Income Tax Officer, Chandigarh V. Sh.Narinder Brar, Chandigarh

ITA 1102/CHANDI/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2547 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 143(3); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1102/CHD/2013 ASSESSMENT YEAR 2010-11 THE ITO, VS. SH. NARINDER BRAR, WARD-1(2), CHANDIGARH CHANDIGARH PAN NO. ABJPB2706L (APPELLANT) (RESPONDENT) APPELLANT BY : SH MANOJ MISHRA RESPONDENT BY : SH. VINEET KRISHAN DATE OF HEARING : 04.01.2016 DATE OF PRONOUNCEMENT : 18.01.2016 . ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A) DATED 30.9.2013 RELATING TO ASSESSMENT YEAR 2010-11 . 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS & CONT RARY TO FACTS & LAW. 2. THAT THE LD. CIT(A) HAS ERRED IN ADMITTING ADDITION AL EVIDENCE FILED DURING THE APPELLATE PROCEEDING IGNO RING THE FACT THAT 2.1 DESPITE BEING AFFORDED VARIOUS OPPORTUNITIES, AS MENTIONED IN THE ASSESSMENT ORDER, THE ASSESSEE CHO SE NOT TO FILE THE SAME BEFORE THE ASSESSING OFFICER WITHO UT ANY SUFFICIENT CAUSE. 2 2.2 THE ASSESSING OFFICER HAS IN HIS REMAND REPORT VEHEMENTLY OPPOSED THE ADMISSION OF THE ADDITIONAL EVIDENCE AND 2.3 THE ASSESSING OFFICER HAS NOT GONE INTO MERIT OF TH E ADDITIONAL EVIDENCE AT ALL AS IS THE EVIDENT FROM T HE REMAND REPORT, THEREFORE, THE ASSUMPTION BY THE CIT(A) THA T HE HAS NOT CONTROVERTED THE EVIDENCE IS NOT CORRECT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SSESSEE SUBMITTED ITS RETURN OF INCOME ON 14.10.2010 DECLARING TOTAL INCOME AT R S. 8,24,540/-. THE RETURN WAS PROCESSED ON 21.4.2011. SUBSEQUENTLY, THE CASE WAS MANUALLY SELECTED UNDER SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME -TAX ACT, 1961 (IN SHORT 'THE ACT') WAS ISSUED TO THE ASSESSEE ON 30.9.2011. TH E ASSESSEE DERIVES INCOME FROM MANUFACTURING OF TRACTOR PARTS. IN THIS CASE, THE ASSESSING OFFICER FRAMED THE ASSESSMENT EX-PARTE ON THE BASIS OF MATERIAL PL ACED ON RECORD AS PER THE PROVISIONS OF SECTION 144 OF THE ACT. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 35,51,928/- ON ACCOUNT OF BOGUS SUNDRY CREDITOR S. THE ASSESSING OFFICER OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS FOL LOWING CREDITORS WERE TO FURNISH THE CONFIRMATIONS WHICH, EITHER DID NOT FIL E ANY CONFIRMATION OR THERE WAS A DIFFERENCE IN BALANCE AS SHOWN BY THE ASSESSE E. THE DETAILS ARE AS UNDER:- S.NO. NAME OF THE PARTY LETTER NO.& DATE DIFFERENCE / REMARKS 1 M/S MAHINDRA & MAHINDRA LTD. MOHALI 9916/07.02.2013 19,93,354/- 2 9918/07.02.2013 86,485/-. NO CONFIRMATION HAS BEEN RECEIVED FROM THE PARTY. 3 9917/07.02.2013 25,17,610/-. NO CONFIRMATION HAS BEEN RECEIVED FROM THE PARTY. 3 4 9913/07.02.2013 9,54,499/-. NO CONFIRMATION HAS BEEN RECEIVED FROM THE PARTY. TOTAL 35,51,928/- THE ASSESSING OFFICER TREATED THE ABOVE BOGUS SUNDR Y CREDITORS AND ADDED BACK THE AMOUNT OF RS. 35,51,928/- TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER MADE AN ADDITION OF RS. 7,80,970/- ON ACCOUNT OF BOGUS UNSECURED LOANS. ACCORDING TO ASSESSING OFFICER, FO LLOWING PERSONS FROM WHOM LOANS HAVE BEEN SHOWN HAVE NOT CONFIRMED THAT LOANS WERE GIVEN TO THE ASSESSEE. SH. TEJ PAL BRAR, 1598/18-D, CHANDIGARH RS. 16,0 6,815/- SH. SATINDER BRAR 1598/18-D, CHANDIGARH RS. 6,20,18 5/- TOTAL RS. 7,80,870/- THE ASSESSING OFFICER ADDED THE AMOUNT OF RS. 7,80, 870/- TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO MADE THE A DDITION ON ACCOUNT OF COMMISSION PAID. THE ASSESSING OFFICER ASKED THE AS SESSEE TO FURNISH THE DETAILS OF BUSINESS DONE FOR HIM BY SHRI GURINDER BRAR TO W HOM COMMISSION OF RS. 2,37,205/- WAS PAID. THE ASSESSEE FAILED TO FURNISH ANY DETAILS AND JUSTIFICATION REGARDING THE COMMISSION PAYMENT TO SHRI GURINDER S INGH. IN THE ABSENCE OF ANY PROOF OF GENUINENESS OF COMMISSION PAYMENT, THE ASS ESSING OFFICER ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE A SSESSING OFFICER ALSO MADE AN ADDITION OF RS. 6,40,289/- ON ACCOUNTS OF REJECTION S AND DEDUCTIONS MADE BY THE PRINCIPALS. THE ASSESSEE CLAIMED MANUFACTURING AND TRADING ACCOUNT EXPENSES OF RS. 6,40,289/- ON ACCOUNT OF REJECTIONS AND DEDUCTI ONS. THE ASSESSEE FAILED TO FURNISH THE DETAILS OF EXPENSES DEBITED ON ACCOUNT OF REJECTIONS AND DEDUCTIONS. IN THE ABSENCE OF ANY EVIDENCE, THE ASSESSING OFFIC ER ADDED BACK THE AMOUNT IN QUESTION TO THE INCOME OF THE ASSESSEE. 4 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) DELETED THE ADDITION OF RS. 35,51,928/- MADE BY THE ASSESSING OFFICER OBSERVIN G AS UNDER:- 6.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL AND HAVE ALSO GONE THROUGH THE FACTS OF THE CASE. AT THE OUTSET, IT MAY BE MENTIONED THAT THE SUM TOTAL OF DIFFERENCE WORKS OUT TO RS. 55,51,928/- WHEREAS THE ASSESSING OFFICER HAS WORKED OUT THE SAME AT RS. 35,51,928/- ONLY, WHICH SHOWS CALLOUS WAY OF WORKING OF THE ASSESSING OFFICER. 6.3.1 THE ASSESSING OFFICER WROTE TO THE FOUR PARTI ES MENTIONED IN THE ASSESSMENT ORDER TO CONFIRM THE BA LANCES OF THE APPELLANT IN THEIR BOOKS OF ACCOUNTS. THREE OF THESE PARTIES DID NOT FILE CONFIRMATION AND THERE WAS DIF FERENCE IN BALANCE AS PER CONFIRMATION GIVEN BY M/S MAHINDRA & MAHINDRA LTD. (HEREINAFTER REFERRED TO AS M/S M&M) . I MAY POINT OUT THAT THERE WILL NOT BE ANY DIFFERENCE IN THE ACCOUNT OF A REPUTED COMPANY LIKE M/S M&M AND THE ASSESSING OFFICER SHOULD HAVE DOUBLY VERIFIED FROM M/S M&M AN D THE APPELLANT BEFORE MAKING THE ADDITION IN RESPECT OF DIFFERENCE IN BALANCE PERTAINING TO M/S M&M. THE INFORMATION C OLLECTED BY THE ASSESSING OFFICER WAS NEVER CONFRONTED TO TH E APPELLANT AND SO THERE IS SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL THAT THE ADDITION WAS MADE WITHOUT CONFRONT ING THE APPELLANT ABOUT THE MATERIAL OBTAINED AT THE BACK O F THE APPELLANT. IT MAY ALSO BE MENTIONED THAT ADDITION O F THE CREDIT BALANCES IN THE OTHER CASES, WHO HAD NOT FIL ED CONFIRMATIONS IN RESPONSE TO NOTICE U/S 133(6), CAN NOT BE MADE WITHOUT OBTAINING PROPER CLARIFICATION FROM TH E ASSESSEE, SINCE THE ASSESSEE CANNOT BE TREATED TO B E AT FAULT IF OTHER PARTY DOES NOT FILE THE CONFIRMATION. BE AS I T MA AND WITHOUT PREJUDICE TO WHAT HAS BEEN DISCUSSED HEREIN ABOVE, AS THE APPELLANT HAS NOW FILED CONFIRMATIONS AND GIVEN CLARIFICATIONS, WHICH HAVE NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER, THE ADDITION MADE IS DELETED. GR OUND OF APPEAL NO. 4 IS ALLOWED. 5 6.3.2 AS ALREADY POINTED OUT, THE ADDITION HAS BE EN MADE SHORT DUE TO TOTALING MISTAKE MADE BY THE ASSE SSING OFFICER, BUT THIS WILL NOT MATTER, SINCE THE ENTIRE ADDITION IS DELETED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT APPEARS THAT THE ASSESSEE HAD FILED THE WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A), RELE VANT PORTION OF WHICH IS REPRODUCED BY THE CIT(A) IN PARA 6.2 OF THE IMPUGNE D ORDER. IN THE WRITTEN SUBMISSIONS THE ASSESSEE HAS STATED THAT NOW THE CONFIRMED COPIES OF ACCOUNT OF M/S MAHINDRA & MAHINDRA LTD., MOHALI, (2) SUPER HOBES & BROACHES (P) LTD., PATIALA (3) SHYNE AUTO (P) LTD AND (4) ETC EL ECTRO GEAR, DERABASSI ARE ATTACHED. A PERUSAL OF THESE CONFIRMATIONS SHALL SH OW THAT THERE IS NO DIFFERENCE. HAD THE LD. ASSESSING OFFICER ASKED THE APPELLANT THAT THE MATTER COULD BE SORTED OUT BUT THE LD. ASSESSING OFFICER C HOSE TO MAKE THE ADDITION ARBITRARILY AND WITHOUT ANY BASIS AT THE BACK OF TH E APPELLANT WHICH HAS NOT FINANCIAL VALUE. IT IS, PRAYED THAT THE SAME MAY KI NDLY BE DELETED? SHRI MANOJ MISHRA LD. DR SUBMITTED THAT THE CONFIRMED COPIES O F ACCOUNT OF ABOVE FOUR PARTIES WERE PRODUCED FOR THE FIRST TIME BEFORE THE CIT(A). ACCORDING TO LD. DR THE LD. CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE IN VIOLATION OF PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 1962. THE LD. DR POINTED OUT THAT IN PARA 6.3.1 OF THE IMPUGNED ORDER, THE CIT(A) HAS MENTION ED THAT ASSESSEE NOW FILED CONFIRMATION AND GIVEN CLARIFICATIONS AND THE CIT(A ) HAS NOT FOLLOWED THE RELEVANT RULES WHILE ADMITTING THE ADDITIONAL EVIDE NCE. IN OUR VIEW, THE PROCEDURE AND MANNER IN WHICH THE ADDITIONAL EVIDEN CE IS TO BE PRODUCED IS LAID DOWN IN RULE 46A OF INCOME TAX RULES, 1962. RULE 46 A(1) LAYS DOWN THE GROUND ON WHICH THE CIT(A) CAN ALLOW THE ADDITIONAL EVIDENCE. SUB RULE (2 )OF RULE 46A PROVIDES THAT THE CIT(A) WHILE ADMITTING SUCH EVIDENCE MUST RECORD ITS REASONING IN WRITING. SUB RULE (3) OF RULE 46A PROVIDES THAT NO EVIDENCE PRODUCED UNDER SUB-RULE (1) SHALL BE TAKEN INTO ACC OUNT UNLESS THE ASSESSING 6 OFFICER HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE OR DOCUMENTS PRODUCED OR PERMITTED TO CROSS-EXAMINE TH E WITNESSES EXAMINED OR PERMITTED TO PRODUCE ANY EVIDENCE OR DOCUMENT IN RE BUTTAL TO THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. IN THE INSTANT CASE, THE LD. CIT(A) WHILE ADMITTING ADDITIONAL EVIDENCE HAS NOT RECORDED ITS REASONING IN WRITING. IT IS ALSO NOT CLEAR THAT THE ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION OF FOUR PARTIES WAS NEVER CONFRONTED TO THE ASSESSING OFFIC ER OR THE ASSESSING OFFICER HAS BEEN GIVEN A REASONABLE OPPORTUNITY TO EXAMINE THE ADDITIONAL EVIDENCE AS PRODUCED BY THE ASSESSEE BEFORE THE CIT(A). THIS I S ALSO IN ACCORDANCE WITH RULE OF NATURAL JUSTICE AND THIS PROVISION IS MANDA TORY PROVISION AND NON- COMPLIANCE OF THE SAME WOULD VITIATE THE ORDER ITSE LF. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND REMAND THE MATTER TO THE L D. CIT(A) WITH THE DIRECTION THAT CIT(A) SHALL GIVE A REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE EVIDENCE AS PROVIDED IN SUB-RULE (3) OF RULE 46A. THE CIT(A) IS DIRECTED TO GIVE AN OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 6. FOR STATISTICAL PURPOSES, THE GROUND REGARDING D ELETION OF ADDITION ON ACCOUNT OF BOGUS SUNDRY CREDITORS IS ALLOWED. 7. THE CIT(A) HAS DELETED THE ADDITION OF RS. 7,80 ,870/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNSECURED LOANS ON THE GROUND THAT THE CONFIRMATIONS WERE NOT FILED. THE LD. CIT(A) DELET ED THE ADDITION STATING THAT THE FIGURES MENTIONED AT RS. 16,06,815/- AGAINST TH E NAME OF SHRI TEJ PAL BRAR IN THE ASSESSMENT ORDER IS NOT CORRECT AND THE ACTUAL AMOUNT IS RS. 1,60,685/-. THE LD. CIT(A) HAS CATEGORICALLY STATED THAT THE ASSESS EE HAD FILED CONFIRMATIONS BEFORE THE ASSESSING OFFICER IN RESPECT OF UNSECURE D LOANS TO THE EXTENT OF RS. 7,80,870/-. THE LD. CIT(A) HAS FURTHER OBSERVED T HAT THESE TWO LOANS ARE FROM 7 THE FAMILY MEMBERS OF THE ASSESSEE. AS PER COPY OF ACCOUNT OF THESE PERSONS, THESE ARE OLD LOANS, OBSERVED THE CIT(A). THEREFORE , THE CIT(A) DELETED THE ADDITION OF RS. 7,80,870/-. 8. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, IT IS CLEAR THAT THE LOANS IN QUESTION ARE PETTY OLD LOANS FROM THE FAMILY MEMBERS. IT IS ALSO CLEAR THAT THE ASSESSEE SUBMITTED THE COPIES OF ACC OUNT OF THESE TWO PERSONS BEFORE THE ASSESSING OFFICER. NO FRESH LOAN WAS TAK EN DURING THE YEAR UNDER CONSIDERATION. IN OUR OPINION, THERE WAS NO JUSTIFI CATION IN MAKING THE ADDITION AND THE LD. CIT(A) HAS CORRECTLY DELETED THE ADDITI ON. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. 9. THE CIT(A) HAS ALSO DELETED THE ADDITION OF RS. 2,37,205/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF COM MISSION PAID. THE LD. CIT(A) OBSERVED THAT SHRI GURINDER BRAR HAS A TECH NICAL BACKGROUND AND HAS BEEN WORKING WITH THE ASSESSEE FIRM SINCE LONG ON C OMMISSION BASIS. HIS JOB WAS TO INSPECT THE COMPLETE MANUFACTURING PROCESS A ND VERIFY THE MACHINED PRODUCTS. SHRI GURIDNER BRAR IS AN EXISTING ASSESSE E AND HE HAS DECLARED THE INCOME FROM COMMISSION IN HIS RETURN OF INCOME. THE LD. CIT(A) HAS ALSO OBSERVED THAT THE COMMISSION PAID HAS ALSO BEEN ALL OWED IN THE PAST. ACCORDINGLY, THE CIT(A) ALLOWED THE CLAIM OF THE AS SESSEE. 10. AFTER HEARING THE RIVAL SUBMISSIONS, WE MAY OBS ERVE HERE THAT LD. DR COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A). TH ERE IS NO DISPUTE THAT NOBODY HAS DOUBTED THE GENUINENESS OF PAYMENTS OF COMMISSI ONS TO SHRI GURDINDER BARAR WHO IS A TECHNICALLY QUALIFIED PERSON. THE CO MMISSION PAID HAD ALSO BEEN ALLOWED IN THE PAST. SHRI GURINDER BRAR HAS ALSO D ECLARED THE COMMISSION IN THE 8 RETURN OF INCOME. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A). 11. THE LD. CIT(A) ALSO DELETED THE ADDITION OF RS. 6,40,289/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REJECTIONS AND DEDU CTIONS MADE BY THE PRINCIPALS. THE RELEVANT FINDINGS OF THE CIT(A) ARE AS UNDER:- 9.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. LD. COUNSEL FOR THE ASSESSEE. THE REJECTIONS AND DEDUCTIONS PER TAINED TO M/S M&M AND M/S PUNJAB TRACTOR LTD. FOR WHOM THE APPELLANT IS DOING THE WORK FOR MANUFACTURING AS WE LL AS ON JOB WORK BASIS. AS PER THE APPELLANT, THE DEDUCTION S ARE MADE BY THESE COMPANIES IF THE PRODUCT DOES NOT CONFIRM TO THE STANDARD / OF MANUFACTURING DEFECTS AND SIMILAR DED UCTION CLAIMED OF MORE THAN RS. 10,00,000/- WAS ALLOWED TO THE APPELLANT IN A.Y. 2006-07 IN ASSESSMENT FRAMED U/S 143(3). THE ASSESSING OFFICER HAS NOT COMMENTED ON THE SUBM ISSION OF THE APPELLANT IN HIS LETTER DATED 23.07.2013 AND SO IT HAS TO BE CONCLUDED THAT THE ASSESSING OFFICER HAS NOTHING TO SAY IN THE MATTER. THE REJECTIONS AND DEDUCTIONS HAVE BEEN DONE BY A REPUTED COMPANY, NAMELY M/S M&M AND M/S PUNJAB TRACTOR LTD. AND ARE GENUINE DEDUCTIONS, WHICH HAVE TO BE ALLOWED BY WAY OF DEDUCTION FROM THE INCOME. THE AD DITION MADE ON THIS ACCOUNT IS ACCORDINGLY DELETED. GROUND OF APPEAL NO. 7 IS ALLOWED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS OBSRVED THAT THE SAME CLAIM OF THE ASSESSEE HAS BEEN ALLOWED IN THE ASSES SMENT YEAR 2006-07 IN ASSESSMENT FRAMED U/S 143(3) OF THE ACT. SHRI VINEE T KRISHAN LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CLAIM MADE BY THE A SSESSEE IS GENUINE. ACCORDING TO HIM, THE ASSESSEE HAS SUPPLIED GEAR PA RTS TO M/S MAHINDRA & MAHINDRA AND PUNJAB TRACTORS LTD AND IF THE PRODUCT DOES NOT CONFIRMS TO THE 9 STANDARDS AND HAVE ANY MANUFACTURING DEFECTS, THE D EDUCTIONS ARE MADE BY THE PRINCIPALS. THERE IS NOTHING TO RECORD TO CONTROVER T THE CONTENTION OF THE ASSESSEE. IT IS NOT THE CASE OF THE ASSESSING OFFIC ER THAT THE CLAIM MADE BY THE ASSESSEE IS WRONG OR NON-GENUINE. FURTHERMORE, THE REJECTIONS AND DEDUCTIONS HAVE BEEN MADE BY THE REPUTED COMPANIES AND, HENCE , THE CLAIM OF THE ASSESSEE CANNOT BE DOUBTED. THIS GROUND OF APPEAL IS HEREBY REJECTED. 13. FOR STATISTICAL PURPOSES, THE APPEAL IS ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON 18.1.2016 SD/- SD/- (ANNAPURNA MEHROTRA) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED 18 TH JANUARY, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR