Conveyor & Ropeway Services Pvt. Ltd., Kolkata V. DCIT, Circle - 8(1), Kolkata , Kolkata

ITA 1468/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4517 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 19-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P J BHIDE
• Keywords: Opportunity of being heard
• Section: 40A(3); 133(6)

Judgement Text

1 ITA NO. 1468/KOL/2017 CONVEYOR & ROPEWAY SERVICES PVT. LTD., AY 2012-13 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NO. 1468/KOL/2017 ASSESSMENT YEAR: 2012-13 CONVEYOR & ROPEWAY SERVICES PVT. LTD. (PAN: AABCC5090J) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-8(1), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 31.07.2018 DATE OF PRONOUNCEMENT 08.08.2018 FOR THE APPELLANT SHRI P. J. BHIDE, AR FOR THE ASSESSEE/CROSS OBJECTOR SHRI A. BHATTACHARJEE, ADDL. CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-16, KOLKATA DATED 02.02.2017 FOR AY 2012-13. 2. THE ASSESSEE HAS RAISED GROUND NO. 1 AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.36,37,072/- U/S. 40A(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF ENGINEERING, CONSTRUCTION DESIGN AND MANUFACTURING OF AERIAL PAS SENGER ROPEWAYS, MATERIAL HANDLING SYSTEMS ETC. IT ALSO CARRIED OUT ON THE BUSINESS O F OWNING AND OPERATING ROPEWAYS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVE D THAT THE ASSESSEE HAD INCURRED EXPENSES UNDER VARIOUS HEADS ABOVE RS.20,000/- IN C ASH. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY SUCH PAYMENTS ABOVE RS.20,000/- SHOULD NO T BE DISALLOWED U/S. 40A(3) OF THE ACT. HOWEVER, ACCORDING TO AO, THE ASSESSEE HAS BE EN UNABLE TO OFFER ANY SATISFACTORY 2 ITA NO. 1468/KOL/2017 CONVEYOR & ROPEWAY SERVICES PVT. LTD., AY 2012-13 EXPLANATION AND HENCE, AFTER PERUSAL OF LEDGERS THE AO FOUND THAT A SUM OF RS.36,37,072/- ARE NOT ALLOWABLE EXPENSES U/S. 40A(3) ON VARIOUS A CCOUNTS, (A LIST OF WHICH IS APPEARING IN THE ASSESSMENT ORDER FROM PAGE 2 TO 3) AND, THEREAF TER, HE ADDED BACK THE SAID SUM TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE P REFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSE E IS BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE RO PEWAY SERVICES IN VARIOUS PLACES SITUATED AT DIFFERENT PARTS OF THE COUNTRY. ACCORDING TO LD . COUNSEL FOR THE ASSESSEE, THE CONVEYOR AND ROPEWAY SERVICES ARE SET UP IN DIFFERENT PARTS OF THE COUNTRY AND THE ASSESSEES BUSINESS IS TO FERRY PASSENGERS FOR A FARE ON THE CONVEYOR A ND ROPEWAY SERVICES MAINTAINED BY THE ASSESSEE COMPANY. ACCORDING TO LD. COUNSEL, THE AS SESSEE COLLECTS THE TRAVELLING FARE FROM PASSENGERS IN CASH AND DISBURSES EXPENSES AT THE RE SPECTIVE SITES IN CASH FOR DAILY SMOOTH RUNNING OF THE BUSINESS. ACCORDING TO LD. COUNSEL, THE DAILY COLLECTION OF FARES AND EXPENSES ARE MET BY THE AFORESAID COLLECTION OF FAR ES FROM THE PASSENGERS. IT WAS BROUGHT TO OUR NOTICE THAT ONLY FORTNIGHTLY THE DAY TO DAY VOU CHERS ARE SENT TO THE HEAD OFFICE SITUATED AT KOLKATA AND THE ACCOUNTS ARE COLLATED IN RESPECT OF SALES/EXPENSES WHICH ARE CREDITED AND DEBITED AS PER THE ACCOUNTING PRINCIPLES. ACCORDING TO LD. COUNSEL, THE AO DISALLOWED THE EXPENSES ON ACCOUNT OF THE FACT THAT ASSESSEE HAS D EBITED THE EXPENSES ACCOUNT FOR MORE THAN RS.20,000/- ON A PARTICULAR DATE SINCE THE EXPENSES ARE INCURRED IN CASH. THE DETAILS OF THE EXPENDITURE ARE AS FOLLOWS: PARTICULARS AMOUNT (RS.) STAFF WELFARE 1,18,346/- TRAVELLING 6,50,031/- CAR HIRE CHARGES 1,02,760/- HIRE CHARGES (OTHERS) 30,000/- CAR EXPENSES 29,130/- STAMP DUTY 70,825/- LABOUR CHARGES 21,658/- LABOUR CHARGES 1,39,426/- CONVEYANCE 3,21,625/- ELECTRIC CHARGES (BHOPAL) 1,83,400/- 3 ITA NO. 1468/KOL/2017 CONVEYOR & ROPEWAY SERVICES PVT. LTD., AY 2012-13 ELECTRIC CHARGES (VIZAG) 7,81,780/- PURCHASE - REG (VIZAG) 2,10,850/- LABOUR CHARGES (SALKAPA) 4,69,783/- POWER & FUEL (SUKANPA) 5,07,458/- TOTAL 36,37,072/- 5. THE MAIN GRIEVANCE OF THE LD AR IS THAT THE EXPE NSES PER DAY HAS NOT EXCEEDED RS.20,000/- AND ON THE SAME DAY THE EXPENSES WAS IN CURRED AT DIFFERENT SITES IN SEVERAL PLACES OF THE COUNTRY AND AMOUNT OF EXPENDITURE INC URRED IN CASH IS ALSO LESS THAN RS.20,000/- PER DAY AND THE CONFUSION HAS HAPPENED BECAUSE ACCOUNTING WAS DONE ONLY ON A FORTNIGHTLY BASIS. ACCORDING TO LD. AR. THE EXPENS ES INCURRED AT DIFFERENT SITES ARE COLLATED AND ACCOUNTED WHICH HAS LED THE AO TO CONCLUDE THA T THE ASSESSEE HAD MADE EXPENDITURE OF MORE THAN RS. 20,000/- PER DAY WHEREAS ACCORDING TO THE ASSESSEE, ON A DAY THE EXPENSES HAVE NOT EXCEEDED RS. 20,000/-IN CASH. ACCORDING T O LD. AR, THE AO DID NOT GIVE PROPER OPPORTUNITY TO THE ASSESSEE AS WELL AS LD. CIT(A) H AS PASSED A CRYPTIC ORDER WITHOUT LOOKING INTO EVIDENCE FURNISHED BEFORE HIM. IN SUCH A SCEN ARIO SINCE THE ASSESSEE WAS NOT AFFORDED SUFFICIENT OPPORTUNITY TO PLEAD ITS CASE BEFORE THE AO, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE ISSUE TO THE FILE OF AO FOR FRESH A DJUDICATION AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. FOR TH AT, WE RELY ON THE DECISION OF THE HONBLE (THREE JUDGE BENCH) OF THE HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2001) 249 ITR 216 (SC) WHEREIN THE HONBLE COURT HAS HELD AS UNDER: IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF T HE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT READS TH US : WE WILL STRAIGHTAWAY AGREE WITH THE ASSESSEES SUB MISSION THAT THE INCOME-TAX OFFICER HAD NOT GIVEN TO THE ASSESSEE PROPER OPPORTUNITY OF BEI NG HEARD. THAT THE ASSESSEE COULD HAVE PLACED EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY OR BEFORE THE TRIBUNAL IS REALLY OF NO CONSEQUENCE FOR IT IS THE ASSESSMENT ORDER THAT COUNTS. THAT ORDER MUST BE MADE AFTER THE ASSESSEE HAS BEEN GIVEN A RE ASONABLE OPPORTUNITY OF SETTING OUT HIS CASE. WE, THEREFORE, DO NOT AGREE WITH THE TRIBUNAL AND THE HIGH COURT THAT IT WAS NOT NECESSARY TO SET ASIDE THE ORDER OF ASSESSMENT AND REMAND THE MATTER TO THE ASSESSING AUTHORITY FOR FRESH ASSESSMENT AFTER GIVING TO THE ASSESSEE A PROPER OPPORTUNITY OF BEING HEARD. TWO QUESTIONS WERE PLACED BEFORE THE HIGH COURT, OF WHICH THE SECOND QUESTION IS NOT PRESSED. THE FIRST QUESTION READS THUS : 4 ITA NO. 1468/KOL/2017 CONVEYOR & ROPEWAY SERVICES PVT. LTD., AY 2012-13 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN NOT SETTING ASIDE THE ASSESSMENT ORDER IN SPITE OF A FINDING ARRIVED AT BY IT THAT THE INCOME- TAX OFFICER HAD NOT GIVEN A PROPER OPPORTUNITY OF H EARING TO THE ASSESSEE ? IN OUR OPINION, THERE CAN ONLY BE ONE ANSWER TO THI S QUESTION WHICH IS INHERENT IN THE QUESTION ITSELF : IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEALS ARE ALLOWED. THE ORDER UNDER CHALLENGE IS SET ASIDE. THE ASSESSMENT ORDER, THAT OF THE COMMISSIONER (APPEALS) AND OF THE TRIBUNAL A RE ALSO SET ASIDE. THE MATTER SHALL NOW BE REMANDED TO THE ASSESSING AUTHORITY FOR FRESH CO NSIDERATION, AS AFORESTATED. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 6. COMING TO THE GROUND NO. 2, WHICH IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE INVOCATION OF SEC. 41(1) OF THE ACT AND ADDING BACK RS.38,05,742/- TO THE TOTAL INCOME OF THE ASSESSEE. 7. BRIEF FACTS OF THE CASE IS THAT THE AO HAD ASKED THE ASSESSEE TO PRODUCE THE DETAILS OF SUNDRY CREDITORS IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS. THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT ON A TEST CHECK BASIS . THE AO NOTED THAT TWO NOTICES WHICH WERE ISSUED TO M/S. METALS INDIA AND M/S. SANIYA IN DUSTRIAL CORPORATION HAD BEEN RETURNED UN-SERVED WITH POSTAL REMARK NOT KNOWN. THEREFOR E, THE AO CONCLUDED THAT THE TWO PARTIES ARE IN-GENUINE AND THE TRANSACTIONS ARE SHA M WITH THE SAID CONCERNS AND ACCORDINGLY, DISALLOWED AND ADDED BACK THE AMOUNTS SHOWN AS SUND RY CREDITORS TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DISMISS THE APPEAL BY PASSING A CRYPTIC ORDER. AGGRIEVED, THE ASSESSEE IS BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE HAS PRODUCED T HE COPIES OF LEDGER ACCOUNT OF BOTH THE PARTIES I.E. M/S. METALS INDIA AND M/S. SANIYA INDU STRIAL CORPORATION WHICH DULY REFLECTED THE CREDIT IN THE BOOKS OF THE ASSESSEE FROM THE FY 2007-08 TO 2011-12. ACCORDING TO LEDGER ACCOUNT THE ASSESSEE OWED RS.17,43,183/- TO M/S. METALS INDIA AND RS.20,19,963/- TO M/S. SANIYA INDUSTRIAL CORPORATION RESPECTIVELY. I T WAS BROUGHT TO OUR NOTICE THAT THESE BALANCES ARE LYING IN THE ACCOUNTS SINCE 31.03.2009 AND THESE CREDIT BALANCES IN THE ACCOUNTS REMAINED STATIC FROM THAT DATE ONWARDS. A CCORDING TO LD. AR, THE ASSESSEE HAD ALL THE INTENTION TO PAY THE AFORESAID CREDITORS BUT CO ULD NOT DO SO FOR WANT OF FUNDS. WE NOTE 5 ITA NO. 1468/KOL/2017 CONVEYOR & ROPEWAY SERVICES PVT. LTD., AY 2012-13 THAT THE LEDGER ACCOUNT REFLECTED THE NAMES OF BOTH THE PARTIES AND THE CREDIT BALANCES IN RESPECT OF BOTH THE CONCERNS ARE IN THE BOOKS OF TH E ASSESSEE FROM THE YEAR ENDED ON 31.03.2009 AND THE ASSESSEE ACKNOWLEDGED THE FACT O F ITS OWING INDEBTEDNESS TO THESE PARTIES BY CONTINUING TO SHOW THE LIABILITIES IN IT S BALANCE SHEET. WE NOTE THAT THESE BALANCES IN THESE ACCOUNTS ARE BEING BROUGHT FORWAR D FROM EARLIER YEARS AND THERE WAS NO FRESH CREDIT IN THESE ACCOUNTS IN THE RELEVANT PREV IOUS YEAR. SINCE THE ASSESSEE HAD CONTINUED TO OWE THE LIABILITY TO THE ABOVE CREDITO RS THERE CANNOT BE ANY CESSATION OF LIABILITY AND, THEREFORE, SIMPLY BECAUSE THE NOTICES U/S. 133 (6) OF THE ACT RETURNED UN-SERVED CANNOT BE A GROUND FOR INVOKING SEC. 41(1) OF THE ACT AND, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE U/S. 41(1) OF THE AC T WAS NOT WARRANTED IN THIS CASE AND, THEREFORE, WE DIRECT DELETION OF THE ADDITION. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08/08/201 8 SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH AUGUST, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT CONVEYOR & ROPEWAY SERVICES PVT. LTD., 75C, PARK STREET, KOLKATA-700 016. 2 RESPONDENT DCIT, CIRCLE-8(1), KOLKATA. 3 4 5 CIT(A)-16, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY