ITO, New Delhi V. M/s Ratnakar Food & Beverages P. Ltd., New Delhi

ITA 1311/DEL/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8910 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: V K JAIN
• Keywords: Unexplained cash credit; Unexplained expenditure; Search and seizure; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI B. C. MEENA , ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A .NO. - 1311/ DEL/2011 (ASSESSMENT YEAR - 200 7 - 0 8 ) ITO VS. M/S RATNAKAR FOOD & WARD 15(3), BEVERAGES. P. LTD. ROOM NO. 223, C.R. BUILDING, F - 2/7 OKHLA INDUSTRIAL I.P. ESTATE NEW DELHI. AREA - I, NEW DELHI. 110020 PAN: AAACR1533J (APPELLANT) (RESPONDENT) REVENUE BY: - SH. VIKRAM SAHAY, SR. DR ASSESSEE BY: - SH. V. K. JAIN , C A. DATE OF HEARING: 17/02/2015 DATE OF PRONOUNCEMENT: 24 /02/2015 ORDER PER C. M. GARG, JM. THIS APPEAL HAS BEEN HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT (APPEAL S) XVIII, NEW DELHI , VIDE DATED 2 0 . 12 .201 0 IN APPEAL NO.23 1 / 09 - 10 FOR ASSESSMENT YEAR 200 7 - 0 8 . 2. GROUND NO. 1 AND 4 OF THE REVENUE ARE OF GENERAL IN NATURE WHICH NEED S NO ADJUDICATION, REMAINING GROUND NO. 2 AND 3 OF THE REVENUE READ AS UNDER: 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE BY ADMITTING ADDITIONAL EVIDENCES DURING THE APPELLATE PROCEEDINGS INSPITE OF SEVERAL OPPORTUNITIES PROVIDED BY THE AO TO PRODUCE THE SAME AT THE ASSESSMENT/REMAND STA GE . 3. THAT THE LD. CIT(A) HAS ERRE D IN LAW AND FACTS OF THE CASE BY NOT ADJUDICATING ON EACH ISSUE INVOLVED IN THIS CASE I.E. I) ADDITION OF RS.11,74,314/ - OUT OF REPAIR AND I.T.A .NO. - 1311/DEL/2011 2 MAINTENANCE EXPENSES, II) DISALLOWANCE OF RS.39,83,428/ - BEING FREIGHT AND FORWARDING EXPENSES, III) DISALLOWANCE OF RS.29,29,334/ - BEING ADVERTISEMENT PUBLICITY & SALES EXPENSES, IV) ADDITION OF RS.2,66,465/ - BEING UNEXPLAINED CREDIT IN THE NAME OF M/S GRAPHIC CONCEPTS AND V) DISALLOWANCE OF RS.6,07,100/ - BEING UNEXPLAINED EXPENDITURE. 3. APROPOS THESE GROUNDS, WE HAVE HEARD BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY ADMITTING ADDITIONAL EVIDENCES DURING THE APPELLATE PROC EEDINGS INSPITE OF SEVERAL OPPORTUNITIES PROVIDED BY THE AO TO THE ASSESSEE TO PRODUCE RELEVANT EXPLANATION AND EVIDENCE DURING THE ASSESSMENT PROCEEDINGS AND ALSO DURING THE REMAND PROCEEDINGS. 4. THE LD. DR FURTHER CONTENDED THAT THE LD. CIT(A) HAS ERRE D IN LAW AND ON FACTS OF THE CASE BY NOT ADJUDICATING THE EACH ISSUE INVOLVED IN GROUND NO. 4 TO 8 OF THE FIRST APPEAL PERTAINING TO ADDITIONS IN REGARD TO REPAIR AND MAINTENANCE EXPENSES, DISALLOWANCE OF FREIGHT AND FORWARDING EXPENSES, DISALLOWANCE OF AD VERTISEMENT, PUBLICITY & SALES EXPENSES, ADDITIONS BEING UNEX PLAINED CREDIT IN THE NAME OF M/S GRAPHIC CONCEPTS AND DISALLOWANCE OF UNEXPLAINED EXPENDITURE. 5. THE LD. DR SUBMITTED THAT THE AO PROVIDED DUE OPPORTUNITY OF HEARING TO THE ASSESSEE BUT THE ASSESSEE DID NOT COOPERATE DURING THE ASSESSMENT I.T.A .NO. - 1311/DEL/2011 3 PROCEEDINGS THAT IS WHY THE AO HAD NO OPTION BUT TO COMPLETE THE PROCEEDINGS EX PARTE ON MERITS ON THE BASIS OF IN FORMATION AND MATERIAL AVAILABLE ON RECORD. 6. THE LD. DR FURTHER POINTED OUT THAT THE LD. CIT(A) CALLED REMAND REPORT FROM THE AO AND ADMITTED THE ADDITIONAL EVIDENCE FOR CONSIDERATION BUT THE LD. CIT(A) GRANTED RELIEF FOR THE ASSESSEE ON ALL FIVE COUNTS BY MERELY MENTIONING THAT THE AO IN HIS REMAND REPORT HAS NOT GIVEN ANY ADVERSE COMMENTS WHATSOEVER ON THE VOLUMINOUS DETAILS AND DOCUMENTS FURNISHED BY THE ASSESSEE AND THE LD. CIT(A) DELETED THE IMPUGNED ADDITIONS WITHOUT ANY REASONING AND ADJUDICATION. 7. THE LD. DR FURTHER POINTED OUT THAT RULE 46A OF IT RULES PROVIDES THAT THE ASSESSEE CANNOT PRODUCE ADDITIONAL EVIDENCE DURING FIRST APPELLATE PROCEEDINGS EXCEPT CERTAIN CIRCUMSTANCES STATING THEREIN IN THE RULE. 8. THE LD. DR FURTHER POINTED OUT THAT IF THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE WAS NOT GIVEN DUE OPPORTUNITY OF HEARING DURING THE ASSESSMENT PROCEEDINGS THEN ALSO THE LD. CIT(A) WAS DUTY BOUND TO AFFORD OPPORTUNITY TO VERIFY/EXAMINE AND COMMENT ON THE DETAILS, EVIDENCE AND EXPLANA TION OF THE ASSESSEE FILED AS ADDITIONAL EVIDENCE UNDER RULE 46A OF THE IT RULES 1962. 9. REPLYING TO THE ABOVE THE LD. AR VEHEMENTLY CONTENDED THAT THE ASSESSEE WAS PREVENTED TO FILE RELEVANT EXPLANATION, EVIDENCE AND DETAILS BEFORE THE AO DURING THE ASS ESSMENT PROCEEDINGS AND THEREFORE, THE SAME WAS SUBMITTED I.T.A .NO. - 1311/DEL/2011 4 BEFORE THE LD. CIT(A) UNDER RULE 46A OF THE IT RULES, 1962 WHICH WAS RIGHTLY ADMITTING AND CONSIDERED BY THE FIRST APPELLATE AUTHORITY. 10. THE LD. AR VEHEMENTLY CONTENDED THAT THE LD. CIT(A) WAS QUITE JUSTIFIED IN GRANTING RELIEF FOR THE ASSESSEE AS THE ASSESSEE WAS ABLE TO SUBSTANTIATE BY SUBMITTING ADDITIONAL EVIDENCE THAT THE AD HOC DISALLOWANCE AND ADDITIONS MADE BY THE AO WERE NOT SUSTAINABLE AND THEREFORE, THE SAME WERE RIGHTLY DELETED BY TH E LD. CIT(A). 11. HOWEVER, THE LD. AR FAIRLY ACCEPTED THAT THE LD. CIT(A) HAS GRANTED RELIEF FOR THE ASSESSEE WITHOUT SEPARATELY ADJUDICATING UPON THE CORE FIVE ISSUES AND WITHOUT ASSIGNING ANY SEPARATE REASONS FOR ADMITTING THE IMPUGNED ADDITIONS, THEREF ORE, IF IT FOUND JUST AND PROPER THE CASE MAY BE RESTORED TO THE FILE OF EITHER CIT(A) OR AO FOR DE NOVO ADJUDICATION ONLY ON THESE FIVE ISSUES. 12. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT THE AO COMPLETED ASSESSMENT PROCEEDINGS EX PAR TE, AND THE ASSESSEE COULD NOT GET AN OPPORTUNITY TO SUPPORT AND EXPLAINED HIS RETURN OF INCOME AND TO CLARIFY THE DOUBTS IN THE MIND OF AO WHICH RESULTED INTO IMPUGNED AD HOC ADDITIONS ON THE AFORESAID FIVE COUNTS. FROM VIGILANT READING OF THE IMPUGNED OR DER OF THE LD. CIT(A) WE ALSO NOTE THAT THE LD. CIT(A) CALLED REMAND REPORT OF THE AO ON THE ADDITIONAL EVIDENCE, DETAILED EXPLANATION SUBMITTED BY THE ASSESSEE UNDER RULE 46A OF THE IT RULES 1962 AND ADMIT THE SAME BY HOLDING THAT THE ASSESSEE WAS NOT GRA NTED DUE OPPORTUNITY OF HEARING BEFORE THE AO AND THIS ACTION OF THE AO I.T.A .NO. - 1311/DEL/2011 5 PREVENTED THE ASSESSEE TO FILE SUPPORTIVE DETAILED AND EXPLANATION DURING THE ASSESSMENT PROCEEDINGS. 13. AT THE SAME TIME, WE ALSO OBSERVED THAT THE LD. CIT(A) DID NOT ALLOW THE AO TO COMMENT ON THE MERITS OF THE ADDITIONAL EVIDENCE AND EXPLANATION AND CONSIDERED THE SAME FOR GRANTING RELIEF TO THE ASSESSEE. 14. FROM OPERATIVE PART OF THE IMPUGNED ORDER, WE OBSERVED THAT THE LD. CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSION : 6.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, REMAND REPORT OF THE AO AND THE SUBMISSION MADE BY THE LD. AR OUT OF THE TOTAL REPAIR AND MAINTENANCE EXPENDITURE CLAIMED AT RS.32,38,023/ - , THE AO HAS DISALLOWED RS.11,74, 314/ - ON EXPARTE BASIS BY TAKING PRO RATA TURNOVER AS COMPARED TO THE TURNOVER OF THE LAST YEAR. THE AO HAS ALSO DISALLOWED THE ENTIRE EXPENSES OF RS.39,83,428/ - AND RS.29,29,334/ - CLAIMED BY THE APPELLANT UNDER THE HEAD FREIGHT & FORWARDING EXPENSES; AND ADVERTISING, PUBLICITY AND SALES EXPENSES DUE TO NON AVAILABILITY OF DETAILS AND LACK OF TDS VERIFICATION. SIMILARLY, THE AO HAS DISALLOWED THE CREDIT IN THE NAME OF M/S GRAPHIC CONCEPTS AT RS.2,66,465/ - DUE TO NON - SERVICE OF NOTICE U/S 133(6). THE AO HAS ALSO DISALLOWED RS.6,07,100/ - PAID TO M/S DEVYANI FOOD INDUSTRIES PVT. LTD. IN CASH DUE TO NON - PRODUCTION OF BOOKS OF ACCOUNTS. AS PER THE ASSESSMENT ORDER, ALL THE ABOVE ADDITIONS HAVE BEEN MADE BY THE AO IN AN EXPARTE MANNER. HOWEVER, CONSIDERING THE SUB MISSIONS MADE BY THE LD. AR AS REPRODUCED ABOVE, I AM I.T.A .NO. - 1311/DEL/2011 6 AFRAID SUCH AD HOC AND ARBITRARY DISALLOWANCES CANNOT BE LEGALLY SUSTAINED. THE PURPOSE OF ASSESSMENT IS TO ARRIVE AT THE TRUE PROFITS OF THE ASSESSEE FOR THE PURPOSE OF TAXATION WHICH CAN BE DONE ONLY AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE AND EXAMINING THE EVIDENCES IN DETAIL. THERE CANNOT BE ANY SHORT CUT TO DOING A FAIR AND PROPER ASSESSMENT AND THE NECESSARY PROCESSES HAVE TO BE UNDERTAKEN BY THE AO FOR THIS PURPOSE. HOWEVER, I AM AF RAID THE AO HAS FAILED TO DO THIS AND DESPITE TIME AVAILABLE FOR COMPLETING THE ASSESSMENT FROM THE LIMITATION POINT OF VIEW, HE HAS NOT AFFORDED PROPER OPPORTUNITY TO THE ASSESSEE AND HAS MADE ARBITRARY ADDITIONS IN A SLIPSHOD MANNER . THE NOTICES WERE ALS O NOT SENT AT THE CORRECT ADDRESS AS MENTIONED EARLIER IN THIS ORDER. THE DETAILS SUBMITTED AT THE ASSESSMENT STAGE HAVE NOT BEEN TAKEN INTO ACCOUNT BY THE AO WHILE MAKING THE ABOVE EX PARTE ADDITIONS. FURTHER, THE APPELLANT HAS PRODUCED VOLUMINOUS DETAILS DURING APPELLATE PROCEEDING CONSISTING OF THE AUDITED STATEMENT OF ACCOUNTS, TAX AUDIT REPORTS, COPY OF REPLIES FILED BEFORE THE AO GIVING DETAILS AND DOCUMENTS, COMPLETE DETAILS OF EXPENSES INCLUDING COPIES OF LEDGER ACCOUNTS, BILLS & VOUCHERS, CO MPARATIVE CHART OF YEAR WISE EXPENSES, DETAILS OF THE PARTIES ALONGWITH COPIES OF THEIR ACCOUNTS, DETAILS OF TDS DEDUCTED AND ACKNOWLEDGEMENT OF TDS RETURNS FILED, CONFIRMATION OF ACCOUNTS FROM SUNDRY CREDITORS AND THE PARTY TO WHOM CASH PAYMENT WAS MADE A S WELL AS SOURCE OF THE SAME AS PER CASH BOOK ETC. ALL THE ABOVE DETAILS AND DOCUMENTS HAD BEEN FORWARDED TO THE AO FOR EXAMINATION DURING THE REMAND PROCEEDING. HOWEVER, THE AO IN HIS REMAND REPORT HAS NOT GIVEN ANY ADVERSE COMMENTS I.T.A .NO. - 1311/DEL/2011 7 WHATSOEVER ON THE ABOV E VOLUMINOUS DETAILS AND DOCUMENTS FURNISHED BY THE APPELLANT. CONSIDERING THE AFORESAID, THE ABOVE EX PARTE AND AD HOC ADDITIONS MADE BY THE AO CANNOT BE SUSTAINED. THE AO IS DIRECTED TO VERIFY THE DETAILS OF TDS FURNISHED BY THE APPELLANT. SUBJECT TO THE ABOVE, THE IMPUGNED ADDITIONS ARE DELETED. 15. IN VIEW OF ABOVE, WE ARE INCLINE D TO HOLD THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE ON ALL FIVE GROUNDS VIZ., GROUND NO. 4 TO 8 BEFORE THE FIRST APPELLATE AUTHORITY, IN A CRYPTIC AND SLIP S H O D MANN ER WITHOUT SEPARATE ADJUDICATION ON EVERY ISSUE AND WITHOUT ADDRESSING THE EXPLANATION AND ADDITIONAL AND OTHER RELEVANT EVIDENCE OF THE ASSESSEE AND OBJECTIONS OF THE AO O N THE PARTICULAR ISSUE. IT IS EX P EC TED FROM JUDICIAL AND QUASI JUDICIAL AUTHORITIES THAT THEY SHOULD ADJUDICATE AND ADDRESS ALL THE ISSUES/GROUNDS WHICH HAVE BEEN RAISED BEFORE THEM FOR ADJUDICATION AND WHICH MAY BE SUBJECT TO FURTHER LEGAL SCRUTINY BEFORE HIGHER FORUM OR AUTHORITY. WE ARE UNABLE TO APPRECIATE MANNER AND APPROACH OF THE LD. CIT(A) IN WHICH HE GRANTED RELIEF TO THE ASSESSEE DELETED THE EX PARTE AND AD HOC ADDITIONS MADE BY THE AO. UNDER ABOVE NOTED FACTS AND CIRCUMSTANCES OF THE PRESENT CASE , WE HAVE NO HESITATION TO HOLD TH AT THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN MAKING EX PARTE AD HOC ADDITIONS AND ALSO DELETING THE SAME WITHOUT DETAILED AND SEPARATE ADJUDICATION AS PER PROVISIONS OF THE ACT . IN THIS SITUATION WE ARE OF THE CONSIDERED OPINION THAT ALL FIVE ISSUES AS MENTIONED AND RAISED BY THE ASSESSEE AS GROUND NO. 4 TO 8 BEFORE LD. CIT(A) REQUIRE DE NOVO ADJUDICATION AT THE END OF AO . THUS, WE RESTORE THE I.T.A .NO. - 1311/DEL/2011 8 SAME TO THE FILE OF THE AO FOR PROPER ADJUDICATION AFTER AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WITHOUT BEING PREJUDICED AND INFLUENCED BY THE EARLIER ASSESSMENT AND IMPUGNED ORDER. SINCE THE CASE IS RESTORED FOR LIMITED PURPOSE ONLY ON FIVE COUNTS AS STATED ABOVE , ACCORDINGLY , GROUND NO. 2 & 3 OF THE REVENUE ARE DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 /02/ 2015. SD/ - SD/ - ( B. C. MEENA ) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 /02/2015 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR