TMI Blog2010 (12) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 24-12-2010 - R.K. Gupta, M.L. Gusia, JJ. Mahendra Gargieya, for the Applicant Sanjay Kumar, for the Respondent ORDER R.K. Gupta, Judicial Member 1. These are two miscellaneous applications filed by assessee arising out of order of Tribunal in ITA No. 22/Jp/2002 and C.O. No. 5/Jp/2002 and ITA No. 322/Jp/2003 relating to asst. yr. 1998-99 dt. 31st May, 2007. 2. The appeal of the Department and cross-objection of the assessee were disposed of by the Tribunal by which the appeal of the Department was allowed in part and the cross-objection of the assessee was rejected. 3. The main issue in the appeal of the Department was against in accepting the tax audit report under s. 44AB in the absence of books of account and other relevant documents which were in its possession even after the date of survey but were not produced before Dy. Director of IT (Inv.)/AO on the ground of illness of one of the partners and thereby holding action of the AO in invoking provisions of s. 145(3) of the Act as bad in law. 4. In second and third ground, the Department has objected in deleting trading addition of Rs.2.37 crores or so in silver ornaments, Rs.2.34 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 44AB and other enclosures, the assessee declared an income of Rs.5,20,200. The AO issued notice under s. 143(2) on 8th Oct., 1999 and again on 22nd Oct., 1999. A questionnaire calling for certain details pertaining to the case was also issued on 20th Nov., 2000. The assessee made compliance except producing the books of account. The AO called for the books of account through a questionnaire issued on 20th Nov., 2000 along with notice under s. 143(2) but the assessee again made compliance except production of the books of account on the excuse that the same have been destroyed in fire on 4th June, 2000. The AO, therefore, invoked provisions of s. 145 of the Act on two basis, firstly books of account could not be produced before him by the assessee and secondly there were certain discrepancies noted during the course of survey proceedings. The Jt. CIT declined to interfere with the assessment proceedings on the application of the assessee under s. 144A on 30th March, 2000 requesting him to direct the AO not to estimate the gross profit in respect of various items of its trading on the basis of earlier years result since business was quite distinct and different this year. The AO c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port under s. 44AB which was filed with the return of income. The auditor Shri A.K. Khandelwal, chartered accountant who had conducted the audit of books of account and issued audit report on 8th June, 1998 was summoned. He deposed on oath stating that he had conducted the tax audit in the case of the assessee firm and during the course of such audit he had verified the various accounts of the assessee firm by scrutinizing the purchases, sales and expenses from the relevant vouchers and got the summary prepared which was stated to be available with him in a floppy as its working tools, which if needed could be produced for verification. He thus was agreeable to this fact that his client i.e., the assessee had maintained regular books of account duly supported by necessary vouchers and bills and no discrepancies was noticed during the conduct of audit and a normal report was therefore issued by him i.e., without any adverse comments as per the guidelines of ICAI. The AO was allowed opportunity to cross-examine Shri Khandelwal. The AO accordingly cross-examined Shri Khandelwal mostly on the point of discrepancy noticed during the course of survey operations to which Shri Khandelwal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered accountant as defined under s. 288 of the Act and report under s. 44AB was filed in the normal manner with the return of income. It was argued that even otherwise the books of account were very much there from the very initiation of the assessment proceedings in the month of October, 1999 till the date of their destruction by fire on 6th April, 2000. It was claimed that the assessee firm had maintained regular and proper books of accounts, duly supported by record, purchase and sale bills, stock register, sale register, purchase register etc. which were found at the time of survey. The survey party had examined the same and certain mistakes were noticed by them. The survey party found stock in hand and cash in excess/short and made their own calculation in haste. The tax auditors were made aware about the discrepancies noticed by the survey party in stock and cash. The tax auditors had checked the records thoroughly and ultimately found that there was no discrepancy in the books of account under audit after scrutiny, examination and verification audit report was issued. The tax auditors did not make any observation or remark as to defect in the method of accounting, manner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book of the Department. Various questions put by Department were brought to the notice of the Bench and various discrepancies noted were also explained to the Bench which has been explained at p. 10 of its order by the Tribunal. In para 3.11 it has been stated that the total concealment of income detected through survey as per Addl. Director of IT's report was Rs.12,42,734 on account of stock excess and shortfall and Rs.3,61,348 on account of cash. Regarding the fact that during the financial year 1997-98 the VDIS, 1997 was in operation and in that a large number of persons made declarations disclosing unaccounted for precious stones and gold and silver bullion/jewellery. The facts recorded in this respect by the AO were again explained and it was submitted that books of account were not produced neither before AO nor before Dy. Director of IT. Therefore, the AO taking into consideration the past history of the case has rightly rejected the books of account and had applied GP rate. 10. Regarding the fire, it was observed that it is surprising that in this purported fire only the account books were burnt and that also very selective account books such as sale vouchers which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was more profit. The AO in this regard has observed that the purchases of jewellery have been made after making appropriate deduction varying from 15 to 20 per cent in respect of silver articles and 5 to 10 per cent in respect of gold articles on account or impurities. Generally margin of profit in this line of business depends to a great extent on such percentage of deduction. The Saraffs melt the purchased jewellery and then add fresh impurities and sell such processed/manufactured jewellery at 100 per cent weight. Thus, on purchase of silver articles the Saraffs accept such articles of 100 gms. weight at the value of 85 gms. or 80 gms. weight depending upon the percentage of impurity and while selling the same he charges value of 100 gms. from the customers. Similarly, for gold, he accepts articles of 100 gms. weight at the value of weight of 90 to 95 gms. Thus his normal profit on this item of impurity alone comes to more than 15 to 20 per cent in respect of silver articles and 5 to 10 per cent in respect of gold articles. In addition to this there is the normal profit rate which depends upon the market rate on a particular day and also the manufacturing charges and profit ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account, the audit report was not rightly accepted by the AO and in our view he had rightly rejected the books' result to estimate the income. Invocation of s. 145 by him is thus upheld. 3.22. Now we have to examine as to whether estimation of income in the present case was fairly made by the AO or not. In the asst. yr, 1997-98 the assessee had shown gross profit at 16.89 per cent in gold and 13.65 per cent in sliver and in asst. yr. 1996-97 in respect of gold it was 57.28 per cent and in silver 18.27 per cent whereas in the present year under consideration i.e., asst. yr. 1998-99 the assessee has shown GP rate of 0.39 per cent in respect of gold ornaments, 0.3 per cent in silver ornaments and 0.17 per cent in diamonds (traded for the first time). The AO ignored comparable instances furnished by the assessee in the case of Jain Jeweller and Ratan Sagar of Kota respectively showing 0.20 per cent and 0.24 per cent gross profit on the basis that in those cases assessments under s. 143(3} were not made. 3.23. In our view, the AO has rightly ignored those claimed to be comparable instances because the assessee could not establish before the AO as to whether the claimed compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the paper book filed before the Tribunal was not taken into consideration by the Tribunal. 17. Various case laws were cited before Tribunal i.e., CIT us. Eastern Commercial Enterprises (1995) 123 CTR (Cal) 217: (1994) 210 ITR 103 (Cal), (2001) 169 CTR (SC) 406: (2001) 251 ITR 7 (SC) (supra). These were relied upon by assessee. However, there is no whisper about these case laws in the order of the Tribunal. 18. Regarding the past history, it was submitted that there was no diamond sale in the past and in diamond sales there is very little margin and, therefore, without taking into consideration this aspect, the Tribunal has applied a GP rate of 15 per cent on account of silver ornaments, 4 per cent on account of diamond articles and 10 per cent on account of gold articles. 19. It was further submitted that for asst. yr. 1999-2000 even lower gross profit declared by assessee has been accepted by the AO while passing assessment order under s. 143(3} and this fact was brought to the knowledge of the Tribunal. However, there is no whisper about this fact also. 20. It was further submitted that out of Rs.83.73 crores of total sales, Rs.47.17 crores relate to diamond, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has not been taken into consideration by the Tribunal as Tribunal in operative paras of its order has mentioned about the order of AO only. The assessment in this case was completed by the AO by rejecting the books of account in view of provisions of s. 145(3) and thereafter the profit has been estimated on the basis of past history of the case. The learned CIT(A) decided the appeal of the assessee and the ground against rejection of books of account and applying the GP rate on the basis of past history were allowed in favour of the assessee. While allowing the ground of the assessee, the learned CIT(A) has given his findings in paras 5 to para 5.19 at pp. 15 to 22. The brief facts of the case and submissions of the assessee and objection of AO have been considered by learned CIT(A) at pp. 2 to 15 of his order. The learned CIT(A) has discussed the issue in detail that AO issued only notice under s. 143(2) and no notice was issued under s. 142(1) for calling upon the books of account. Provisions of ss. 142 and 143(2) have been discussed in detail by learned CIT(A) and then by placing reliance on various case laws i.e., in the case of P.S. Subramaniam. Chettiar vs. Jt. CTO 18 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A). Reliance was placed on various case laws i.e., in the case of E.M.C. (Works) (P) Ltd. vs. ITO (1963) 49 ITR 650 (All), in the case of AddL CIT vs. Jay Engineering Works Ltd. (supra) and in the case of CIT vs. Smt. Godavaridevi Saraf (1978) 113 ITR 589 (Bom). The binding circular of CBDT and the decision of the Tribunal on identical facts i.e., in the case of ITO vs. Girish M. Mehta(2006) 99 TTJ (Rajkor) 394 and the decision in the case of Pushpanjall Dyeing and Printing Mills (P) Ltd. vs. Jt CIT (supra) were relied upon. 27. After going through the order of Tribunal, we noticed that there is even no whisper in respect to these decisions relied upon by learned counsel of the assessee during the hearing of the appeal before the Tribunal. The statement of Shri A.K. Khandelwal, the auditor of the assessee was recorded by learned CIT(A) under s. 131. The AO was allowed cross-examination. However, there is no whisper in the order of the Tribunal about these facts. The most vital facts which in our considered view remained to be unconsidered is that it was specifically mentioned before Tribunal in para 5 at p. 9 of the written submission that the later development has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A). At one or two points the Tribunal has observed that learned CIT(A) was not correct in holding that provisions of s. 145(3) are not applicable. How the learned CIT(A) is not correct, no finding has been given by the Tribunal. Regarding the GP rate also, the Tribunal has observed that order of the AO seems to be correct. However, regarding the finding of learned CIT(A), the only observation that "the learned CIT(A), in our considered view, was not justified in accepting the trading result declared by the assessee". How the trading result accepted by the learned CIT(A) are not correct, no finding or discussion has been made by the Tribunal. 30. In view of these facts and circumstances, we are of the considered view that a mistake has been crept in the order of the Tribunal by not taking into consideration the vital aspect of the case and various case laws considered by learned CIT{A) and again relied upon by learned counsel of the assessee before the Tribunal through detailed written submissions. 31. The Hon'ble Supreme Court in the case of Honda Siel Power Products Ltd. vs. CIT (2007) 213 CTR (SC) 425: (2007) 295 ITR 466 (SC) has held that: "When prejudice result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to review or recall the order sought to be rectified." 33. While holding so, the Hon'ble Supreme Court has taken into consideration the decision of Hon'ble Delhi High Court in the case of CIT vs. Woodward Governor India (P) Ltd. and Ors. (2007) 210 CTR (Del) 354: (2007) 294 ITR 451 (Del), Affection Investments Ltd. vs. Asstt. CIT (2009) 222 CTR (Gig) 387: (2009) 19 DTR (Guj) 325: (2010) 326 ITR 255 (Guj), Sundarjas Kanyalal Bhatya and Ors. vs. Collector and Ors. (1990) 183 ITR 130 (SC) and Union of India and Anr. vs. Paras Laminates (P) Ltd. (1990) 87 CTR (SC) 180: (1990) 186 ITR 722 (SC) where similar findings have been given by the respective High Courts and Supreme Court. 34. In the case of Champa Lal Chopra vs. State of Rajasthan (2002) 177 CTR (Raj) 234: (2002) 257 ITR 74 (Raj), the Hon'ble Rajasthan High Court has held that in a given case where the factual mistake is so apparent that it becomes necessary to correct the same, the Tribunal would be justified in not only correcting the said mistake by way of rectification but if the judgment has proceeded on the basis of that fact, it would be justified in recalling such order. 35. In another case of CIT us. Ramesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not considering the various case laws cited before it and not taking into consideration the various vital aspects explained though detailed written submissions before deciding the issue against the assessee. Moreover, we are allowing the miscellaneous application of the assessee in view of the decision of Hon'ble apex Court in the case of Honda Siel Power Products Ltd. vs. CIT (supra). 38. In these circumstances, we hold that the order of the Tribunal is liable to be recalled and accordingly we recall the order of Tribunal in toto decided in ITA No. 22/Jp/2002 in case of M/s Gehna, C.O. No. 5/Jp/2002 filed by assessee in case of M/s Gehna and in ITA No. 322/Jp/2003 in case of Upendra Kumar Soni. 39. For the sake of clarification, the order of the Tribunal is recalled in toto to decide the same afresh after hearing both the parties afresh. 40. Another miscellaneous application which relates to the case of another assessee i.e. in case of Upendra Kumar Soni, the facts are identical and the Tribunal has passed a consolidated order i.e., in case of Gehna and Upendra Kumar Soni and we have already stated that the order of the Tribunal is recalled in toto. Therefore, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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