JAY MADHAV BHARMAL, MUMBAI V. ITO 24(3)(1), MUMBAI

ITA 1542/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5789 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KOTHARI IZRFKHZ DH LS
• Keywords: Additional evidence; Reasonable cause; Bad and doubtful debts

Judgement Text

- 1 - VK;DJ VIHYH; VF/KDJ.K BZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI JH VKJ JH VKJ JH VKJ JH VKJ- -- - LH LH LH LH- -- - 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA MK0 ,L MK0 ,L MK0 ,L MK0 ,L- -- - VH VH VH VH- -- - ,E ,E ,E ,E- -- - IOYU IOYU IOYU IOYU] U;KF;D ] U;KF;D ] U;KF;D ] U;KF;D LNL; DS LE{K LNL; DS LE{K LNL; DS LE{K LNL; DS LE{K BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND DR. S.T. M PAVALAN, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO.1542/MUM/2013 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR 2009-10 SHRI JAY MADHAV BHARMAL A-10, HEENA GAURAV JEWEL, GOKULDHAM MARKET, FILMCITY ROAD, GOREGAON (EAST), MUMBAI 400 063. CUKE@ VS. INCOME TAX OFFICER 24(3)(1) MUMBAI. PAN:- ACGPB9257L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASSESSEE BY SHRI VIJAY KOTHARI IZR;FKHZ DH VKSJ LS @ REVENUE BY MS. SONIA KUMAR VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER R.C. SHARMA, AM. THIS IS AN APPEAL, FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 19.11.2012 FOR A.Y. 2009-10, IN THE MATTER OF EX PARTE ORDER PASSED BY AO U/S 144. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF ENGINEERING CONTRACTOR. THE RETURN FILED BY ASSESSEE WAS SELECT ED FOR SCRUTINY AND AO ISSUED NOTICE U/S 142(1). THE ASSESSEE HAD TEMPORAR ILY SHIFTED OFFICE LQUOKBZ DH RKJH[K@ DATE OF HEARING 16-01-2014 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 16-01-2014 - 2 - PREMISE FROM MUMBAI TO PUNE ALONG WITH HIS BOOKS OF ACCOUNTS. THE NOTICES WERE RETURNED UNDELIVERED AND ONLY ON DECEM BER 2001, THE NOTICE WAS SERVED TO NEAR BY SHOP. AS THERE WAS NO APPEARANCE ON BEHALF OF THE ASSESSEE, AO PASSED EX PARTE ORDER WHEREIN AO DISALLOWED VARIOUS EXPENSES. LABOUR CHARGES PAID WERE ALSO DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) FOR NON DEDUCTION O F TAX AT SOURCE. AO HAS ALSO DISALLOWED INTEREST ON HOUSING LOAN. ONE THIRD OF THE CREDITOR AND CORRESPONDENTLY ONE THIRD OF EXPENSES WERE ALSO DIS ALLOWED. THUS THE RETURNED INCOME OF RS. 11,10,440/- WAS ASSESSED BY AO AT RS. 1,52,45,387/- U/S 144 OF INCOME TAX ACT. 3. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT DU E TO REASONABLE CAUSE, ASSESSEE COULD NOT APPEAR BEFORE THE AO. ADD ITIONAL EVIDENCE WERE ALSO SUBMITTED UNDER RULE 46A TO SUBSTANTIATE THE CLAIM OF EXPENSES, DETAILS OF TAX DEDUCTED AT SOURCE AND RES PECTIVE PAYMENTS IN THE GOVERNMENT TREASURY. HOWEVER, THE LD. CIT(A) DI D NOT ACCEPT THE ADDITIONAL EVIDENCES AND CONFIRMED THE ACTION OF AO . AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HAV E CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND F ROM RECORD THAT DUE TO SHIFTING OF OFFICE PREMISE THE NOTICE WERE NOT S ERVED ON THE ASSESSEE, AND THE ASSESSEE COULD NOT APPEAR BEFORE THE AO. BE FORE CIT(A), ASSESSEE HAS FURNISHED VARIOUS DOCUMENTARY EVIDENCES UNDER R ULE 46A WHICH GO TO THE ROOT OF THE ISSUE TO SUBSTANTIATE ASSESSEES CL AIM OF EXPENSES AS WELL AS DEDUCTION OF TAX AT SOURCE. WE FOUND THAT AS PER DOCUMENTS PLACED ON RECORD, THE ASSESSEE HAS DULY DEDUCTED TAX AT SOURC E OUT OF PAYMENTS SO MADE AND DEPOSITED THE TAX IN GOVT. TREASURY. THE T AX AUDIT UNDER THE ACT - 3 - WAS ALSO CARRIED OUT WHICH ALSO CONFIRMED SUCH PAYM ENTS. OUR ATTENTION WAS ALSO DRAWN TOWARDS INTEREST PAID ON HOUSING LOA N AND THEIR DEDUCTABILITY U/S 80C. ALL THESE DOCUMENTARY EVIDEN CES WHICH GO TO PROVE THE CLAIM OF EXPENSES GO TO THE ROOT OF ISSUE WHICH ARE REQUIRED TO BE EXAMINED AT THE LEVEL OF AO. WE HAVE ALSO VERIFIED THE LEDGER ACCOUNT OF LABOUR CHARGES PAID DURING THE YEAR WHICH IS PLACED AT PAGE 22 AND 23 OF THE PAPER BOOK, WE FOUND THAT AO HAS DISALLOWED MAJ OR EXPENSES BY OBSERVING THAT PROFIT HAS BEEN REDUCED TO 75% AS CO MPARED TO LAST YEAR. WE FOUND THAT MAJOR HEAD OF EXPENSE WAS ON ACCOUNT OF BAD DEBTS WHICH IS AN EXTRAORDINARY ITEM OF EXPENSE. THE REASONS FO R CLAIM OF BAD DEBTS WERE ALSO FURNISHED IN THE BOOKS OF ACCOUNTS IN THE FORM OF LEDGER ACCOUNTS OF BAD DEBTS. THE ASSESSEE HAS INCURRED LA BOUR CHARGES AND ALSO PAYMENT TO SUB CONTRACTORS, WHICH WAS DISALLOWED BY AO ON THE PLEA OF NON DEDUCTION OF TAX U/S 40(A)(IA). AS PER THE DOCU MENTS PLACED ON RECORD, ASSESSEE HAS DULY DEDUCTED TAX OUT OF SUCH PAYMENTS AND PAID THE SAME. LEDGER COPIES OF HE PARTIES, COPY OF ACKNOWLE DGEMENT OF TDS RETURN, TDS WORKING WAS PLACED TO SUBSTANTIATE THE CLAIM OF ASSESSEE. WE ALSO FOUND THAT WITHOUT CONFIRMING THE AUTHENTICITY OF THE CREDITOR, THE AO HAS DISALLOWED THE SAME ON ADHOC BASIS TO THE EX TENT OF ONE THIRD. THUS ON THE ONE HAND THE AO HAS DISALLOWED ONE THI RD OF THE EXPENSES AND ON THE OTHER HAND HE HAS DISALLOWED ONE THIRD O F THE CREDITORS WHICH AMOUNTS TO DOUBLE DISALLOWANCE. THE PAYMENT OF HOUS ING LOAN INTEREST IS DULY CONFIRMED BY THE TAX AUDIT REPORT, WHICH HAS B EEN CLAIMED AS DEDUCTION U/S 24 AND DULY REFLECTED IN THE CAPITAL ACCOUNT. COPY OF LEDGER ACCOUNT OF BAD DEBTS, LABOUR CHARGES, DEBTORS ACCOU NT, CONTRACTOR CHARGES ACCOUNT, LEDGER ACCOUNT OF PRIYANKA CONSTRU CTION, QUARTERLY STATEMENT OF TDS U/S 200 (3) WERE ALSO PLACED ON RE CORD. HOWEVER THESE EVIDENCES WERE NOT ACCEPTED BY CIT(A) UNDER RULE 46 A. AS PER OUR - 4 - CONSIDERED VIEW DUE TO REASONABLE CAUSE OF SHIFTING THE OFFICE AND NON RECEIPT OF NOTICE, THE ASSESSEE COULD NOT PRODUCE T HESE EVIDENCES BEFORE THE AO, AS ALL THESE EVIDENCES GO TO THE ROOT OF TH E ISSUE AND THE SAME IS REQUIRED TO BE CONSIDERED. WE FOUND THAT ASSESSMENT WAS FRAMED U/S 144, NOBODY SHOULD BE CONDEMNED UNHEARD. IN THE INT EREST OF JUSTICE WE RESTORE THE ENTIRE ISSUE TO THE FILE OF AO WITH DIR ECTION TO VERIFY THE DOCUMENTARY EVIDENCES FILED BY ASSESSEE BEFORE CIT( A) TO SUBSTANTIATE THE CLAIM OF EXPENSES. ASSESSEE IS AT LIBERTY TO FI LE ANY OTHER EVIDENCE AS REQUIRED BY THE AO IN RESPECT OF VARIOUS EXPENSES A ND CREDITORS CLAIMED IN THE BOOKS OF ACCOUNTS. AO IS TO RE-ADJUDICATE THE M ATTER AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE DIRECT ACCORDINGLY. 4. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 16 /01/2014 SD/- SD/- (DR. S.T.M. PAVALAN) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 16 /01/2014 SKS SR. P.S COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI