having found the plea of the appellant untenable, I hereby confirm the addition of Rs. 17,89,488 as per Annex. A-5 prepared by the Assessing Officer. (In which case the GP is estimated as the same as disclosed by the appellant on its regular sales of the vehicles). The next issue on undisclosed income attributable to sale of spare parts. On the above lines, I hold that the suppression, figure worked out by the Assessing Officer at Rs. 1,89,82,323 is undisputed. However, the GP rate chosen by the Assessing Officer at 23.8 per cent is unsustainable even on prima facie considerations. First of all the Assessing Officer has never elaborated any specific information gathered from the market regarding the adoption of profit margin at 15 per cent. Neither the name of the parties are given, nor the same were confronted to the appellant for necessary legal rebuttal on their part. In preceding paras the GP rate of irregular sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A). Hence, these cross appeals before this Bench. The learned counsel for the assessee submitted that the reasons given by the Assessing Officer in the assessment order for making the additions are information received from consumer's forum and United India Insurance Co. He submitted that no such information was confronted to the assessee. Therefore, no addition could be made by referring to the said information. He further submitted that the other reason given by the Assessing Officer in respect of suppression of sales of spare parts and vehicles was the finding of the sales-tax authorities recorded in the orders for imposing penalties on the assessee. He drew our attention to a copy of order of the sales-tax Tribunal placed at pp. 5 to 8 of the paper book in appeal Nos. 592 and 593 of 2004-05, where the orders of the assessing authority for the assessment years 1999-2000 and 2000-01 were set aside by observing that there was no material placed on record to prove that the assessee had suppressed the purchases made from MUL. The sales-tax Tribunal further observed that the correctness of the figures shown by the assessee in its account books, could not be doubted simply f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spare parts was payable at the rate of 8.8 per cent. By showing sales to registered dealers, the assessee did not make payment of sales-tax. Therefore, the net gain to the assessee in respect of sales-tax difference was 8.8 per cent. Thus, the learned CIT(A) was not justified in reducing the GP to 2.63 per cent i.e., at the same rate as shown on the sales declared in the books of account. Thus, she submitted that the order of the CIT(A) may be set aside and that of the Assessing Officer restored. 9. We have, heard both the parties and given our thoughtful consideration to the rival submissions, examined the facts, evidence and material placed on record. From the facts discussed above, it is obvious that in para 11 of the assessment order, the Assessing Officer has recorded a finding that the book version of the assessee cannot be accepted and the provisions of section 145(1) of the Act were applicable in this case. Accordingly, the Assessing Officer had invoked such provisions. We have also gone through the grounds of appeal taken before the CIT(A). No specific ground relating to rejection of book results was taken before him. Even before us, though the assessee has filed an appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of a person whose decision has to amount in final and subject to no appeal, but whose decision, if it can be shown to have been arrived at without any honest exercise of judgment, may be revised or reviewed by the GIT under the powers conferred upon that official by section 33." 9.2 Now in the present case, the Assessing Officer has referred to the information in the possession of the Department collected from the sales-tax authorities, consumer's forum, United India Insurance Co. Ltd. and information received from MUL. The learned counsel for the assessee has emphatically contended before the Bench that the information gathered from the consumer's forum and United Insurance Co. Ltd. was never confronted to the assessee nor the same has been specifically referred to in the assessment order. Therefore, we agree with the learned Authorised Representative that no adverse inference can be drawn against the assessee by relying on such evidence. 9.3 The Assessing Officer has then referred to the heavy penalties imposed by the sales-tax authorities on the ground that it had suppressed the purchases/sales. The learned counsel for the assessee produced before us a copy of order of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent enquiry he comes to the conclusion that the information received by him is true, he is at liberty to act thereon after disclosing it to the assessee and affording him a reasonable opportunity of rebutting it. The Hon'ble High Court further observed that unproved copy of accounts obtained from the sales-tax authorities in the absence of original accounts not available for verification could not be used against the assessee particularly when these entries are denied by the assessee. In the present case also, a copy of the information given to the assessee was unsigned and unauthenticated. The assessee denied the entries. Therefore, it was the duty of the Assessing Officer to furnish the authenticated copy of the information and allow an opportunity of cross-examination as desired by the assessee before relying on such evidence. The fact that the matter involved limitation, could not be held against the assessee. It was own lapse of the Assessing Officer. He should have taken up the assessment well in time. Having not done so, the Assessing Officer was not correct in drawing adverse inference against the assessee and for making the impugned addition. 10. Thus having regards to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the assessee, the learned CIT(A) allowed the claim of the assessee by recording following findings in the last para of the impugned order :- "The claim of Rs. 6 lacs on account of loss due to the theft has not been entertained by the Assessing Officer for the reasons that the insurance company Ms United India Insurance Company Ltd. Has rejected the claim. This not a sufficient reason. The insurance company can reject the claim for several reasons like no coverage of various items of loss or non-inclusion of the period in question for the policy. The Assessing Officer has not given finding on the content of FIR and no observation on the rejection order issued by Ms United India Insurance Co. Ltd. This, therefore, constitutes another instance of non-speaker order. I, therefore, direct the Assessing Officer to allow the claim of loss to the extent of Rs. 6 lacs." The revenue is aggrieved with the order of the CIT(A). Hence, this appeal before this Bench. 13.2 The learned Departmental Representative did not advance any specific arguments except relying on the order of the Assessing Officer. 13.3 The learned counsel for the assessee, on the other hand, relied on the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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