1981-VIL-24-ITAT-DEL
Equivalent Citation: TTJ 013, 442,
Income Tax Appellate Tribunal DELHI
Date: 30.11.1981
DINA NATH PREM KUMAR.
Vs
INCOME TAX OFFICER.
BENCH
Member(s) : B. S. AHUJA., V. DONGZATHANG.
JUDGMENT
The assessee filed a return showing an income Rs. 62,720.The assessee attended from time to time with his counsel before the ITO. It is doing business in purchase and sale of angle iron, sheets etc. of various metals for manufacturing of trunks and bus bodies. Books of account, such as a ledger, cash book were seen by the ITO with the help of vouchers and bank pass book. No stock register had been maintained for the goods dealt in. Even the opening and closing stock inventories had not been prepared. A G.P. of Rs.81,004 was declared which came to 6.8% as against the G.P of 8.9% in the immediately preceding year. The assessee was asked to explain the fall and it stated that the fall was due to the intention of the assessee to increase the sales at a lower margin of profit. The other reason given was that due to emergency which was imposed in June 1975 control of price was brought into force by the Government. The ITO made efforts to scrutinise the ledger and cash book and found them defective.
2. The ITO further mentioned that the total goods purchased upto a certain date i.e.27th August, 1975 were checked up including the opening stock declared by the assessee. Similarly, the total sales upto that date were checked up. As the assessee had declared the G.P. of about 7% by taking the gross profit earned on this amount of sale, the net sales should be equal to the purchases. However, in the assessee’s case a difference was noticed. The assessee’s purchase and stock upto date was found to be less by Rs.8,000. Thus it was clear that although the assessee had no stock he had declared higher sales which meant that the assessee had not been entering all the transactions in the books of account maintained by him. He, therefore, rejected the book results. In the absence of stock register also it could not be found whether all the purchases had been accounted for in the sales of the closing stock. Expenses on labour freight etc. had been included in the purchase figures without vouchers. In view of these defects and after discussion with the assessee the assessee agreed to an addition of Rs.26,000 to the G.P. The ITO accordingly made the addition.
3. This addition was challenged before the AAC who found that in fact there was no difference on27th August 1975between the purchases and the sales as observed by the ITO. However, there was absence of stock tally and the closing stock details of the accounts were not capable of verification. The assessee had also agreed to the addition and both the assessee and his counsel had signed the order sheet. He, therefore, dismissed the appeal.
4. The assessee is aggrieved and has come up in appeal. The main reason which compelled the ITO to reject the books appears to have been discrepancy which he noticed between the purchases and sales upto27th August, 1975. He noted some other defects also and the assessee agreed to the addition of Rs. 26,000. But that was obviously on account of the fact that the ITO had pointed out the discrepancy which in fact did not exist. The contention of the ld. Deptl. Rep. is that the assessee having agreed to the addition, cannot claim to be aggrieved and, therefore, no appeal lies. Reliance is placed on the Madras High Court ruling in the case of Ramanlal Kamdar vs. CIT 1977 CTR (Mad) 211: (1977) 108 ITR 73(Mad). That was a case in which the ITO proposed to pass an order u/s 154 and the assessee did not object to it and when appeal was filed, the Madras High Court held that the assessee cannot be aggrieved by the order and, therefore was not entitled to appeal before the AAC. The Allahabad High Court in the case of Sterling Machine Tools vs. CIT (1980) 123 ITR 181 (All) held that unless it could be said that the letter given by the assessee in the case agreeing to the addition was written under a misapprehension and ignorance of the expert’s report, no appeal would lie against the assessment made on agreed basis.
5. As against this the ld. counsel for the assessee had relied on the Punjab & Haryana High Court decision in the case of Chhatmull Aggarwal vs.CIT (1979) 8 CTR (P&H) 368 :(1979) 116 ITR 694 (P&H) where their Lordships held that the right of appeal by an assessee is not barred where an assessment order is passed on the admission of the assessee. The admission made under misapprehension can be challenged in appeal before the AAC.
6. Looking to all these rulings and the facts of the case we are satisfied that the admission of the assessee to be assessed on an addition of Rs. 26,000 was brought about by a misapprehension that the ITO had detected a difference between the purchases and sales which in fact was not correct. Under the circumstances, therefore, interest of justice demands that the orders of the authorities below should be set aside and we do so. We direct the ITO to make the assessment afresh. If there are any defects in the books he should point them out and then decide whether any addition is called for and whether the results based on books of account needs to be rejected.
7. The appeal shall be treated as allowed for statistical purposes.
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