TMI Blog2008 (12) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... here was some force in the submissions made by the assessee. The assessee was not maintaining day-to-day stock register or quantitative details of colour and chemicals used and the consumption of the coal and diesel. The assessee during the course of hearing accepted defects as pointed out by the Assessing Officer and agreed to lump sum addition of Rs. 6 lakhs on account of decline in gross profit. 3. In appeal, the CIT(A) deleted the addition observing that lump sum estimated addition cannot be sustained. 4. The learned DR argued and submitted that the CIT(A) was not justified in deleting the addition when the assessee during the course of hearing accepted the defects pointed by the Assessing Officer and agreed to the addition of Rs. 6 lakhs to its income. 5. The learned AR of the assessee argued that the assessee had not agreed to any addition on account of decline in gross profit during the course of assessment proceedings. The mention by the assessee that the assessee agreed to lump sum addition of Rs. 6 lakhs to its income is actually incorrect. Hence, he submitted that the order of the CIT(A) should be upheld. 6. We have heard the rival submissions and perused the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur to arrive at an agreed order. But I am unable to persuade myself to concur with his conclusion. 2. The assessee-company is engaged in dyeing and printing of man-made fabrics (MMF) on job-work basis. During the year under consideration, the assessee has shown gross profit at Rs. 60,79,966 at the rate of 16.83 per cent as against Rs. 47,40,9,52 at the rate of 19.73 per cent in the immediate preceding year. Thus, there is a decline in GP. The assessee explained the decline in GP was due to steep hike in purchase price of colours and chemicals which are the only raw material used in job work. The Assessing Officer vide order sheet entry dated 13-4-2007 brought to notice of the assessee that company has not maintained day-to-day stock register or quantitative tally in respect of colour and chemicals utilized and there is no record for consumption and coal. The Assessing Officer also brought to notice of the assessee that in a manufacturing unit, maintenance of production/wastage register, stock register is a must to prove the genuineness of the production. In view of the above, the Assessing Officer made a lump sum addition of Rs. 6lakhs on agreed basis on account of decline in gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained day-to-day stock register and quantitative tally in respect of colour and chemicals utilized by the assessee-company. There was also no record for consumption of coal and diesel. The assessee has also not maintained production/wastage register in manufacturing unit. The Assessing Officer considered the facts of the case and had made the addition on sound footing on agreed basis. Therefore, the Assessing Officer's action in making the lump sum addition of Rs. 6,00,000 is in order and, hence, the order of the learned CIT(A), Surat is not acceptable." 6. After considering the conspicuous facts of the case, main question falls for our consideration, whether the learned CIT(A) is justified in entertaining the appeal when addition of Rs. 6 lakhs was made on agreed basis. In the assessment order, the Assessing Officer has clearly mentioned that addition of Rs. 6 lakhs has been made on agreed basis and the learned CIT(A), in my opinion, clearly erred in deleting the same by stating that the same was made without basis. In my opinion, the learned CIT(A) erred in entertaining the appeal particularly when the assessee has not filed any application for rectification. This view is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Assessing Officer the assessee had ever agreed to the addition of Rs. 6 lakhs. After making this verification, he will re-adjudicate the addition of Rs. 6 lakhs afresh in accordance with law after giving opportunity of being heard to both the sides. 9. In the result, for the statistical purposes, the revenue's appeal is allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is difference of opinion, the matter is being referred to the Hon'ble President of ITAT with a request that the following proposed question may be referred to a Third Member or pass such order as the Hon'ble President may think fit: "Whether on the facts and in the circumstances of the case, the order of the learned CIT(A) should be upheld or the addition of Rs. 6 lakhs be restored to the file of the CIT(A) for re-adjudicating the same afresh?" THIRD MEMBER ORDER Per R.P. Garg, Senior Vice-President (As a Third Member).-The President, Income-tax Appellate Tribunal has nominated me as Third Member to resolve following point of difference between the Judicial Member and Accountant Member: "Whether on the facts and in the circumstances of the case, the order of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order and that in absence of any such material the contention of the assessee that he never agreed for such an addition cannot be brushed aside. He also observed that no defect in the explanation given by the assessee before the Assessing Officer in respect of decline in the rate of gross profit was found by the revenue and that the Assessing Officer also could not point out the above increase in the raw material by 0.69 per cent in comparison to increase of only 0.09 per cent in the rate of job charges could not have resulted in decline in gross profit by 2.90 per cent. In the above circumstances, he saw no error in the order of the CIT(A) and confirmed his order. 4. On the contrary, the learned Judicial Member observed that in the assessment order, the Assessing Officer has clearly mentioned that addition of Rs. 6 lakhs has been made on agreed basis and the learned CIT(A), according to him, clearly erred in deleting the same by stating that the same was made without basis. In his opinion, the learned CIT(A) erred in entertaining the appeal particularly when the assessee has not filed any application for rectification. He is fortified this view by the decision of Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.3 It is being the fact that we have accepted the defects as pointed out by the ld. Assessing Officer that the company has not maintained the day-to-day stock records. And, we have not agreed to any addition proposed by ld. AG. However, it is later on learnt by us that non-maintenance of day-to-day stock records is not mandatory and is not any more defect. 3.4 Reading carefully in para 6 of the order of Ld. Assessing Officer, it clearly reveals that the admission to fact by the assessee has been misunderstood and wrongly recorded in the order. 3.5 Aggrieved by the addition of Rs. 6 lakhs, we have filed the appeal as a remedy and not filed any application for rectification. Further in view of judgment of Punjab High Court in the case of Chhatmal Agrawala v. CIT, 116 ITR 694, the Court has observed that in a case where the admission of the assessee has been wrongly recorded in the assessment order, it is open to the assessee to file a petition for rectification, but where the said order is appealable, it is equally open to the assessee to avail of the remedy of appeal and appellate authority will have to decide the appeal on merits. 3.6 The CIT(A) has rightly judged the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a surrendered amount. They merely observed that the same should ordinarily be filed after exhausting the remedy of getting impugned order rectified by the Assessing Officer himself. This is merely a suggestion regarding procedure to be followed and it does not mandatorily lay down that an appeal against the addition of a surrendered amount per se would be incompleted. The one important point is to be noticed in case before your honour that there is no fact finding which is averse in nature, except non-maintenance of day-to-day stock record, recorded by the ld. Assessing Officer and that led to the assessee to conclude the assessment on agreed addition. The agreed to fact of non-maintenance of stock record and agreed to addition on account of GP fall is entirely different and misinterpreted written in order of ld. AD, which has been verified by the Ld. CIT(A) as a whole ground of appeal before him and he has rightly deleted the entire addition on verification of each record before him in interest of justice. Even if there is agreed addition, a mere admission or surrender in ratio of an income cannot operate as an estoppel and the income-tax authorities are bound to consider a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itle an assessee to file an appeal against the order of the ITO before the AAC where the assessee denied his liability to be assessed under the Act. It would be a different matter if the AAC comes to the conclusion that the order was passed on the admission of the assessee and the assessee is unable to explain that the admission was wrongly recorded under some mistaken belief of fact and law. In that case, the AAC may dismiss the appeal on merits. In a case where the admission of the assessee has been wrongly recorded in the assessment order, it is open to the assessee to file a petition for rectification, but, where the said order is appealable, it is equally open to the assessee to avail of the remedy of appeal and the appellate authority will have to decide the appeal on merits. Nor is it necessary for the assessee to file an affidavit in support of his submissions in all cases. The assessee may choose to file an affidavit in support of his submissions and if he chooses not to file any such affidavit, the circumstances appearing on the file have to be judged in the light of the material available and if there are sufficient circumstances on the file to come to the conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is equally open to the assessee to avail of the remedy of appeal and the appellate authority will have to decide the appeal on merits. The crux of the problem is, where the admission was wrongly recorded in the order, the Punjab and Haryana High Court held that the appeal lies to the Appellate Assistant Commissioner. On these facts, in my opinion, the right course is to set aside the matter to the file of the CIT (Appeals) to find out from assessment record and verify whether before the Assessing Officer, the assessee had ever agreed to the addition of Rs. 6 lakhs and after making this verification, to adjudicate the addition of Rs. 6 lakhs afresh in accordance with law. 13. The observation by the learned Accountant Member that the DR could not produce any material that the assessee himself had agreed for the trading addition which also found in the assessment order and in absence of any such material, the contention of the assessee that he never agreed for such addition cannot be brushed aside does not depict the factual position. In the written submission of the assessee, he agrees that there was an admission but has given a twist to the fact that the said concession was for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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