Ravinder Bhatta, Rohtak v. ITO, Rohtak

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NOS. 4318 & 4319/DEL/2009 ASSESSMENT YEARS : 2005-06 & 2006-07 M/S. RAVINDER BHATTA CO. V.P.O. KHARAWAR DISTT. ROHTAK. VS. INCOME TAX OFFICER WARD-4 SPT. HQ. ROHTAK. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI UMANG SAHA I AGGARWAL ADV. RESPONDENT BY : SHRI ISTIYAQUE AHMAD SR. D.R. O R D E R PER: C.L. SETHI J.M. THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE . 2. ITA NO. 4318/DEL/09 IS FILED BY THE ASSESSEE AGA INST THE ORDER DATED 17.08.2009 PASSED BY THE LD. CIT(A) CONFIRMING THE PENALTY AMOUNTING TO RS. 28 620/- LEVIED U/S 271B OF THE INCOME TAX ACT 196 1 PERTAINING TO THE ASSESSMENT YEAR 2005-06 WHICH IS TAKEN UP FIRST FO R OUR CONSIDERATION. 3. IN THIS CASE THE A.O. LEVIED PENALTY U/S 271B F OR THE REASON THAT THE AUDIT REPORT FURNISHED BY THE ASSESSEE ALONGWITH RETURN O F INCOME WAS NEITHER SIGNED BY THE CHARTERED ACCOUNTANT NOR SEALED AS REQUIRED UNDER THE LAW AND THE YEAR MENTIONED IN THE AUDIT REPORT WAS ALSO NOT CORRECT. THE A.O. WAS THEREFORE OF ITA NOS. 4318 & 4319/DEL/2009 2 OF 7 THE VIEW THAT ASSESSEE HAS NOT COMPLIED WITH THE PR OVISIONS OF LAW CONTAINED IN SECTION 44AB OF THE ACT. THE A.O. LEVIED THE PENALT Y BY CONCLUDING AS UNDER:- THE FACT REMAINS THAT AUDIT REPORT AS WELL AS ACCO UNTS ANNEXED WITH THE REPORT ARE NEITHER SIGNED NOR SEALED BY TH E CA BUT SINGED BY SHRI RAVINDER KUMAR PARTNER ONLY. NO SEAL HAS BEEN PROVIDED ON THE AUDIT REPORT. FURTHER THE AUDIT REPORT IS NOT FOR THE YEAR UNDER CONSIDERATION. A UNSIGNED REPORT IS NO REPORT AT A LL IN THE EYES OF LAW. UNDER GUIDANCE NOTE ON AUDIT REPORT APPENDIX 318 (B 051) THE REPORT SHOULD NOT ONLY BE SIGNED BY THE CHARTERED ACCOUNTA NT BUT SEALED ALSO. I THEREFORE HELD THE ASSESSEE FIRM IN DEFAULT IN OBTAINING THE AUDIT REPORT DULY SIGNED AND SEALED BY THE CHARTERED ACCO UNTANT. AS PER TRADING ACCOUNT THE SALES OF THE ASSESSEE DURING TH E YEAR UNDER CONSIDERATION WERE RS. 57 24 135/-. PENALTY U/S 27 1B OF THE INCOME @1/2 OF THE RECEIPT WORKS OUT RS. 28 620/-. I THE REFORE IMPOSE A PENALTY OF RS. 28 620/- UNDER SECTION 271 OF THE IN COME TAX ACT. 4. ON AN APPEAL THE LD. CIT(A) CONFIRMED THE PENAL TY BY HOLDING AS UNDER:- THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CO NSIDERED. ON PAGE 2 OF THE PENALTY ORDER THE ASSESSING OFFICER HAS NO TED THAT THE AUDIT REPORT SUBMITTED ALONGWITH THE REPLY DURING PENALTY PROCEEDINGS PERTAIN TO ASSESSMENT YEAR 2006-07 WHICH SHOWS THAT THE AP PELLANT HAD TRIED TO SIDE TRACK THE ATTENTION OF THE ASSESSING OFFICER F ORM THE MAIN ISSUE. THE ISSUE INVOLVED IS THE AUDIT REPORT FOR THE A.Y. 200 5-06 FROM THE AFORESAID THE INTENTION OF THE APPELLANT CANT ACCEPTED AS BO NAFIDE. IT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT EVEN THE A CCOUNTS ANNEXED WITH THE AUDIT REPORT WERE NEITHER SIGNED NOR SEEN BY TH E C.A. BUT WERE SINGED BY SHRI RAVINDER KUMAR PARTNER ONLY. THE AUDIT REP ORT IS NOT FOR THE YEAR UNDER CONSIDERATION AN UNSIGNED REPORT IS NO REPORT AT ALL IN THE EYES OF LAW. FROM THE AFORESAID IT MAY BE SEEN THA T IT WAS NOT JUST AUDIT REPORT AND THE END OF THE SAME WHICH REMAINED UNSIG NED BUT EVEN THE FINAL ACCOUNTS HAVE NOT BEEN SIGNED. KEEPING IN VI EW ALL THE FACTS AND CIRCUMSTANCES IT CAN NOT BE RULED OUT THAT THE AUDI T REPORT WAS PREPARED WITHOUT GETTING THE BOOKS OF ACCOUNTS AUDITED AND F URTHER THAT THE UNSIGNED AUDIT REPORT HAS NO EVIDENTIARY VALUE. TH EREFORE THE PENALTY LEVIED BY THE ASSESSING OFFICER IS CONFIRMED AND TH E APPEAL OF THE APPELLANT IS DISMISSED. 5. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS. 4318 & 4319/DEL/2009 3 OF 7 6. FROM THE ORDER OF THE A.O. AS WELL AS OF LD. CIT (A) IT IS CLEAR THAT AN AUDIT REPORT WAS ENCLOSED WITH THE RETURN OF INCOME FILED BY THE ASSESSEE. IT IS FURTHER CLEAR THAT THE AUDIT REPORT WAS SINGED BY SHRI RAVI NDER KUMAR PARTNER OF THE ASSESSEE FIRM BUT IT WAS NOT SIGNED BY THE CHARTERE D ACCOUNTANT NOR SEALED BY HIM. AS PER PROVISIONS OF SECTION 44AB THE AUDIT R EPORT IS TO BE SIGNED AND SEALED BY THE CHARTERED ACCOUNTANT. HOWEVER IN THE PRESENT CASE THE COPY WHICH WAS FILED ALONGWITH RETURN OF INCOME WAS NOT SIGNED BY THE CHARTERED ACCOUNTANT THOUGH THE SAME WAS SIGNED BY THE ASSESS EE. IT IS THUS CLEAR THAT THERE WAS AN OMISSION ON THE PART OF THE CHARTERED ACCOUNTANT TO SIGN THE COPY OF THE AUDIT REPORT WHICH WAS ENCLOSED WITH THE RETUR N OF INCOME AND WAS PREPARED BY THE ASSESSEES C.A. SHRI SACHIN BHUTANI FOR WHI CH THE ASSESSEE CANNOT BE HELD RESPONSIBLE. IT CAN AT BEST BE SAID TO BE AN INADV ERTENT MISTAKE COMMITTED BY THE ASSESSEES CHARTERED ACCOUNTANT WHO PREPARED THE R ETURN OF INCOME OF THE ASSESSEE. IT IS ALSO NOT THE CASE OF THE A.O. THAT THE FACTS AND FIGURES AND PARTICULARS MENTIONED IN THE AUDIT REPORT ARE OTHER WISE MANIPULATED OR INCORRECT NOT BEING TALLIED WITH THE BOOKS OF ACCOUNT. IT IS ALSO PERTINENT TO NOTE THAT THE AUDIT REPORT SIGNED BY CHARTERED ACCOUNTANT WAS ULT IMATELY FILED BY THE ASSESSEE AS SOON AS IT WAS BROUGHT TO THE KNOWLEDGE OF THE A SSESSEE THAT THE AUDIT REPORT FURNISHED ALONGWITH RETURN OF INCOME WAS NOT SIGNED BY THE CHARTERED ACCOUNTANT. IN THE LIGHT OF THE FACTS POINTED OUT BY THE AUTHORITIES BELOW AND THE EXPLANATION FURNISHED BY THE ASSESSEE WE FIND THAT IT IS A TECHNICAL BREACH COMMITTED BY THE ASSESSEES CHARTERED ACCOUNTANT FO R WHICH THE ASSESSEE CANNOT ITA NOS. 4318 & 4319/DEL/2009 4 OF 7 BE HELD RESPONSIBLE SO AS TO LEVY THE PENALTY U/S 2 17B OF THE ACT. UNDER THESE CIRCUMSTANCES WE THEREFORE HOLD THAT IT IS NOT A FIT CASE WHERE PENALTY U/S 271B FOR THE ASSESSMENT YEAR 2005-06 CAN BE LEVIED. 7. NOW WE SHALL COME TO ITA NO. 4319/DEL/2009 FIL ED BY THE ASSESSEE AGAINST THE ORDER DATED 17.08.2009 PASSED BY THE LD . CIT(A) IN THE MATTER OF AN ASSESSMENT MADE U/S 143(3) OF THE INCOME TAX ACT 1 961 FOR THE ASSESSMENT YEAR 2006-07. 8. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DIRECTED AGAINST THE ADDITION OF RS. 5 73 955/- (THE FIGURE MENTIONED BY THE LD. CIT(A) IN HIS ORDER THOUGH THE A.O. HAS MENTIONED THE FIGURE OF RS. 5 3 7 955/- IN THE PARA 3.1 OF HIS ORDER BUT IN THE COMPUTATION THE A.O. MADE THE ADD ITION OF RS. 4 78 942/- ONLY) MADE BY THE A.O. BY ENHANCING THE TURNOVER BY 25% O F THE TOTAL TURNOVER OF THE IMMEDIATE PROCEEDING YEAR AND THEN APPLYING THE RAT E OF GP ON THE ENHANCED TURNOVER TO MAKE THE AFORESAID ADDITION. 9. IN THIS CASE THE ASSESSEE FILED ITS RETURN OF I NCOME DECLARING TOTAL INCOME AT RS. 11 725/-. ON EXAMINATION OF THE BOOKS OF ACCOU NT IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAD SHOWN GP AT THE RATE OF 20.55 % ON A TURNOVER OF RS. 45 37 095/- AS COMPARED TO THE GROSS PROFIT RATE OF 15.44% ON TURNOVER OF RS. 57 24 145/- SHOWN IN THE IMMEDIATE PRECEDING ASSESS MENT YEAR. THE A.O. HAS MENTIONED THAT THOUGH GROSS PROFIT SHOWN BY THE ASS ESSEE HAS BEEN INCREASED IN THE CURRENT YEAR AS COMPARED TO THE LAST YEAR BUT T HE SALES HAVE BEEN REDUCED. THE A.O. FURTHER STATED THAT REASON OF LOW SALE AS COMPARED TO EARLIER YEAR SHOWN ITA NOS. 4318 & 4319/DEL/2009 5 OF 7 BY THE ASSESSEE THAT THERE WAS A LABOUR PROBLEM AND COMPARATIVELY LESS CUSTOMERS HAD COME TO THE ASSESSEES BRICK BHATTA WAS NOT CON VINCING. THE A.O. THEREFORE ESTIMATED THE SALES AT RS. 71 55 168/- B EING 25% MORE OF THE TURNOVER OF RS. 57 24 135/- SHOWN DURING THE IMMEDIATE PRECE DING ASSESSMENT YEAR. THE A.O. APPLIED THE GP RATE OF 20.55% TO THE TOTAL TUR NOVER OF RS. 71 55 168/- AND THEN ARRIVED AT A G.P. OF RS. 14 70 387 AS AGAINST RS. 9 32 432/- SHOWN BY THE ASSESSEE. THE DIFFERENCE BETWEEN THE GP OF RS. 14 70 387/- WORKED OUT BY THE A.O. AND THE GP OF RS. 9 32 432/- COMING TO RS. 5 3 7 955/- WAS THUS ADDED TO THE ASSESSEES TOTAL INCOME AS SUPPRESSED PROFIT. 10. ON AN APPEAL THE LD. CIT(A) CONFIRMED THE A.O. S ADDITION BY OBSERVING THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE AND ES TABLISH THAT THE FALL IN SALE WAS DUE TO LABOUR PROBLEM AS NO EVIDENCE TO THAT EFFECT WERE PRODUCED. THE LD. CIT(A) HAS THEREFORE TAKEN A VIEW THAT THE A.O. W AS JUSTIFIED IN ESTIMATING THE TURNOVER AT 25% HIGHER TO THE TURNOVER SHOWN IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR. THE LD. CIT(A) THUS CONFIRMED T HE ADDITION. 11. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 13. FROM THE ASSESSMENT ORDER IT IS SEEN THAT IN R ESPONSE TO THE NOTICE ISSUED U/S 143(2) BY THE A.O. THE ASSESSEE HAD APPEARED B EFORE THE A.O. FROM TIME TO TIME AND PRODUCED COMPUTERIZED BOOKS OF ACCOUNT CON SISTING OF CASH BOOKS AND ITA NOS. 4318 & 4319/DEL/2009 6 OF 7 LEDGER. THE BOOKS OF ACCOUNT PRODUCED BY THE ASSES SEE WERE EXAMINED BY THE A.O. THE A.O. STATED THAT THE ASSESSEE WAS ASKED T O GIVE REASONS FOR LOW SALES IN THE CURRENT YEAR AS COMPARED TO THE EARLIER YEAR. THE ASSESSEE GAVE THE EXPLANATION THAT DUE TO LABOUR PROBLEM ASSESSEES BUSINESS HAS BEEN SUFFERED. THE A.O. THEN ESTIMATED THE TURNOVER AT 25% OF THE TURNOVER SHOWN BY THE ASSESSEE IN THE IMMEDIATE PRECEDING ASSESSING YEAR WHICH IN OUR CONSIDERED OPINION IS NOT JUSTIFIED INASMUCH AS THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW AND ESTABLISH THAT THE ASSESSEE HAS SUPPRESSED THE SALES DURING THE YEAR. MERE BECAUSE THE SALES FROM RS. 57 24 135/- SHOWN IN THE IMMEDIATE PRECEDING YEAR HAS BEEN REDUCED TO RS. 45 37 095/- IN THE CURRENT YEAR IS BY ITSELF CANNOT BE A GROUND TO ESTIMATE THE SALES AT THE AMO UNT WHICH IS 25% MORE OF THE TURNOVER SHOWN BY THE ASSESSEE IN THE IMMEDIATE PRE CEDING YEAR. THERE IS NO BASIS OR MATERIAL BASED ON ANY EVIDENCE TO TAKE THE TURNOVER AT 25% HIGHER TO THE TOTAL TURNOVER OF THE IMMEDIATE PRECEDING ASSESSMEN T YEAR. THE A.O. HAS NOT BEEN ABLE TO POINT OUT ANY INSTANCE WHERE THE SALES HAVE BEEN SUPPRESSED BY THE ASSESSEE. THE WHOLE ASSUMPTION MADE BY THE A.O. IS ONLY AN ARITHMETIC EXERCISE WITHOUT BEING BASED ON ANY MATERIAL OR EVIDENCES FO UND DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO INDICATE THAT THE ASSESSE ES TURNOVER SHOWN IN THE BOOKS OF ACCOUNT IS INCORRECT. WE THEREFORE DO N OT FIND ANY BASIS TO SUSTAIN THE ADDITION MADE BY THE A.O. AND FURTHER UPHELD BY THE LD. CIT(A) ON ACCOUNT OF LOW SALES AND GROSS PROFIT. THEREFORE THE ADDITIO N SO MADE BY THE A.O. AND ITA NOS. 4318 & 4319/DEL/2009 7 OF 7 FURTHER CONFIRMED BY THE LD. CIT(A) STANDS DELETED. THE A.O. SHALL MODIFY THE ASSESSMENT ORDER ACCORDINGLY. 14. ANOTHER ADDITION OF RS. 10 000/- WAS ALSO MADE BY THE A.O. BEING THE DISALLOWANCE OUT OF THE TOTAL MISCELLANEOUS EXPENSE S CLAIM AT RS. 40 088/- WHICH HAS NOT BEEN CHALLENGED BY THE ASSESSEE. THEREFORE THE ADDITION OF RS. 10 000/- STANDS CONFIRMED. 15. THE ASSESSEE HAS ALSO TAKEN A GROUND ABOUT THE INTEREST CHARGED U/S 234B AND 234D OF THE ACT. THIS MATTER IS RESTORED BACK TO THE A.O. FOR HIS FRESH WORKING AS PER THE TOTAL INCOME FINALLY DETERMINED IN THE PRESENT CASE. 16. TO SUM UP THE APPEALS FILED BY THE ASSESSEE FO R THE ASSESSMENT YEARS 2005- 06 AND 2006-07 ARE ALLOWED. 17. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 15 TH JANUARY 2010. (SHAMIM YAHYA) ACCOUNTANT MEMBER (C.L. SETHI) JUDICIAL MEMBER DATED: 15 TH JANUARY 2010. MAMTA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. BY ORDER DEPUTY REGISTRAR