M/S B.M. Transport, Jamshedpur V. DCIT, Circle-1, Ranchi

CO 10/RAN/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4195 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 15-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 40A(3); 251; 143(2)

Judgement Text

ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘RANCHI’ BENCH, KOLKATA [VIRTUAL COURT HEARING AT KOLKATA] Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Manish Borad, Accountant Member I.T.A. No. 218/RAN/2019 Assessment Year: 2015-2016 Deputy Commissioner of Income Tax,....................................Appellant Circle-1, Ranchi, C.R. Building (Annexe), 4 t h Floor, Main Road, Ranchi -Vs.- M/s. B.M. Transport,...............................................................Respondent Shop No. E, Sector Market, Telco Colony, Jamshedpur-831041 [PAN: AAFFB1735J & C.O. No. 10/RAN/2019 (arising out of ITA No. 218/RAN/2019) Assessment Year: 2015-2016 M/s. B.M. Transport,...............................................................Cross Objector Shop No. E, Sector Market, Telco Colony, Jamshedpur-831041 [PAN: AAFFB1735J -Vs.- Deputy Commissioner of Income Tax,....................................Respondent Circle-1, Ranchi, C.R. Building (Annexe), 4 t h Floor, Main Road, Ranchi Appearances by: Shri N.K. Khalkho, Sr. D.R., appeared on behalf of the Revenue Shri Jagdish Khandelwal, C.A., appeared on behalf of the assessee Date of concluding the hearing : May 11, 2022 Date of pronouncing the order : May 26, 2022 ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 2 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The Revenue is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), Ranchi dated 01.03.2019 passed for assessment year 2015-16. 2. On receipt of the notices in the Revenue’s appeal, the assessee has filed Cross Objection bearing No. 10/RAN/2019. First we take the appeal of the Revenue, i.e. ITA No. 218/RAN/2019. The grounds of appeal taken by the Revenue read as under:- (1) Whether the Ld. CIT (A) was right in allowing relief to the assessee on the basis of submission made by the assessee under Rule 46A(4) of the Income Tax Rules without hearing the other party/(the AO) on those submissions especially in view of the fact that the assessee was given enough times and opportunities to produce evidences and substantiate claims which it could not do during assessment proceedings. (2) The Ld. CIT (A) has erred in not subjecting the submissions made by the assessee for a Remand Report from the Assessing Officer and the same is in violation of Rule 46A of the Income Tax Rules and that of natural justice that order was passed without hearing the other party (the AO)..?? The admissibility of additional evidences submitted by the assessee before appellate stage without calling for a Remand Report is not justifiable. (3) The Ld. CIT(A) has erred in fact and law by not considering the examination and findings of the Assessing Officer during assessment proceeding and failure of the assessee to substantiate its claim regarding disallowances made on account of Route Expenses amounting to Rs. 1,98,61,327/- and Ex-gratia expenses amounting to Rs. 31,93,714/- and relying on assessment orders and CIT(A) orders of the assessee for old assessment years despite the fact that the findings of the Assessing Officer in different years were not the same. 3. Brief facts of the case are that the assessee-firm filed its return of income on 30.09.2015 declaring total income of Rs.94,,5,7,470/-. The firm was engaged in transportation business. It transports TATA Vehicle Chasis from Jamshedpur to different locations in India. Its case was ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 3 selected for a limited scrutiny but later on converted into the regular scrutiny and a notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the ld. Assessing Officer that the assessee has made payments under different heads in violation to section 40A(3) of the Income Tax Act. Section 40A(3) contemplates “where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure”. In other words, if an assessee incurs any expenditure in cash exceeding Rs. 20,000/- by making a payment to a person in a day, then deduction of such expenditure would not be allowed to the assessee. The assessee is supposed to incur the expenditure through banking channel. The ld. Assessing Officer was of the view that the assessee has incurred expenditure in violation of this sub-section and accordingly he reproduced the ledgers and thereafter worked out the disallowance under section 40A(3). He determined the taxable income of the assessee at Rs.3,36,46,267. The computation of income reads as under:- Total income as per ITR Rs.94,57,470/- Addition under the head income from business: (i) As per para 4.1 above Rs.98,400/- (ii) As per para 5 above Rs.2,13,056/- (iii) As per para 6 above Rs.1,77,500/- (iv) As per para 7.1 above Rs.31,93,714/- ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 4 (v) As per para 8 above Rs.6,44,800/- (vi) As per para 9.1 above Rs.1,98,61,327/- Rs.2,41,88,797/- Total income assessed u/s 143(3) of the Act Rs.3,36,46,267/- Rounded off u/s 288A of the Act Rs.3,36,46,267/- Dissatisfied with the additions, the assessee carried the matter in appeal before the ld. CIT(Appeals). 4. The ld. CIT(Appeals) has examined all the details analytically. He considered all the vouches, ledgers and reproduced the details in tabular form in the impugned order. The impugned order is running into 280 pages and basically from page no. 89 to 268. The ld. 1 st Appellate Authority has only reproduced the details of expenses. Thereafter recorded the following finding:- “The ld. DCIT had disallowed Rs.1,98,61,327/- as payment made in excess of Rs.20,000/- which is totally wrong. The details of route expenses of Rs.1,98,61,327/- clearly shows that there are no payment in excess of Rs.20,000/- to a single person. The break-up of route expenses exceeding Rs.20,000/- aggregating to Rs.1,98,61,327/- is as follows:- Driver wages Rs.88,85,374/- Fooding expenses Rs.41,16,907/- Diesel En-route Rs.68,59,046/- Total Rs.1,98,61,327/- However, as per the audited profit & loss account, the total route expenses is Rs.3,04,53,604/- and the break-up of the same is as follows:- Driver wages Rs.1,40,08,658/- Fooding expenses Rs.61,21,174/- Diesel En-route Rs.1,03,23,772/- Total Rs.3,04,53,604/- ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 5 Route expenses includes additional diesel expenses incurred on route due to different long destinations. It is incurred in normal business course and paid by all assesses who are engaged in the same line of business. The expenses debited in expenses in this type of business. So The Ld. DCIT has wrong in disallowing Route Expenses amounting to Rs. 1,98,61,327/-. The findings of the AO as per the assessment order for the year under consideration, the findings of the AO and the Ld. CIT(A)s for the A.Ys. 2008- 09, 2009-10 & 2010-11, the written & oral submission of the AR have been considered. The following are relevant for deciding the issue under consideration and simultaneously the issue under consideration is also adjudicated as under: (i) As per para 9.1 of the assessment order, the AO has examined the Route expenses and stated that on 779 times, the Appellant has incurred cash expenses under the head of Route expenses and therefore invoked the provisions u/s 40A(3) and disallowed Rs. 1,98,61,327/-. (ii) During the appellate proceedings on 08.01.2019, the Appellant was required to furnish the complete details, date wise & destination wise (from & to) break-up of Route expenses. These details were sought as per the provisions of Rule 46A(4) and thereafter the Appellant has also filed the requisite details as per the written submission dated 25.02.2019. (iii) As per the above written submission, the AR has furnished comprehensive details of Route expenses of 779 items in which amount debited in the ledger account is more than Rs. 20,000/- as well as breakup of required details. The AR has submitted the break up of Rs. 1,98,61,327/- as amount paid to drivers wages of Rs. 88,85,374/- and for fooding of drivers of Rs. 41,16,907/- and for Diesel en- route expenses of Rs. 68,59,046/-. It has been stated that a single entry has been passed for the total payments made to all the drivers in a single day and the AO has erroneously presumed on her own that such payments were made to a single person. The AR further argued that, had the Appellant been confronted or a show cause notice issued to the Appellant, the Appellant could have satisfactorily explained to the AO at that point of time itself and the AO could have appreciated the correct factual position and would not have taken such erroneous decision. Accordingly, this ground of appeal is partly allowed”. 5. With the assistance of the ld. representatives, we have gone through the record carefully. A perusal of the grounds of appeal taken by the Revenue would reveal that in Grounds No. 1 & 2, Revenue has pleaded that the ld. CIT(Appeals) has entertained fresh material by exercising the ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 6 powers under Rule 46A sub-Rule (4) without providing an opportunity of hearing to the Assessing Officer. 6. In order to appreciate these two grounds of appeal, we deem it appropriate to take note of Rule 46A, which reads as under:- “46A. (1) the appellant shall not be entitled to produce before the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer except in the following circumstances, namely- (a) Where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer, or (c) Where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) Where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity- ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 7 (a) to examine the evidence or document or to cross examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271”. 7. A bare perusal of this Rule would indicate that sub-Rule (1) prohibits the appellant i.e. assessee to produce any fresh evidence whether oral or documentary which was not produced before the ld. Assessing Officer. The fresh evidence can be produced on fulfilment of the circumstances narrated in clause (a) to (d) of sub-Rule (1). These clauses further contemplate that – (a) an assessee would be permitted to produce fresh evidence if Assessing Officer has refused to admit evidences, which ought to have been admitted; (b) where the assessee was prevented by sufficient cause from producing such evidence before the ld. Assessing Officer; (c) where the assessee was prevented by sufficient cause from producing before the ld. Assessing Officer any evidence, which is relevant to any ground of appeal; or ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 8 under clause(d) where the ld. Assessing Officer did not permit the assessee to produce the evidence. 8. Sub-Rule 2 of Rule 46A further contemplates that no evidence will be entertained by the ld. 1 st Appellate Authority unless an opportunity is given to the ld. Assessing Officer and a finding for admitting such evidence is not recorded in writing. After admission of such evidence, it can only be considered by the ld. 1 st Appellate Authority after an opportunity to rebut this evidence is being granted to the ld. Assessing Officer under sub-Rule (3). The sub-Rule (4) empowers the ld. CIT(Appeals) to call for any evidence for just decision of the appeal. The ld. CIT(Appeals) may direct any party to produce any document, any evidence, any order to decide the appeal. 9. A perusal of the grounds of appeal raised by the Revenue would show that evidence has been called for under sub-Rule (4) by the ld. CIT(Appeals). The grievance of the Revenue is, such evidence has been taken into consideration without giving opportunity to the ld. Assessing Officer. To our mind, there is no force in the arguments of the revenue because if additional evidence is being entertained by the ld. 1 st Appellate Authority on the application of the assessee, then an opportunity is to be granted to the ld. Assessing Officer. But if such evidence is being called upon by the ld. 1 st Appellate Authority by exercising the power under sub-Rule (4), then no opportunity is required, because the ld. 1 st Appellate Authority has a co-terminus power with that of the Assessing Officer. The ld. 1 st Appellate Authority has been empowered to enhance or reduce the assessed income by giving a notice to the assessee. It can enhance the assessed income. Therefore, the powers exercised by the ld. Commissioner under sub-Rule (4) of Rule 46A is equivalent that of ld. Assessing Officer for calling of the information and the Rule does not ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 9 contemplate any opportunity required to be given to the Assessing Officer. 10. Apart from the above, we find that all these details were submitted before the ld. Assessing Officer. The assessee has earlier presented the ledger copy. Thereafter it has filed individual invoices explaining how expenses have been accounted in the accounts. Thus it is only ancillary evidence in support of the evidence already filed before the ld. Assessing Officer and reproduced in the assessment order. The assessment order contains voucher no., invoice no. and the copies of those vouchers have been tabulated and produced before the ld. 1 st Appellate Authority. Therefore, we do not find any merit in the first two grounds of appeal. 11. As far as Ground No. 3 is concerned, we find that the ld. Assessing Officer has made the above addition on the ground that payments were made in violation to section 40A(3) of the Act. But the ld. 1 st Appellate Authority has factually considered the details of payments and arrived at a conclusion that these payments were not made to a single person in a day exceeding the limit contemplates in section 40A(3). Thus according to the finding of the ld. CIT(Appeals), there is no default under section 40A(3). 12. After careful consideration of the whole details tabulated in the impugned order, we are satisfied that the ld. 1 st Appellate Authority has analysed the facts in right perspective. Rather on the other hand, the ld. Assessing Officer has misconstrued the payment details of the assessee for working out the addition. Therefore, after going through the order of the ld. CIT(Appeals), we do not find any error in it and this ground of appeal is also rejected. ITA No. 218/RAN/2019 A.Y. 2015-2016 & C.O. No. 10/RAN/2019 (in ITA No. 218/RAN/2019) A.Y. 2015-2016 M/s. B.M. Transport 10 13. In the result, the appeal of the Revenue is dismissed. 14. As far as the Cross Objection filed by the assessee is concerned, the assessee has raised four grounds of appeal. Sub-clause (4) of section 253 authorises every respondent to file Cross Objection on receipt of notice in an appeal against any part of the order impugned in the appeal. The grounds of Cross Objection do not depict the grievance of the assessee against the impugned order. They are in support of the finding recorded by the ld. 1 st Appellate Authority. Therefore, the Cross Objection is not maintainable. All these grounds of Cross Objection are rejected. 15. In the result, the appeal as well as Cross Objection are dismissed. Order pronounced in the open Court on May 26 th, 2022. Sd/- Sd/- (Manish Borad) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 26 th day of May, 2022 Copies to : (1) Deputy Commissioner of Income Tax, Circle-1, Ranchi, C.R. Building (Annexe), 4 t h Floor, Main Road, Ranchi (2) M/s. B.M. Transport, Shop No. E, Sector Market, Telco Colony, Jamshedpur-831041 (3) Commissioner of Income Tax (Appeals), Ranchi (4) Commissioner of Income Tax , (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.