ACIT, Bangalore v. M/s S.A. Corporation, Bangalore

ITA 851/BANG/2009 | 2004-2005
Pronouncement Date: 10-02-2010 | Result: Allowed

Appeal Details

RSA Number 85121114 RSA 2009
Bench Bangalore
Appeal Number ITA 851/BANG/2009
Duration Of Justice 5 month(s) 20 day(s)
Appellant ACIT, Bangalore
Respondent M/s S.A. Corporation, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 10-02-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 10-02-2010
Date Of Final Hearing 01-02-2010
Next Hearing Date 01-02-2010
Assessment Year 2004-2005
Appeal Filed On 21-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.851/BANG/2009 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 7(1) BANGALORE. : APPELLANT VS. M/S. S.A. CORPORATION NO.4 & 5 R. NARAYANAPURA RAMAGONDANAHALLI VARTHUR ROAD BANGALORE 560 066. : RESPONDENT C.O. NO.55/BANG/2009 (IN ITA NO.851/BANG/2009) ASSESSMENT YEAR : 2004-05 M/S. S.A. CORPORATION NO.4 & 5 R. NARAYANAPURA RAMAGONDANAHALLI VARTHUR ROAD BANGALORE 560 066. : CROSS OBJECTOR VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 7(1) BANGALORE. : APPELLANT IN APPEAL ITA NO.851/B/09 & CO 55/B/09 PAGE 2 OF 7 REVENUE BY : SMT. JACINTA ZIMIK VASHAI ASSESSEE BY : SHRI S.N. SHYANBHOG O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER O F THE CIT(APPEALS) DATED 10.6.09. 2. GROUND NOS. 1 6 & 7 ARE GENERAL IN NATURE. THE OTHER GROUNDS OF APPEAL ARE AS UNDER: 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON THE BASIS OF ESTIMATION OF CURRENT YEARS INCOME ON THE BASIS OF THE NET PROFIT RATE OF THE PRECEDING YEAR. 3. THE LD. CIT(A) FAILED TO APPRECIATE THE CIRCUMSTANC ES IN WHICH AN ORDER U/S 144 ESTIMATING THE INCOME OF THE ASSESSEE WAS MADE. 4. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT IN THE ABSENCE OF COMPLIANCE BY THE ASSESSEE TO THE NOTICE S ISSUED THE AOS ESTIMATION OF PROFIT OF THE ASSESSEE FOR T HE CURRENT YEAR BASED ON THE PROFIT PERCENTAGE DECLARED FOR TH E IMMEDIATE PRECEDING YEAR WAS ONLY REASONABLE AND FAIR. 5. WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE SATISFI ED HIMSELF ABOUT THE CORRECTNESS OF THE BOOKS OF ACCOUNT OF TH E ASSESSEE BEFORE ACCEPTING THE PROFITS AS PER THE BOOKS. ALS O THE CIT(A) OUGHT TO HAVE GIVEN THE AO AN OPPORTUNITY TO EXAMINE AND COMMENT ON COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNT AND REASONABLENESS OF % NET PROFIT SHOWN BY ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FIRM ENGAGED IN EXPORT OF GHERKINS IN SOLUTIONS AND RETURN OF INCOM E WAS FILED ON 1.11.04 DECLARING LOSS OF RS.58 30 955. NOTICE U/S. 143(2) WAS ISSUED ON 1.8.05 TO ITA NO.851/B/09 & CO 55/B/09 PAGE 3 OF 7 THE ASSESSEE BUT NONE APPEARED IN RESPONSE. ANOTHE R NOTICE U/S. 143(2) DATED 18.5.06 ISSUED TO THE ASSESSEE FOR WHICH ALSO THERE WAS NOBODY APPEARED BEFORE THE AO. HENCE ON 3.8.06 NOTICE U/S . 271(1)(B) READ WITH SECTION 274 WAS ISSUED TO THE ASSESSEE TO IMPOSE PE NALTY FOR NON- COMPLIANCE OF THE ABOVE NOTICES. WHEN THERE WAS NO RESPONSE TO THE PENALTY NOTICE ALSO AS A FINAL RESORT A SHOW CAUS E NOTICE WAS ISSUED TO THE ASSESSEE ON 22.9.06 GIVING ANOTHER OPPORTUNITY TO P RODUCE DETAILS MENTIONED THEREON AND ASKING HIM TO SHOW CAUSE WHY ASSESSMENT SHOULD NOT BE COMPLETED U/S. 144 OF THE I.T. ACT 1961. T HIS NOTICE ALSO CAME BACK UNSERVED AS NOT CLAIMED. THE AO WITHOUT ANY OPTI ON COMPLETED THE ASSESSMENT U/S. 144 OF THE ACT. HE APPLIED THE NE T PROFIT OF 6.31% AS IN THE A.Y. 2003-04 FOR THE SALES TURNOVER AND ARRIVED AT THE TOTAL INCOME OF RS.28 34 461. THE CLAIM OF THE ASSESSEE THAT IT IS 100% EOU WAS REJECTED ON THE GROUND THAT ASSESSEE DERIVED INCOME FROM BOT H EXPORT SALES AND LOCAL SALES. 4. ON APPEAL THE LD. CIT(APPEALS) ALLOWED THE CLAI M OF THE ASSESSEE VIDE PARA 9 OF HIS ORDER AS UNDER: 9. THE NEXT ISSUE IS REGARDING ADOPTING THE SAME RATE OF NET PROFIT AT 6.31% OF THE PREVIOUS YEAR ON THE SALES T URNOVER AMOUNTING TO RS.28 34 461. IN THIS REGARD THE TUR NOVER FOR THE FY 2003-04 WAS RS.4 49 20 158 OUT OF WHICH RS.3 89 22 238 WAS EXPORT TURNOVER AND RS.59 97 920 AS LOCAL SALES. T HE AO HAS NOT GIVEN ANY COGENT REASON AND MATERIAL TO ADOPT THE N ET PROFIT OF LAST YEAR AT 6.31% ON THE TURNOVER OF THIS YEAR. T HE APPELLANT STATED THAT DURING THE YEAR UNDER APPEAL THERE WAS GOOD HARVEST OF GEREKINS BUT THERE WAS NO SUFFICIENT EXPORT ORDER. SOME OF THE SHIPMENTS WERE REJECTED BY IMPORTERS AND THE REMAIN ING GEREKINS SOLD IN THE LOCAL MARKETS. THE BANKS REFUSED TO EX TEND THE LOAN FACILITIES AND ASKED TO CLEAR THE LOAN AND ALSO ADJ USTED THE LOANS AGAINST THE DEPOSITS KEPT IN THE BANK. THE BANK AL SO ENCASHED THE SUBSIDY RECEIVABLE FROM GOVERNMENT FOR EXPORT. DUE TO FINANCIAL ITA NO.851/B/09 & CO 55/B/09 PAGE 4 OF 7 HARDSHIP THE BUSINESS WAS CLOSED. I HAVE PERUSED T HE NOTICE OF CANARA BANK CALLING BACK THE LOAN EXPORT CREDIT GU ARANTEE CORPORATION OF INDIA REJECTING THE SHIPMENT ETC. I N VIEW OF ALL THESE FACTS THE AO HAS NOT BROUGHT ANY MATERIAL TO ADOPT THE NET PROFIT AT 6.31% OF LAST YEAR FOR THE AY UNDER APPEA L. EACH YEAR OF ASSESSMENT IS A DIFFERENT ENTITY AND WITHOUT REA SONABLE CAUSE THE NET PROFIT OF LAST YEAR CANNOT BE ADOPTED FOR T HIS YEAR. THE AO IS DIRECTED TO DELETE THE NET PROFIT ESTIMATED B Y HIM. THIS GROUND OF APPEAL SUCCEEDS AND APPELLANT GETS RELIEF ACCORDINGLY. C.O. NO.55/BANG/09 5. IN THE CROSS OBJECTIONS THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E FIRST NOTICE U/S 143(2) SELECTING CASE FOR SCRUTINY SERV ED ON THE A.R. OF THE ASSESSEE IS VALID SERVICE AS SUCH ASSESSMEN T COMPLETED U/S 144 IS ALSO VALID WHEN ASSESSEE HAS NO KNOWLEDGE OF RECEIPT OF SUCH NOTICE AND RESPONDENT CAME TO KNOW OF THE ISSU E AND SERVICE OF ABOVE NOTICE ON A.R. ONLY WHEN THEY RECEIVED AS SESSMENT ORDER AND ORDER LEVYING PENALTY U/S. 271(1)(B) OF T HE INCOME-TAX ACT. 3. THE FIRST NOTICE U/S. 143(2) SELECTING THE CASE FOR SCRUTINY SHOULD HAVE BEEN SERVED ON ASSESSEE AND NOT ON THE A.R. OF THE ASSESSEE AS PER SECTION 282(2)(A) OF THE I.T. ACT A ND AS PER SECTION 143(2)(II) THE NOTICE REQUIRING PRODUCTION OF EVIDE NCE SHOULD BE SERVED ON THE ASSESSEE WITHIN 12 MONTHS FROM THE EN D OF THE MONTH IN WHICH THE RETURN OF INCOME HAS BEEN FILED. 4. AS PER SECTION 282(2)(A) OF THE I.T. ACT THE NOT ICES PERTAINING TO THE FIRM SHOULD BE SERVED ON ANY MEMB ER OF FIRM BY POST OR AS IF IT WERE A SUMMONS ISSUED BY A COURT U NDER CODE OF CIVIL PROCEDURE. SO SERVICE OF SUCH NOTICE ON THE A.R. OF THE ASSESSEE IS NOT PROPER. 6. THE BRIEF FACTS LEADING TO THIS ISSUE HAVE BEEN BROUGHT IN PARA 3 OF THIS ORDER. IN OTHER WORDS THE APPELLANTS CONTEN TION BEFORE THE CIT(APPEALS) WAS THAT THE FIRST NOTICE U/S. 143(2) AND OTHER NOTICES WERE ITA NO.851/B/09 & CO 55/B/09 PAGE 5 OF 7 SERVED ON THE AR AND NOT ON THE ASSESSEE AS PER SEC TION 282(2)(A) OF THE ACT AND SINCE THE ASSESSEE RECEIVED NO NOTICES THER E WAS NO RESPONSE TO THE SAID NOTICES. RELYING ON THE DECISION OF RATAN LAL TIKU V. CIT (97 ITR 553) WHEREIN IT WAS HELD THAT THE WORD SHALL SERVE ON THE ASSESSEE A NOTICE OCCURRING IN SEC. 143(2) IMPLY A DUTY TO BE PERFORMED AND THE WORD SHALL CONNOTES THAT THE PROVISIONS ARE MANDATORY. NON COMPLIANCE WITH THE PROVISIONS GOES TO VITIATE THE ORDER OF ASSESSM ENT ITSELF. EVEN THOUGH THERE WARE SOME LOCAL SALES DEDUCTION U/S. 80HHC C AN BE GIVEN ON PRORATA BASIS AS STATED IN THE ABOVE SECTION. THE LD CIT(APPEALS) CONSIDERED THE ISSUE VIDE PARA 8 OF HIS ORDER AND R EJECTED THE CONTENTIONS OF THE ASSESSEE AS UNDER: 8. I HAVE CONSIDERED THE FACTS OF THE CASE. IT IS SEEN THAT THE APPELLANT APPEALED AGAINST THE ORDER U/S. 144 WITHO UT SERVING THE NOTICE U/S. 143(2) AND 142(1). TO SUPPORT ITS GROU ND THE APPELLANT FILED CIT(A)IIIS ORDER DATED 10.7.08. T HE CIT(A) MADE THE FINDING THAT NOTICES U/S. 142(1)(2)/143(2) WERE SERVED ON THE APPELLANTS AR. THIS FACT WAS ADMITTED BY T HE APPELLANT BEFORE THE CIT(A) IN THE APPELLATE PROCEEDINGS IN R ESPECT OF SEC. 271(1)(B) OF THE ACT. IN THE NOTICES U/S. 143(2)/1 42(1) WERE SERVED ON THE APPELLANTS AR THE APPELLANT CANNOT DENY THE FACT THAT THE NOTICES ISSUED AND SERVED ON THE AR WAS ME ANT FOR THE APPELLANT AND IT WAS THE APPELLANTS DUTY TO COMPLY WITH THOSE NOTICES. IN THE PRESENT CASE THERE WAS NO COMPLIA NCE FROM THE APPELLANT AND AFTER NOTICE U/S. 143(2) AND PROPOSED LETTER FOR COMPLETING THE ASSESSMENT U/S. 144 THE ASSESSMENT ORDER U/S. 144 WAS PASSED. IN VIEW OF THIS I AM OF THE OPINION T HAT THE APPELLANTS GROUNDS OF CHALLENGING THE ORDER U/S. 1 44 CANNOT BE SUSTAINED. THE NOTICE U/S. 143(2) ISSUED ON 1.8.05 WAS WITHIN ONE YEAR FROM THE DATE OF FILING OF RETURN. THEREFORE THESE GROUNDS OF APPEAL ARE DISMISSED. THE ORDER U/S. 144 IS HEREBY CONFIRMED. 7. AT THE BEGINNING OF THE HEARING LD. AR VEHEME NTLY ARGUED THAT ORDER U/S. 144 THRUST ON THE ASSESSEE IS BAD IN LAW SINCE THE NOTICE U/S. ITA NO.851/B/09 & CO 55/B/09 PAGE 6 OF 7 142(1)/143(2) WERE NOT SERVED ON THE ASSESSEE. INS TANTLY THE LD. DR OBJECTED TO THE LD. ARS PLEA AND PRODUCED BEFORE T HIS BENCH THE SIGNED ACKNOWLEDGEMENT OF THE DELIVERED LETTER ADDRESSED I N THE ASSESSEES NAME AND ADDRESS. LD. DR CLAIMED IT TO BE THE FIRST NOT ICE SENT TO THE ASSESSEE BY THE AO. 8. FURTHER ON PERUSING THE LD. CIT(APPEALS) ORDER WE OBSERVED THAT THE LD. CIT(APPEALS) HAD NOT EXAMINED THE FACTS AS TO THE QUANTUM OF EXPORT TURNOVER AND LOCAL TURNOVER AND HAVE ALSO NO T EXAMINED THE RELEVANT DOCUMENTS AS TO THE EXPORT TURNOVER. FURTHER IT IS EVIDENT THAT THE LD. AO ALSO DID NOT HAVE AN OPPORTUNITY TO EXAMINE THE AFF AIRS OF THE ASSESSEE IN DETAIL. THE ACKNOWLEDGEMENT WHICH WAS PRODUCED BY THE LD. DR BEFORE US WHICH ESTABLISHES THE SERVICE OF THE NOTICE HAVE NO T BEEN DEALT WITH BY THE LD. CIT(APPEALS) IN HIS ORDER PERHAPS THE ISSUE WA S NOT BROUGHT OUT BEFORE HIM. 9. CONSIDERING ALL THESE FACTS WE ARE OF THE FIRM OPINION THAT ALL THE ISSUES RAISED BY THE ASSESSEE IN THE CROSS OBJECTI ON AND REVENUE IN ITS APPEAL HAVE TO BE REMITTED BACK TO THE FILE OF LD. AO FOR FRESH CONSIDERATION IN THE INTEREST OF JUSTICE. IT IS ORDERED ACCORDIN GLY. THE ASSESSEE IS DIRECTED TO COOPERATE WITH THE PROCEEDINGS OF THE R EVENUE AND THE LD. AO IS ALSO HEREBY DIRECTED TO COMPLETE THE ASSESSMENT AFT ER FRESH CONSIDERATION EXPEDITIOUSLY AND JUDICIOUSLY CONSIDERING ALL THE F ACTS AND AS PER LAW. 10. IN THE RESULT THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.851/B/09 & CO 55/B/09 PAGE 7 OF 7 PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF FEBRUARY 2010. SD/- SD/- ( K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE DATED THE 10 TH FEBRUARY 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.