M/s CPCS Upham Corporation, Ghaziabad V. DCIT, New Delhi

CO 69/DEL/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7167 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UC DUBEY
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH B BENCH B BENCH B BENCH B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.492/DEL/2011 492/DEL/2011 492/DEL/2011 492/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006- -- -07 0707 07 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S CPCS UPHAM CORPORATION, M/S CPCS UPHAM CORPORATION, M/S CPCS UPHAM CORPORATION, M/S CPCS UPHAM CORPORATION, 103 103 103 103- -- -104, CS 104, CS 104, CS 104, CS- -- -1, GYAN KHAND 1, GYAN KHAND 1, GYAN KHAND 1, GYAN KHAND- -- -II, II,II, II, INDRAPURAM, INDRAPURAM, INDRAPURAM, INDRAPURAM, GHAZIABAD. GHAZIABAD. GHAZIABAD. GHAZIABAD. PAN : AACCC0924G. PAN : AACCC0924G. PAN : AACCC0924G. PAN : AACCC0924G. (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.69/DEL/2011 CROSS OBJECTION NO.69/DEL/2011 CROSS OBJECTION NO.69/DEL/2011 CROSS OBJECTION NO.69/DEL/2011 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006- -- -07 0707 07 M/S CPCS UPHAM M/S CPCS UPHAM M/S CPCS UPHAM M/S CPCS UPHAM CORPORATION, CORPORATION, CORPORATION, CORPORATION, 103 103 103 103- -- -104, CS 104, CS 104, CS 104, CS- -- -1, GYAN K 1, GYAN K 1, GYAN K 1, GYAN KHAND HAND HAND HAND- -- - II, II,II, II, INDRAPURAM, INDRAPURAM, INDRAPURAM, INDRAPURAM, GHAZIABAD. GHAZIABAD. GHAZIABAD. GHAZIABAD. PAN : AACCC0924G. PAN : AACCC0924G. PAN : AACCC0924G. PAN : AACCC0924G. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI U.C.DUBEY, SR.DR. ASSESSEE BY : SHRI SALIL AGGARWAL, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.A D.A D.A D.AGRAWAL, GRAWAL, GRAWAL, GRAWAL, VP VPVP VP : : : : THE ONLY GROUND RAISED IN THIS APPEAL BY THE REVEN UE READS AS UNDER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD .CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING ADDITI ON ON ACCOUNT OF DEPRECIATION, TRAVELING, EXPENSES, UNSEC URED LOAN, HOTEL EXPENSES, RENT EXPENSES AND LOAN & ADVA NCES TO 10% AS AGAINST 50% AT RS.1,73,41,819/-, IGNORING THAT ITA-492/D/2011 & C.O.69/D/2011 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE FAILED TO SUBSTANTIATE ITS CLAIM FOR THESE EXPENSES AND DID NOT PRODUCE ANY BILLS/VOUCHERS PROOF OF INSTALLATIO N OF MACHINERY FOR DEPRECIATION, CONFIRMATION FROM CREDITORS/DEBTORS. 2. IN THE ASSESSEES CROSS-OBJECTION, THE ASSESSEE HAS RAISED VARIOUS GROUNDS WHICH READ AS UNDER:- 1. THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN GIVING A RELIEF OF RS.1,45,87,517/- AND D ISALLOWING AN AMOUNT OF RS.27,54,302/- OUT OF TOTAL ADHOC DISALLOWANCE BY ASSESSING OFFICER MADE OF RS.1,73,41,819/-, BY RESTRICTING THE ADHOC DEDUCTIO N TO 10% INSTEAD OF 50% AS MADE BY AO. 2. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT NO NOTICE ISSUED BY ASSESSING OFFICER WAS EVER SERVED ON ASSESSEE COMPANY DURING BOTH ASSESSMENT A ND REMAND PROCEEDINGS. A. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACT S IN COMING TO A CONCLUSION THAT ENOUGH OPPORTUNITIES WE RE GIVEN TO ASSESSEE. HE OVER LOOKED THE FUNDAMENTAL FACT THAT ORIGINAL PROCEEDINGS WERE U/S 144 AND EVEN IN REMAND PROCEEDINGS THE NOTICES WERE NEVER SERVED ON THE ASSESSEE. THUS, THE ORDERS PASSED BY ASSESSING OFF ICER IN ORIGINAL AS WELL AS REMAND PROCEEDINGS ARE WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD. ITA-492/D/2011 & C.O.69/D/2011 3 3. THAT THE LEARNED CIT(A) FURTHER GROSSLY ERRED IN LAW AND ON FACTS IN NOT ADMITTING THE ADDITIONAL EVIDEN CES FILED BY ASSESSEE UNDER RULE 46A. A. THAT THE LEARNED CIT(A) IGNORED THE BASIC PRINCI PLE OF NATURAL JUSTICE BY DENYING SUCH ADDITIONAL EVIDENCE S TO BE ADMITTED. THE DOCUMENTS PRODUCED CONTAINED EACH AN D EVERY DETAIL OF THE EXPENDITURE CLAIMED BY ASSESSEE AND JUSTIFIED THOSE EXPENSES. 4. THAT THE LEARNED CIT(A) BASED HIS DISALLOWANCE O F 10% ON MERE REASONABLE GUESS WORK. WHEREAS, IN SUBSEQUENT ASSESSMENT YEARS THE RETURNED INCOME WAS ACCEPTED AS SUCH BY THE AO WITHOUT MAKING ANY ARBIT RARY DISALLOWANCES. SO, IF THE LEARNED CIT(A) WOULD HAV E APPLIED HIS MIND AND WOULD HAVE ADMITTED THE ADDITIONAL EVIDENCES, THERE WOULD HAVE BEEN NO NEED FOR ANY AD HOC DISALLOWANCE. 5. THAT THE LEARNED CIT(A) FURTHER ERRED IN NOT DEL ETING THE INTEREST CHARGED BY AO U/S 234B. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN DECLARING TOTAL LOSS OF ` 59,25,198/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT ` 1,14,16,621/- IN WHICH HE DISALLOWED 50% OF THE EXPENSES. THE LEARNED CIT(A) REDUCED TH E DISALLOWANCE TO 10%. THE REVENUE IS AGGRIEVED WITH THE RELIEF ALLO WED WHILE THE ASSESSEE IS IN APPEAL AGAINST THE ADDITION SUSTAINE D. THE LEARNED COUNSEL STATED THAT THE ASSESSMENT WAS COMPLETED EX -PARTE. HE ALSO POINTED OUT THAT NO NOTICE ISSUED BY THE ASSESSING OFFICER WAS RECEIVED BY THE ASSESSEE BECAUSE THE ASSESSEE HAS SHIFTED FR OM THE ADDRESS ITA-492/D/2011 & C.O.69/D/2011 4 MENTIONED IN THE RETURN OF INCOME. HE WAS FAIR ENO UGH TO ACCEPT THAT THE CHANGE OF ADDRESS WAS NOT INTIMATED TO THE ASSE SSING OFFICER. THEREFORE, THE ASSESSING OFFICER CANNOT BE SAID TO HAVE ISSUED THE NOTICE AT THE WRONG ADDRESS. HE, THEREFORE, SUBMIT TED THAT TECHNICALLY, THE ASSESSMENT UNDER SECTION 144 IS JUSTIFIED. HE, HOWEVER, STATED THAT EVEN IN THE BEST JUDGEMENT ASSESSMENT, THERE C ANNOT BE ANY JUSTIFICATION FOR DISALLOWANCE OF 50% OF THE EXPENS ES. MOREOVER, ASSESSING OFFICER HAS NOT ONLY DISALLOWED 50% OF TH E EXPENSES, BUT, HE ALSO DISALLOWED 50% OF UNSECURED LOANS, LOAN AND AD VANCE ETC. THERE CANNOT BE ANY JUSTIFICATION FOR 50% DISALLOWANCE OU T OF EXPENSES AND UNSECURED LOAN. THE CIT(A), WITHOUT PROPERLY APPRE CIATING THE FACTS, SUSTAINED THE DISALLOWANCE AT 10%. HE, THEREFORE, SUGGESTED THAT THE ORDERS OF AUTHORITIES BELOW MAY BE SET ASIDE AND MA TTER MAY BE RESTORED TO THE ASSESSING OFFICER FOR EXAMINING THE VARIOUS EXPENSES AND UNSECURED LOAN ETC. HE FURTHER STATED THAT SET ASIDE SHOULD BE LIMITED TO THE GROUNDS RAISED IN EITHER THE ASSESSE ES APPEAL OR IN THE REVENUES APPEAL. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE ASSE SSING OFFICER BUT HE ALSO FAIRLY ADMITTED THAT THE MATTER NEEDS PROPE R EXAMINATION AT THE END OF THE ASSESSING OFFICER. 5. WE HAVE HEARD BOTH THE SIDES AND HAVE PERUSED TH E MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSING OFFIC ER MADE THE ADDITION OF ` 1,73,41,819/- AS UNDER:- ADD : ADDITIONS AS DISCUSSED ABOVE - DEPRECIATION 268865 - SUB CONSULTANT EXP. 6250041 - TRAVELING EXP. 150338 - UNSECURED LOAN 1991997 - LOAN & ADVANCES 8492020 ITA-492/D/2011 & C.O.69/D/2011 5 - HOTEL EXPENSES 53648 - RENT EXPENSES 134910 TOTAL = 17341819 6. THE ASSESSING OFFICER SIMPLY DISALLOWED 50% OF D EPRECIATION, VARIOUS EXPENSES AND ALSO THE UNSECURED LOAN AND LO ANS AND ADVANCES. IN OUR OPINION, THERE CANNOT BE ANY JUST IFICATION FOR SUCH AD- HOC DISALLOWANCE. THE LEARNED CIT(A) REDUCED THE D ISALLOWANCE TO 10%. HOWEVER, AFTER CONSIDERING THE FACTS OF THE C ASE AND ARGUMENTS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT THE M ATTER NEEDS PROPER EXAMINATION AT THE END OF THE ASSESSING OFFICER. I N THE ORIGINAL ASSESSMENT PROCEEDINGS, THE MATTER COULD NOT BE EXA MINED BECAUSE THE NOTICE COULD NOT BE SERVED UPON THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF AUTHORITI ES BELOW AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. W E DIRECT HIM TO READJUDICATE THE ISSUES RAISED IN THE REVENUES APP EAL OR THE ASSESSEES CROSS-OBJECTION AFTER CONSIDERING THE AS SESSEES EXPLANATION/EVIDENCES AS MAY BE FURNISHED BEFORE HI M. WE ALSO DIRECT THE ASSESSEE TO FURNISH NECESSARY EXPLANATION/EVIDE NCES WITH REGARD TO VARIOUS ISSUES RAISED IN THESE APPEALS BEFORE THE A SSESSING OFFICER. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS- OBJECTION OF THE ASSESSEE ARE DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2012. SD/- SD/- ( (( (RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 25.05.2012 VK. ITA-492/D/2011 & C.O.69/D/2011 6 COPY FORWARDED TO: - 1. ASSESSEE : : : : M/S CPCS UPHAM CORPORATION, 103-104, CS-1, GYAN KHAND-II, INDRAPURAM, GHAZIABAD. 2. REVENUE : DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR