Haldwani Stone Co, Lalkuan v. ACIT, circle-1, Haldwani

ITA 24/DDN/2019 | 2014-2015
Pronouncement Date: 25-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 2426014 RSA 2019
Assessee PAN AABFH5504K
Bench Dehradun
Appeal Number ITA 24/DDN/2019
Duration Of Justice 1 year(s) 10 month(s) 10 day(s)
Appellant Haldwani Stone Co, Lalkuan
Respondent ACIT, circle-1, Haldwani
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 25-03-2021
Last Hearing Date 04-03-2021
First Hearing Date 04-03-2021
Assessment Year 2014-2015
Appeal Filed On 15-05-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUN AL DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE SHRI SUDHANSHU SRIVASTAVA JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI ACCOUNTANT MEMBER ITA NO.24/DDN/2019 (ASSESSMENT YEAR 2014-15) M/S HALDWANI STONE COMPANY NEAR RAILWAY STATION LALKUAN UTTARAKHAND-262 402 PAN AABFH 5504K VS. ASST. CIT CIRCLE-1 HALDWANI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. SAUBHAGYA AGARWAL ADV. RESPONDENT BY SH. N.C.UPPADHAY SR. DR DATE OF HEARING 05.03.2021 DATE OF PRONOUNCEMENT 25.03.2021 ORDER PER SUDHANSHU SRIVASTAVA JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 07.02.2018 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HALDWANI {CIT(A)} FOR ASSESSMENT YEA R 2014-15. 2 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN PROCESSING OF STONE GRIT AND SAND. THE RETURN OF INCOME WAS FILED DECLARING A TOTAL INCOME OF RS.16 41 890/-. THE CASE WAS SELECTED FOR SCRUTINY U NDER CASS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER CALLED FOR DETAILS AND SUPPORTING DOCUMENTS/VOUCHER S IN RESPECT OF THE VARIOUS EXPENSES DEBITED IN THE PROFIT & LOSS A CCOUNT AMOUNTING TO RS.3 53 81 485/-. THE ASSESSING OFFICE R IN ABSENCE OF BILLS AND VOUCHERS AND RELEVANT DETAILS BEING PR ODUCED PROCEEDED TO DISALLOW 25% OF THIS TOTAL EXPENDITURE OF RS.3 53 84 485/-. MAKING AN ADHOC DISALLOWANCE OF RS .88 46 121/ THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.1 0 4 88 010/-. 2.1 AGGRIEVED THE ASSESSEE APPROACHED THE LD. FIR ST APPELLATE AUTHORITY WHO DISMISSED THE ASSESSEES AP PEAL FOR THE SAME REASON I.E. NO WRITTEN SUBMISSIONS OR DOCUMENT S WERE SUBMITTED BEFORE THE LD. FIRST APPELLATE AUTHORITY. THE ORDER OF THE LD. CIT(A) WAS PASSED EX-PARTE QUA THE ASSESSEE. 3 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT 2.2 NOW THE ASSESSEE HAS APPROACHED THIS TRIBUNAL CHALLENGING THE DISALLOWANCE BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE LD. CIT(A) HAS ERRED IN LAW IN PASSING THE IMPUGNED ORD ER WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE AP PELLANT AND IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND N OT CONSIDERING THE SUBMISSIONS FILED DURING THE COURSE OF ASSESSME NT PROCEEDINGS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN LAW IN PASSING THE IMPUGNED ORDER WITHOUT SERVING THE MANDATORY NOTICE OF HEARING TO THE APPELLANT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADHOC DISALLOWANCE OF RS.88 46 121/- (I.E. 2 5% OF RS.3 53 84 485/-) UNDER THE HEAD 'OTHER EXPENSES' A ND FURTHER ERRED IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSE SSEE U/S 145(3) OF INCOME TAX ACT AND THAT TOO WITHOUT ANY B ASIS. 4. THAT ACTION OF LD. AO IN REJECTING THE BOOKS OF ACCOUNT OF THE APPELLANT IS HIGHLY UNJUSTIFIED AND MECHANICAL IN MANNER. 4 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE ASSESSMENT ORDER PASSED BY LD. AO IS NOT VALID AS P ER AS JURISDICTION HAS NOT BEEN VALIDLY ASSUMED. 6. THAT THE APPELLANT CRAVES THE LEAVE TO AD D MODIFY AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3.0 AT THE OUTSET THE LD. AUTHORIZED REP RESENTATIVE (AR) SUBMITTED THAT THERE IS A DELAY OF 45 DAYS IN FILIN G THE APPEAL BEFORE THE TRIBUNAL AND PRAYED THAT THE DELAY BE CONDONED AND THE APPEAL BE ADMITTED TO BE HEARD ON MERITS. THE LD. AR DREW O UR ATTENTION TO THE AFFIDAVIT SUBMITTED BY THE ASSESSEE IN THIS REG ARD AND SUBMITTED THAT THERE WAS A CHANGE IN THE PARTNERSHIP FIRM W.E. F 01.02.2019 AND THE NEW PARTNERS CAME TO KNOW OF THE OUTSTANDING DEMAND FOR THE CAPTIONED ASSESSMENT YEAR WHEN A NOTICE U/S 221 OF THE INCOME TAX ACT 1961 WAS RECEIVED. IT WAS SUBMITTED T HAT THEREAFTER IMMEDIATELY AFTER COMING TO KNOW OF THE DISMISSAL OF ASSESSEES APPEAL BY THE LD. CIT(A) THE PRESENT AP PEAL WAS FILED. IT WAS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEES PRAYER FOR CONDONATION OF DELAY IN FILIN G THIS APPEAL BE ACCEPTED. 5 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT 4.0 PER CONTRA THE LD. SR. DEPARTMENTAL REPR ESENTATIVE (DR) OPPOSED THE CONTENTION OF DELAY. 5.0 HAVING HEARD BOTH THE PARTIES AND HAVIN G GONE THROUGH THE CASE AND PERUSED THE MATERIAL ON RECORDS WE AR E OF THE CONSIDERED OPINION THAT IN VIEW OF SUBSTANTIAL JUSTI CE THE DELAY NEEDS TO BE CONDONED. THE BONAFIDES OF THE ASSESSEE ARE NOT UNDER QUESTION AND THEREFORE WE CONDONE THE DELAY AND A DMIT THE APPEAL FOR HEARING. 6.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMITTED THAT THE REASON FOR NON-COMPLIANCE BEFORE BOTH THE LOWER AUT HORITIES WAS THAT THERE WAS A DISPUTE AMONG THE PARTNERS OF THE F IRM AND THEREFORE SINCE NOBODY HAD TAKEN THE INITIATIVE TO GET THE CASE REPRESENTED THE ASSESSEE COULD NOT BE REPRESENTED BEFORE THE LOWER AUTHORITY. THE LD. AR ALSO SUBMITTED THAT NOW THE FI RM HAS BEEN TAKEN OVER BY NEW PARTNERS WHO WERE KEEN TO GET THE DI SPUTE RESOLVED. THE LD. AR SUBMITTED THAT IT IS NOT THE D EPARTMENTS CASE THAT THE ASSESSEE HAD NOT MAINTAINED BOOKS OF ACCOU NT. IT WAS ALSO SUBMITTED THAT THE BOOKS WERE DULY AUDITED BY A CHA RTERED ACCOUNTANT AS IS EVIDENT FROM THE AUDITED BALANCE S HEET WHICH WAS 6 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT PLACED ON RECORD. THE LD. AR ALSO SUBMITTED THAT TH E ASSESSING OFFICER HAD MADE AN ADHOC DISALLOWANCE @ 25% WITHOUT ANY BASIS. IT WAS SUBMITTED THAT THE FACT OF THERE BEING A DIS PUTE AMONG THE PARTNERS WAS WITHIN THE KNOWLEDGE OF THE ASSESSING OF FICER ITSELF BUT HE DID NOT GIVE DUE CREDENCE TO THE SAME ALTHO UGH HE HAS MENTIONED THE SAME IN THE BODY OF ASSESSMENT ORDER ITSELF. THE LD. AR ALSO SUBMITTED A CHART SHOWING GROSS PROFIT AS WEL L AS NET PROFIT IN THE EARLIER TWO YEARS I.E. ASSESSMENT YEARS 2012 -13 & 2013-14. THE LD. AR ALSO SUBMITTED THAT THE ASSESSING OFFICE R HAD REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME TAX A CT 1961 WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCO UNT WERE DULY AUDITED AND COPY OF AUDITED FINANCIAL STATEMENTS HA D BEEN FILED ALONG WITH RETURN OF INCOME. THE LD. AR SUBMITTED TH AT THE REJECTION OF BOOKS OF ACCOUNT WAS BAD IN LAW AND SO WA S THE ADHOC DISALLOWANCE OF EXPENDITURE. IT WAS PRAYED THAT SINCE THE ADDITION WAS BASED ON MERE GUESS WORK AND FURTHER HAD NO REAS ONABLE BASIS THE SAME OUGHT TO BE DELETED COMPLETELY. 7.0 PER CONTRA THE LD. SR. DEPARTMENTAL R EPRESENTATIVE (DR) SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND S UBMITTED THAT 7 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT WHATEVER THE REASON MIGHT HAVE BEEN THE FACT REMAIN ED THAT THE ASSESSEE HAD NOT PRODUCED ONE SINGLE VOUCHER EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE FIRST APPELLAT E PROCEEDINGS. THE LD. SR. DR ALSO VEHEMENTLY ARGUED THAT THE BOOK S OF ACCOUNT HAD BEEN CORRECTLY REJECTED BY THE ASSESSING OFFICE R FOR THE REASON THAT THE ASSESSEE HAD FAILED TO PRODUCE THE RELEVAN T VOUCHERS OF EXPENSES. 8.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HA VE ALSO PERUSED THE MATERIAL ON RECORD. THE FACTS IN THIS CASE ARE UNDISPUTED. THE ASSESSEE DID NOT PRODUCE VOUCHERS PERTAINING TO EXP ENSES AMOUNTING TO RS.3 53 84 485/- EITHER BEFORE THE ASS ESSING OFFICER OR BEFORE THE LD. FIRST APPELLATE AUTHORITY. THE RE ASON GIVEN BY THE ASSESSEE FOR NON SUBMISSION OF DOCUMENTS AND RELEVA NT VOUCHERS IS THAT THERE WAS A DISPUTE AMONGST THE PARTNERS AND NO NE OF THE PARTNERS TOOK ANY INTEREST AT THAT POINT OF TIME TO ENSURE THAT THE ASSESSEE FIRM IS REPRESENTED PROPERLY EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD. CIT(A). IT HAS FURTHER BE EN BROUGHT ON RECORD THAT THERE HAS BEEN A CHANGE IN THE CONSTITU TION OF THE PARTNERSHIP W.E.F 1 ST FEBRUARY 2019. THE LD. AR HAS ALSO FILED A 8 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT DETAILED MATRIX REGARDING THE CHANGE IN THE CONSTIT UTION OF PARTNERSHIP FIRM DURING THE PRECEDING YEARS WHICH IS DULY EVIDENCED BY THE DIFFERENT PARTNERSHIP DEEDS EXECUT ED WHENEVER THERE WAS A CHANGE IN THE CONSTITUTION OF THE PARTN ERSHIP FIRM. IN SUCH A SITUATION IT IS OUR CONSIDERED OPINION THAT GIVEN THE HISTORY OF THE DISPUTE AMONG THE PARTNERS NO PURPOSE WOULD BE SERVED IF THE MATTER WAS RESTORED TO THE FILE OF THE ASSESSIN G OFFICER FOR BEING EXAMINED AFRESH AS IT IS QUITE POSSIBLE THAT THE RE LEVANT VOUCHERS AND DOCUMENTS / BOOKS OF ACCOUNT MIGHT NOT BE AVAIL ABLE NOW. 8.1 ON A QUERY FROM THE BENCH THE LD. AR A LSO WAS NOT IN A POSITION TO GIVE AN UNDERTAKING THAT IF THE MATTER IS RESTORED TO THE OFFICE OF THE ASSESSING OFFICER THE ASSESSEE WOULD BE ABLE TO PRODUCE THE RELEVANT VOUCHERS AND BOOKS OF ACCOUNT. 8.2 WE HAVE GONE THROUGH THE CHART SUBMITTED BY THE ASSESSEE DEPICTING SALES GROSS PROFIT AND THE NET PROFIT FO R ASSESSMENT YEARS 2012-13 2013-14 AND 2014-15. THIS CHART IS BEING R EPRODUCED HEREIN UNDER FOR A READY REFERENCE: 9 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT AY 2012-13 2013-14 2014-15 SALE 71819797 83537621 128185658 GROSS PROFIT 9137059.21 11322134.34 15944070.58 % OF GROSS PROFIT 12.72 13.55 12.44 NET PROFIT 4.65 3.34 3.11 A PERUSAL OF THE CHART SHOWS THAT IN ASSESSMENT YEAR 2012-13 THE NET PROFIT PERCENTAGE WAS 4.65% WHICH FELL TO 3.34% IN ASSESSMENT YEAR 2013-14 AND FURTHER FELL TO 3.11% IN ASSESSMEN T YEAR 2014-15 I.E. THE YEAR UNDER CONSIDERATION. THE FACT DOES R EMAIN THAT WHATEVER THE CIRCUMSTANCES MIGHT HAVE BEEN THE ASSE SSEE WAS DUTY BOUND TO PRODUCE THE RELEVANT VOUCHERS AND BOO KS OF ACCOUNTS WHEN IT WAS SO REQUIRED BY THE ASSESSING OFFICER DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. AR HAS ARGUED VE HEMENTLY AGAINST THE REJECTION OF BOOKS OF ACCOUNT BY THE AS SESSING OFFICER. THE UNDISPUTED FACT REMAINS THAT THE ASSESSEE HAD B EEN GIVEN NUMEROUS OPPORTUNITIES BY THE ASSESSING OFFICER TO PRODUCE THE BILLS AND VOUCHERS RELATING TO VARIOUS EXPENSES DEB ITED IN THE PROFIT & LOSS ACCOUNT BUT THE ASSESSEE HAD ONLY FURNISHED COPIES OF LEDGER ACCOUNTS AND NO BILLS AND VOUCHERS WERE PROD UCED BEFORE THE ASSESSING OFFICER FOR THE PURPOSES OF VERIFICATION. THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE RETURN ED INCOME AND 10 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT ALSO TO DEMONSTRATE THAT THE CLAIM OF EXPENDITURE WA S GENUINE. WE ARE IN COMPLETE AGREEMENT WITH THE OBSERVATION OF TH E ASSESSING OFFICER THAT SINCE THE ASSESSEE HAD FAILED TO PRODU CE BILLS AND VOUCHERS RELATING TO THE VARIOUS EXPENSES DEBITED I N THE PROFIT AND LOSS ACCOUNT COMPLETE AND CORRECT PROFIT CANNOT BE DEDUCED FROM SUCH BOOKS OF ACCOUNT. SINCE THE ASSESSEE HAD FAIL ED TO PRODUCE THE RELEVANT BILLS AND VOUCHERS WE UPHOLD THE ACTIO N OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT . 8.3 HOWEVER ALTHOUGH THE ASSESSEE DID NOT PRODUCE THE RELEVANT VOUCHERS AND BILLS BEFORE THE ASSESSING OF FICER AT THIS JUNCTURE IT DOES NOT APPEAR VERY FEASIBLE TO US TO REMIT THE MATTER BACK TO THE ASSESSING OFFICER FOR RE-EXAMINATION. I N OUR CONSIDERED OPINION INTEREST OF SUBSTANTIAL JUSTICE WOULD BE SE RVED BY DIRECTING THE ASSESSING OFFICER TO RE-COMPUTE THE NET PROFIT @ 4% ON SALES OF RS.12 81 85 658/- BEFORE DEDUCTION OF DEPRECIATION AND INTEREST AND REMUNERATION TO PARTNERS. THIS WILL TAKE CARE OF ANY POSSIBLE LEAKAGES ON ACCOUNT OF EXPENSES NOT DULY EVIDENCED BY BILLS AND VOUCHERS AND THE INTEREST OF THE REVENUE WOULD BE SA FEGUARDED. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO RE- COMPUTE THE 11 ITA NO.24/DDN/2019 HALDWANI STONE CO . VS. ACIT INCOME OF THE ASSESSEE BY TAKING 4% OF THE SALES AS NET PROFIT FOR THE YEAR UNDER CONSIDERATION AND THEREAFTER ALLOW DEDUCTION OF DEPRECIATION AND REMUNERATION AND INTEREST TO THE P ARTNERS FROM SUCH NET PROFIT FOR THE PURPOSE OF COMPUTING THE TA XABLE INCOME OF THE PARTNERSHIP FIRM. THE APPEAL IS DISPOSED OFF WIT H THE DIRECTIONS TO THE ASSESSING OFFICER AS ABOVE. 9.0 IN THE FINAL RESULT THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON 25 TH MARCH 2021. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:25/03/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI (DEHRADUN CIRCUIT BENCH DEHRADUN)