9911796707
TMI Blog2010 (12) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s. 145(3) of the Act as bad in law. 4. In second and third ground, the Department has objected in deleting trading addition of Rs.2.37 crores or so in silver ornaments, Rs.2.34 crores or so in gold ornaments and Rs.2.27 crores or odd in diamond account totalling to Rs.7 crores or so made by the AO and deleting the addition of Rs.90,493 out of the expenses debited in P and L a/c. 5. In cross-objection filed by the assessee, the assessee has objected in sustaining the addition of Rs.2,00,000 on account of entry in Bank of Baroda. 6. The brief facts of the case discussed by the Tribunal are discussed in the case of M/s Gehna that the assessee firm consisting of two partners i.e., wife and husband has been carrying on business of trading in gold, silver ornaments and allied articles. The principal place of its business remained at 19-D, Gumanpura, Kota. At the ground floor of this premises showroom of firm was there and partners were residing at first floor. During the financial year relevant to asst. yr. 1998-99 the assessee also undertook the trading of diamonds besides trading in gold and silver ornaments/articles. During the year there has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requesting him to direct the AO not to estimate the gross profit in respect of various items of its trading on the basis of earlier years result since business was quite distinct and different this year. The AO compared the GP rate of this year in respect of gold ornaments being 0.39 per cent, silver ornaments 0.3 per cent and diamonds 0.17 per cent (traded for the first time) to the preceding two assessment years where the corresponding GP rate in asst. yr. 1996-97 in respect of gold was 57 per cent and in silver it was 18.27 per cent whereas in immediately preceding asst. yr. 1997-98 the corresponding percentage of gross profit was 16.89 per cent and 13.65 per cent. Thus, by rejecting the book results declared by the assessee the AO estimated gross profit @ 20 per cent in respect of silver ornaments, 10 per cent in respect of gold ornaments and 5 per cent in respect of diamonds on sales of these commodities thereby making the trading addition of about Rs.7 crores or so in all these accounts. 7. Besides, the AO made an addition of Rs.2,00,000 being a deposit in the bank account of the assessee firm with Bank of Baroda, Jhalawar Road Branch, as the assessee could not explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO was allowed opportunity to cross-examine Shri Khandelwal. The AO accordingly cross-examined Shri Khandelwal mostly on the point of discrepancy noticed during the course of survey operations to which Shri Khandelwal offered no comments on the basis that he did not compare the two things, namely physically found and as recorded in the books of account. He, however, asserted that there were no discrepancies in the books of account when these were made available to him for the audit. Shri Khandelwal also made available the computer print out of his working papers of the audit stated to be saved by him in a floppy as requested by the AO. The floppies so produced by Shri Khandelwal comprised of ledger, cash book, stock register, sale register, purchase register and these were confirmed by him to be the exact replica of the version of the books of account supplied to him for the audit purposes. The aspect of remaking of new ornaments from purchase of old ornaments were also enquired from him and he ascertained that no such activity as per books of account were there during the financial year 1997-98. Shri Khandelwal clarified that no corresponding expenses under the head 'Manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscrepancy in the books of account under audit after scrutiny, examination and verification audit report was issued. The tax auditors did not make any observation or remark as to defect in the method of accounting, manner of accounting and correctness and completeness of the accounts. The assessee firm collected four sale bills from the customer along with their confirmatory letters submitted during the course of assessment proceedings with request to make direct verification from such purchasers. It was argued that there was no material on record to suspect or doubt the correctness or genuineness of quantum of sale consideration in respect of the sales. There was no evidence for coming to the conclusion that the accounts were not correct, complete or the method of accounting was different than regularly followed in the past by the assessee. The assessee accordingly submitted that on the facts and totality of the circumstances and in the light of record made available by the tax auditors coupled with his statements, question of applying GP rate does not arise and addition made deserves to be deleted. Reliance was placed on the various case laws i.e., Addl CIT vs. Jay Engineering Wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had applied GP rate. 10. Regarding the fire, it was observed that it is surprising that in this purported fire only the account books were burnt and that also very selective account books such as sale vouchers which were required for verification. Purchase vouchers and credit/cheques sales vouchers were not burnt. As the sale bills were not available, therefore, sale could not be verified and the AO was right in rejecting the books of account. Reliance was placed on various cases mentioned at p. 14 of the order of the Tribunal. Accordingly it was submitted that the addition made by AO was justified and liable to be restored. 11. On the other hand detailed submissions were made on behalf of the assessee which has been recorded by the Tribunal in paras 3.18 and 3.19. 12. Rejoinder advanced by learned Departmental Representative is recorded in para 3.20. 13. Thereafter after considering the submissions of both parties, the Tribunal has given its finding as under: "3.21. Considering the aforesaid facts and circumstances and the arguments advanced by the parties, we find substance in the contentions of the learned Departmental Representative disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent in respect of silver articles and 5 to 10 per cent in respect of gold articles. In addition to this there is the normal profit rate which depends upon the market rate on a particular day and also the manufacturing charges and profit margin, observed the AO. The probability of circumstance in this regard is that the assessee remained one of the most knowledgeable Saraff in the city and just like any other prudent businessman he would not involve himself in any transaction without maximum profit motive. The AO has rightly observed that such an experienced person cannot be expected to have entered into a business involving about Rs.84 crores only for purchasing old jewellery at market rate and selling the same in the same form again at market rate. At the best it can be taken that assessee had sacrificed a little on account of the general margin of profit but not on account of profit towards gain on impurities. Under these circumstances we are of the view that the AO had rightly rejected the books of account by invoking the provisions of s. 145 of the Act to estimate the income of the assessee. We do not find substance in the findings of the learned CIT(A) that the AO for ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that in those cases assessments under s. 143(3} were not made. 3.23. In our view, the AO has rightly ignored those claimed to be comparable instances because the assessee could not establish before the AO as to whether the claimed comparable cases were really comparable. No such material was placed on record to establish similarities of the case of assessee with them. Simply filing of their financial result does not make other cases as comparable with the case of the assessee though there are many other factors viz., nature of product, source of supplies, customer's financial arrangement etc. which have not been placed on the record. In such circumstances, normally it is the past history, which is the best guide. 3.24. After considering the argument advanced by the parties in view of facts and circumstances of the present case, we find substance in the arguments of the learned Departmental Representative. The learned CIT(A), in our view, was not justified in accepting the trading result declared by the assessee. The estimation of gross profit by AO in respect of silver ornaments @ 20 per cent at Rs.2,41,45,055, gold ornaments @ 10 per cent at Rs.2,43,33,663 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while passing assessment order under s. 143(3} and this fact was brought to the knowledge of the Tribunal. However, there is no whisper about this fact also. 20. It was further submitted that out of Rs.83.73 crores of total sales, Rs.47.17 crores relate to diamond, and in diamond sale there is no such profit, therefore, without taking into consideration this fact, again Tribunal has applied 4 per cent profit in diamond sales. 21. It was submitted that detailed written submissions filed before the Tribunal mentioning all these facts, however, the written submissions filed before Tribunal have not been taken into consideration by the Tribunal at all. The Tribunal taking into consideration the argument of learned Departmental Representative and taking into consideration argument of learned AO has decided the issue against the assessee. Written submissions filed on behalf of the assessee were relied upon during the hearing of miscellaneous application. 22. On the other hand, the learned Departmental Representative submitted that the Tribunal has given a finding of fact and, therefore, no mistake is apparent on record. It was further submitted that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only notice under s. 143(2) and no notice was issued under s. 142(1) for calling upon the books of account. Provisions of ss. 142 and 143(2) have been discussed in detail by learned CIT(A) and then by placing reliance on various case laws i.e., in the case of P.S. Subramaniam. Chettiar vs. Jt. CTO 18 STC 357, in the case of Abdul Qayum and Co. vs. CIT (1933) 1 ITR 375 (Oudh), in the case of Jot Ram Sher Singh us. CIT (1934) 2 ITR 129 (All) and in the case of Gunda Subbayya vs. CIT (1939) 7 ITR 21 (Mad)(FB) held that AO has not followed the proper procedure before invoking provisions of s. 145(3) for the purpose of rejection of books of account. Therefore, it was held that the AO was not justified in rejecting the books of account and making the assessment on the basis of past history. Thereafter the Board's Circular No. 387, dt. 6th July, 1984 was also taken into consideration whereby it has been guided that in wake of the fact that the books of account were not in existence on the date of framing the assessment, the TAR (tax audit report) assumes greater importance and rather becomes pivotal document and, therefore, the tax audit report as guided by the CBDT circular has to be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was allowed cross-examination. However, there is no whisper in the order of the Tribunal about these facts. The most vital facts which in our considered view remained to be unconsidered is that it was specifically mentioned before Tribunal in para 5 at p. 9 of the written submission that the later development has to be considered by the Bench, which is that on identical facts the assessment for asst. yr. 1999-2000 v/as completed by the AO under s. 143(3). For this year also no books of account were produced as they were also destroyed in fire and the declared profit at 0.894 per cent on the turnover of Rs.15.70 crores or so was accepted. No comments have been given by the Tribunal in this respect. It is also a vital fact that during the year under consideration various parties sold their jewellery declared under VDIS, 1997 and the same was seldom traded, therefore, there was no comparison of the cases for earlier year as no such purchases were made in earlier year. In earlier year there was only small turnover whereas in the year under consideration turnover of the assessee was increased by many folds. This aspect is also not taken into consideration by the Tribunal while accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous case laws considered by learned CIT{A) and again relied upon by learned counsel of the assessee before the Tribunal through detailed written submissions. 31. The Hon'ble Supreme Court in the case of Honda Siel Power Products Ltd. vs. CIT (2007) 213 CTR (SC) 425: (2007) 295 ITR 466 (SC) has held that: "When prejudice result from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wrong party by the Court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power review. In the present case, the Tribunal was justified in exercising its power under s. 254(2) when it was pointed out to the Tribunal that the decision of the Co-ordinate Bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In that case, a decision by a Co-ordinate Bench was though cited yet however, was not considered by the Tribunal and the miscellaneous application filed by the assessee, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a given case where the factual mistake is so apparent that it becomes necessary to correct the same, the Tribunal would be justified in not only correcting the said mistake by way of rectification but if the judgment has proceeded on the basis of that fact, it would be justified in recalling such order. 35. In another case of CIT us. Ramesh Chand Modi (2000) 163 CTR (Raj) 424: (2001) 249 ITR 323 (Raj), the Hon'ble Rajasthan High Court has held that where the Tribunal fails to decide some of the questions raised before it inadvertently or by oversight, the only appropriate method of correcting such mistake is to recall the order. 36. After taking into consideration the above decisions of the Hon'ble apex Court and the Hon'ble jurisdictional High Court, we find that the order of the Tribunal is liable to be recalled as various case laws cited before the Tribunal during the course of hearing of the appeal have not been taken into consideration, may be due to oversight. Some other aspects as mentioned above have also not been taken into consideration, therefore, to meet the ends of justice, we are of the considered view that order of the Tribunal is liable to be rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
