M/s Davangere Nirmithi Kendra, Davangere V. Assistant Commissioner of Income tax, Circle1, Davangere

ITA 1128/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8561 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: CHYTHANYA K K
• Keywords: Opportunity of being heard
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.1128/BANG/2014 ASSESSMENT YEAR : 2009-10 M/S. DAVANGERE NIRMITHI KENDRA, KIADB MAIN ROAD, INDUSTRIAL AREA, LOKIKERE ROAD, DAVANGERE 577 005. PAN: AAATD 5939P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, DAVANGERE. APPELLANT RESPONDENT APPELLANT BY : SHRI CHYTHANYA, K.K., ADVOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 30.03.2016 DATE OF PRONOUNCEMENT : 31.03.2006 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 25.3.2014 OF THE CIT(APPEALS), HUBLI INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS NOT J USTIFIED IN LAW AND ON F ACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN UP HOLDING THE ACTION OF LEARNED ASSESSING OFFICER IN DISALLOW ING PROJECT EXPENDITURE INCURRED B Y THE APPELLANT SUCH AS PURCHASE OF ITA NO.1128/BANG/2014 PAGE 2 OF 7 MATERIAL, LABOUR CHARGES , WAGES , REPAIR & MAINTENANCE AND TRANSPORTATION CHARGES OF RS . 1,80 , 00,000/ - ON ADHOC BASIS . 3. AS REGARDS DISALLOWANCE OF LABOUR CHARGES AND WAGES , PURCHASE OF CONSTRUCTION MATERIAL AND REPAIRS AND M AINTENANCE: (1) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN U PHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISA LLOWING THE LABOUR CHARGES MERELY ON THE BASIS THAT THE EXP ENDITURE IS CLAIMED AGAINST THE SELF MADE VOUCHERS BY FAILIN G TO APPRECIATE THAT THOSE VOUCHERS CLEARL Y ESTABLISH THE PAYMENTS ARE MADE TO EACH INDIVIDUAL LABOURER WHO H AS ACKNOWLEDGED THE RECEIPTS. (2) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN DISALLOWING THE LABOUR CHARGES & WAGES ON THE BASIS THAT THE SAME ARE SUPPORTED B Y THE SELF MADE VOUCHERS BY FAILING TO APPRECIATE THAT THE LABOURERS ARE UNORGANIZED AND L ARGELY ILLITERATE AND DO NOT ISSUE INVOICES LIKE ESTABLISH ED BUSINESS HOUSES AND ONLY WAY, WHICH IS UNIVERSALLY ADOPTED, OF ESTABLISHING THE EXPENDITURE IS BY SECU RING PROPERL Y AUTHENTICATED VOUCHERS AS HELD IN ACIT VS. A BALARAMA REDD Y, 2010 - TIOL-373-ITAT-BANG. (3) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN DENYING THE EXPENDITURE ACCOUNTED IN RESPECT OF PURCHASE OF CONSTRUCTION MATERIAL ON ADHOC BASIS MERELY ON THE BASIS THAT THE SAME WERE PURCHASED AGAINST THE VOUCHERS. (4) THE LEARNED CIT (APPEALS) HAS FAILED TO APPREC IATE THAT THE PURCHASE OF CONSTRUCTION MATERIALS SUCH AS JELL Y, SAND, GRAVEL ETC. ARE ACCOUNTED ON THE BASIS OF SELF MADE VOUCHERS WHICH IS IN LINE WITH THE TRADE PRACTICE A S THE SELLERS ARE MAINLY UNREGISTERED DEALERS FROM UNORGA NISED SECTOR. (5) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN DISALLOWING REPAIRS AND MAINTENANCE CHARGES ON THE BASIS THAT T HE SAME ARE AGAINST SELF MADE VOUCHERS WHEREAS IN FACT , THE SAME WERE ACCOUNTED BY THE APPELLANT AGAINST TAX INVOICES. (6) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISA LLOWING ITA NO.1128/BANG/2014 PAGE 3 OF 7 THE EXPENDITURE INCURRED TOWARDS TRANSPORTATION CHA RGES ON ADHOC BASIS, WHEN THE APPELLANT HAS NOT ACCOUNTED N OR EXPENDED ANY AMOUNT TOWARDS TRANSPORTATION CHARGES. (7) THE LEARNED CIT (APPEALS) HAS FAILED TO APPREC IATE THAT NO CASH PAYMENT HAS EXCEEDED RS. 20,000/- AS PER SECTI ON 40A (3) OF THE ACT. (8) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN MAKING ADDITIONS ON ADHOC BASIS WITHOUT EVEN RECORDING ANY FINDING THAT THE SAME IS EXCESSIVE OR UNREASONABLE . (9) THE LEARNED CIT (APPEALS) AND LEARNED ASSESSING OFF ICER ARE NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE ON ADHOC BASIS WITHOUT DISPROVING THE SAID TRANSACTION AND T HEIR ACTION IS CONTRARY TO THE DECISION IN THE CASE OF CIT VS. S . S.P. (P) LTD ., (2011) 2 0 2 T A X M AN 3 86 (P&H). (10) THE LEARNED CIT (APPEALS) HAVING NOT DOUBTED THE GR ANTS R E CEIVED BY THE APPELLANT AND THE PROJECTS EXECUTED B Y THE APPELLANT , IS NOT JUSTIFIED IN DISALLOWING EXPENDITURE WHICH ARE REASONABLE ON THE BASIS OF THE PROJECTS E XECUTED BY THE APPELLANT . (11) THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THAT THE NO PROVISION UNDER INCOME TAX ACT AUTHORISES TH E LEARNED ASSESSING OFFICER TO MAKE ADHOC AND ARBITRA RY DISALLOWANCE WITHOUT BRINGING ON RECORD ANY EVIDENC E TO PROVE THAT THE EXPENDITURE IS BOGUS . (12) THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THAT THE GRANTS OF THE PROJECTS UNDERTAKEN BY THE APPELL ANT ARE APPROVED BY THE GOVERNMENT ON THE BASIS OF THE AMOU NT EXPENDED BY THE APPELLANT TOWARDS THE PROJECT . ( 13) THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN MAKING ARBITRARY DISALLOWANCE WHICH IS IN CONTRAVENTION OF BOARD IN INSTRUCTION NOS. 574 , DATED 27.07.1973 AND 767 , DATED 04 . 10.1974 . ITA NO.1128/BANG/2014 PAGE 4 OF 7 4. AS REGARDS FAILURE TO ADHERE TO PRINCIPLES OF NA TURAL JUSTICE: (1) THE LEARNED CIT (APPEALS) HAS UNJUSTLY HELD THA T THE APPELLANT HAS FAILED TO FURNISH THE DETAILS CALLED FOR DURING THE ASSESSMENT PROCEEDINGS WITHOUT APPRECIATING THA T THE DETAILS FURNISHED ON 14.12 . 2011 AND 22.12.2011 WERE NOT CONSIDERED BY THE LEARNED ASSESSING OFFICER. (2) THE LEARNED CIT (APPEALS) HAS FAILED TO APPREC IATE THAT THE LEARNED ASSESSING OFFICER HAS PASSED THE ASSESS MENT ORDER IN A HASTY MANNER , WITHOUT PROVIDING SUFFICIENT TIME TO APPELLANT AFTER THE I SSUE OF PROPOSITION NOTICE. (3) THE LEARNED CIT (APPEALS) HAS UNJUSTLY PASSED AN ORDER WITHOUT EVEN FORWARDING THE REMAND REPORT OF THE LE ARNED ASSESSING OFFICER TO THE APPELLANT AND FAILING TO A PPRECIATE THAT NO OPPORTUNITY WAS PROVIDED TO THE APPELLANT D URING THE REMAND PROCEEDINGS. 5. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN LE VYING INTEREST UNDER SECTION 234B OF RS. 20,74,710/- & SECTION 234C OF RS. 6,249/- WHEN THE SAID DISALLOWANCE IS NOT TENAB LE . FOR THE ABOVE REASONS AND FOR SUCH OTHER REASONS WH ICH MAY BE ALLOWED BY THE HONOURABLE MEMBERS TO BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE AFORESAID APPEAL BE ALLOWED . 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT THE ASSESSIN G OFFICER HAS MADE ADDITION ON ADHOC BASIS AFTER MAKING DISALLOWANCE O F THE EXPENSES CLAIMED BY THE ASSESSEE IN RESPECT OF WORKS DONE. BEFORE THE CIT(APPEALS), THE ASSESSEE HAS FURNISHED ALL THE RELEVANT EVIDENCE OF THE EXPENSES INCURRED FOR EXECUTING THE WORK FOR ITS VERIFICATION, BUT TH E CIT(A) DID NOT LOOK INTO IT. ITA NO.1128/BANG/2014 PAGE 5 OF 7 3. THE CIT(APPEALS), HOWEVER, CALLED FOR A REMAND R EPORT FROM THE AO AND THE REMAND REPORT WAS SUBMITTED BY HIM, WHICH W AS CONSIDERED BY THE CIT(A) AND THE ADDITION WAS CONFIRMED. IN HIS ENTI RE ORDER, THE CIT(A) HAS REPRODUCED THE GROUNDS OF APPEAL, SUBMISSIONS MADE BY THE ASSESSEE AND ALSO THE REMAND REPORT, BUT DID NOT GIVE HIS CONCLU SIVE FINDING ON WHAT BASIS HE HAS CONFIRMED THE ADDITION. 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT DURING THE PENDENCY OF APPEAL BEFORE THE CIT(APPEALS), THE ASS ESSEE HAS MADE REPEATED REQUESTS FOR SUPPLY OF REMAND REPORT SO TH AT EFFECTIVELY ASSESSEE CAN COUNTER IT, BUT THE REMAND REPORT WAS NOT SUPPL IED. IN SUPPORT OF THIS CONTENTION, HE HAS ALSO INVITED OUR ATTENTION TO TH E APPLICATION MADE TO THE CIT(A) DATED 3.3.2014 REQUESTING THE CIT(A) TO PROV IDE COPY OF REMAND REPORT SO THAT HE CAN MAKE EFFECTIVE REPLY TO IT. BUT THIS REMAND REPORT WAS NOT SUPPLIED TO THE ASSESSEE AND THE CIT(A) RELYING UPON THE REMAND REPORT DECIDED THE APPEAL AGAINST THE ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT IT IS SETTLED POSITION OF LAW THAT ONCE THE AUTHORITY RELIES UPON A PARTICULAR EVIDENCE, THAT EVIDENCE SHOULD BE CONFRONTED TO THE PARTY AGAINST WHOM THE AUTHORITY INTENDS TO DRAW AN INFERENCE ON THE BASIS OF THAT D OCUMENT. THEREFORE, IT WAS SUBMITTED THAT THE ORDER OF CIT(A) DESERVES TO BE SET ASIDE AND HE MAY BE DIRECTED READJUDICATE THE ISSUE AFRESH AFTER SUPPLYING COPY OF THE REMAND REPORT AND OBTAINING THE COMMENTS OF THE ASS ESSEE THEREON. ITA NO.1128/BANG/2014 PAGE 6 OF 7 6. THE LD. DR, ON THE OTHER HAND, HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE CIT(APPEALS). THE LD. DR HAS ALSO SUB MITTED THAT THE LOWER AUTHORITIES HAD AFFORDED SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THEREFORE IT CANNOT BE SAID THAT PROPER O PPORTUNITY WAS NOT AFFORDED TO THE ASSESSEE. 7. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE AO HAS DISA LLOWED A PART OF THE EXPENSES ON THE GROUND THAT THE SAME WAS NOT OPEN F OR VERIFICATION, BUT BEFORE THE CIT(A) THE ASSESSEE HAS FILED ALL RELEVA NT EVIDENCE IN RESPECT OF EXPENDITURE INCURRED BY IT, ON WHICH THE REMAND REP ORT WAS ALSO SOUGHT BY THE CIT(A). UNDISPUTEDLY, COPY OF REMAND REPORT WA S NOT SUPPLIED TO THE ASSESSEE DESPITE HIS REQUEST. FROM A PERUSAL OF TH E ORDER OF THE CIT(A), WE FIND THAT THE CIT(A) HAS CONFIRMED THE ADDITION HAVING STRONGLY RELIED UPON THE REMAND REPORT, BUT THE REMAND REPORT WAS N OT CONFRONTED TO THE ASSESSEE. FOLLOWING THE PRINCIPLES OF NATURAL JUST ICE, WE ARE OF THE VIEW THAT IF ANY DOCUMENT IS BEING USED AGAINST THE ASSE SSEE, IT SHOULD HAVE BEEN CONFRONTED TO HIM BEFORE ITS USE. BUT IN THE INSTANT CASE, THE CIT(A) HAS NOT CONFRONTED THE REMAND REPORT OBTAINED FROM THE AO TO THE ASSESSEE BEFORE RELYING UPON THE SAME FOR CONFIRMIN G THE ADDITION. THEREFORE, WE SET ASIDE THE ORDER OF CIT(APPEALS) A ND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO SUPPLY COPY OF THE REM AND REPORT TO THE ASSESSEE AND OBTAIN HIS COMMENTS THEREON AND THEREAFTER ADJU DICATE THE ISSUES ITA NO.1128/BANG/2014 PAGE 7 OF 7 RAISED BEFORE HIM IN LIGHT OF THE SUBMISSIONS AND EVIDENCE ON RECORD AFRESH, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2016. SD/- SD/- ( A.K. GARODIA ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 31 ST MARCH, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.