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TMI Blog2022 (6) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and law the Learned Commissioner of Income Tax (Appeals) has erred in estimating the gross profit at 7.88% as against 0.81% a: disclosed by the appellant company in its return of income. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the facts of the case and law and deserves to be deleted. 3. On appreciation of the facts and circumstances of the case and law the Learned Commissioner of Income Tax (Appeals) has erred in enhancing the assessment by estimating the gross profit of the appellant company from 3% of the total turnover as determined by the learned assessing officer to 7.88% of the total turnover without giving an opportunity to the appellant company a; required under the provisions of Section 251(2) of the Act. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the law and deserves to be deleted. 4. The Appellant craves to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings. 5. The Appellant humbly prays that the appeal be allowed in toto. 2. The assessee vide application dated 10/01/2021 has raised following additional grounds of appeal: "6. That in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of manufacturing of polyester yarn, bright yarn, oriented yarn, texturized yarn, knitting fabrics and also in trading of circulating knitted fabrics. The assessee filed its return of income for the assessment year (A.Y.) 2011-12 on 29/09/2011 declaring total income of Rs. 1,19,210/- after claiming carry forward loss declared NIL income. The case of assessee was selected for scrutiny. Notice under Section 143(2) of the Income Tax Act, 1961 (in short, the Act) was issued by ACIT-Vapi, on 25/09/2012 and was duly served upon the assessee on 27/09/2012. Thereafter the case was transferred to the ITO, Ward-1, Vapi vide letter No. ACIT/Circle/Vapi/Scrutiny/Transfer/2013-14 dated 03/06/2013. During the assessment, the Assessing Officer noted that from the details furnished with return of income, the assessee reported total turnover (sales of Rs. 72.24 crores) on which the assessee has earned (shown) net profit of Rs.1,19,210/-. The assessee in its trading account, claimed purchase of Rs. 63.38 crores and debited Rs. 8.26 crores on account of manufacturing expenses. The Assessing officer noted that no corroborative details were furnished, accordingly, a show cause notice was issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise details of sales and purchases were furnished to the Assessing Officer in the course of assessment proceedings. Sales and purchases were also furnished vide letter dated 12/02/2014. It was also informed to the Assessing Officer that on 28/09/2013, there was a fire in the factory premises. The assessee's store division, raw material, finished goods and entire record was destroyed. Despite that, almost all details were furnished before the Assessing Officer. The assessee furnished names and address of sales parties and purchase party's alongwith their PAN numbers. The assessee claimed that the assessee was in possession of full details regarding purchase/sales, creditors/debtors pertaining to the business of assessee. The Assessing Officer rejected the books of account without pointing any material or specific defect or to the genuineness of transaction on gross profit or marked up in this line of business is very nominal. The assessee prayed that estimated addition if accepted the quantity of purchases of trading such goods like knitted fabrics and yarn are also to be considered without which it is not possible to make the sale of such item. 6. The ld. CIT(A) after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made any submission during the assessment proceedings to justify the gross profit shown in the return of income except the reasons that the gross profit depends upon condition of demand and supply in the market. The ld. CIT(A) book his views that the gross profit shown by the assessee for A.Y. 2009-10 was at 6.88% which was estimated at 7.88% by the ld. CIT(A), accordingly he enhanced the addition by applying gross profit rate of 7.88% instead of 3% applied/adopted by the Assessing Officer. Further aggrieved, the assessee has filed the present appeal before the Tribunal. 8. We have heard the submissions of learned Counsel / authorised representative (AR) of the assessee and the learned senior departmental representative (Sr. DR) for the revenue and have gone through the orders of the lower authorities carefully. The ld AR of the assessee submits that vide application dated 10/01/2021, the assessee has raised additional grounds of appeal that in absence of order under Section 127, the assessment order passed by the ITO, Ward-1, Vapi is illegal as he has no jurisdiction to pass such assessment order. The jurisdiction in his case lies with ACIT, who issued notice under section 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating additional ground No. 9 to 11 are emanating from the record itself. The ld. AR for the assessee submits that after transfer of the case from the ACIT, Circle-Vapi to ITO, Ward-1, Vapi, no fresh notice under Section 143(2) of the Act was issued. In absence of proper notice by the Assessing Officer/ ITO under Section 143(2), who ultimately passed assessment order, the order same is void ab-initio. To support his submission, the ld. AR of the assessee has relied upon the following case laws: * Tata Sons Ltd. Vs ACIT (2016) 76 taxmann.com 126 (Mum-Trib) * Shri Kishore Vithaldas Vs JCIT ITA No. 7397/Mum/2016 dated 16/10/2019 * Jindal Steel & Power Ltd. Vs JCIT ITA No. 619/Del/2015 dated 17/09/2021, * Cosmat Traders Pvt. Ltd. Vs ITO ITA No. 457/Kol/2020 dated 21/04/2021, * Harvinder Singh Jaggi Vs ACIT order dated 12/02/2016. 11. On merit, the ld. AR of the assessee submits that as per book result, the gross profit of assessee was 0.81% but the Assessing Officer estimated gross profit @ 3%. The ld. CIT(A) enhanced the gross profit from 3% to 7.88% without issuing any show cause notice as required under Section 251(2) of the Act. The Ld. CIT(A) held that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. Sr. DR for the Revenue submits that the assessee neither during the assessment filed its reply to the various show cause notices nor furnished any evidence to substantiate the books result. The Assessing Officer in absence of proper books of account or details of sales and purchase and manufacturing expenses, have no option but to reject the books of account which was not substantiate by any evidence. The rejection of books of account was affirmed by the ld. CIT(A). The assessee has not made any submission against rejection of books of account. The ld. Sr. DR further submits that the assessee for the first time before the ld. CIT(A) raised a plea that there was fire in the factory premises of assessee on 28/09/2013 but no document or report of fire department or local police or any evidence substantiating such plea was filed when this appeal is pending since 2015. Not a single document is filed by assessee either to substantiate books of account or to challenge the estimation of addition made by lower authorities. The ld. Sr. DR submits that conduct of assessee right from the beginning was of non-cooperative and the assessee deserve no leniency and the appeal of assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. We find that in making enhancement by the ld. CIT(A) from 3% to 7.88%, he has not issued any show cause notice of such enhancement. Thus, the enhancement made by the ld. CIT(A) is not in accordance with the mandate of Section 251(2) of the Act. Accordingly, the enhancement made by the ld. CIT(A) is quashed/deleted. So far as estimation of profit by assessing officer we find that the assessee has not filed any document or evidence that the estimation by ld CIT(A) is not justify or the profit margin in the line of business of assessee is not more than the profit shown by the assessee. The assessee has not file a single document to substantiate his working of profit or comparable instances in the region cum industry. The assessee claimed that fire took place in the factory of the assessee, not a single piece of evidence in the form of report from fire department or from Police station was filed. Thus, in absence of any evidence to substantiate the books profit, we do not find any reason to disturb the estimation of profit estimated by assessing officer. in the result the assessee gets part relief as we affirm the estimation of profit estimated by assessing officer. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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