Shree Mahavir Carbon Ltd, Cuttack V. ACIT, Cuttack

ITA 165/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4438 (ITAT-CUTTACK)
• Duration Of Justice: 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 30-03-2011
• Court: TRIBUNAL
• Department Lawyers: M R
• Assessee Lawyers: J M PATTNAIK
• Keywords: Opportunity of being heard; Period of limitation; Sham transactions; Condonation of delay; Reason to believe

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 165 AND 166 /CTK/ 2011 / ASSESSMENT YEAR S 2004 - 05 AND 2005 - 06 SHREE MAHAVIR CARBON LIMITED, PLOT NO.85, PHASE III, NEW INDUSTRIAL ESTTE, JAGATPUR, CUTTACK. PAN: AAECS 6716 J - - - VERSUS - ASST.COMMISSIONER OF INCOME - TAX,CIRCLE 1(1), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI J.M.PATTNAIK, AR / FOR THE RESPONDENT: / SHRI M.R.PANIGRAHI, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THESE APPEALS BY THE ASSESSEE AGITATE THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN DISMISSING THE ASSESSEES APPEALS FOR WANT OF PETITION FOR CONDONATION OF DELAY OF 6 DAYS EACH IN FILING THE APPEALS BEFORE IT. THE ASSESSEE ALSO AGITATES GROUND RELATING TO MERIT DISALLOWANCE OF CLAIM OF COMMISSION EXPENSES DISALLOWED BY T HE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 143(3)/147 OF THE INCOME - TAX ACT,1 961 FOR THE AYS 2004 - 05 AND 2005 - 06. 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENTS FOR THE IMPUGNED AYS HAVE BEEN PASSED U/S.143(3)/147 WHERE ON THE BASIS OF A SURVEY CONDUCTED N THE ASSESSEES PREMISES . T HE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE COMMISSIONS CLAIMED TO HAVE BEEN PAID TO THE RESPECTIVE PARTIES ARE SHAM TRANSACTIONS. HE PROPOSED TO DISALLOW THE CLAIM OF C OMMISSION CLAIMED AS EXPENSES IN ASSESSEES RETURNED INCOME I.T.A.NO. 165 AND 166 /CTK/ 2011 2 WHICH WAS APPEALED AGAINST BEFORE THE LEARN ED CIT(A). THE LEARNED CIT(A) PROCEEDED TO ADJUDICATE ON BOTH THE APPEALS BY SEEKING TO INDULGE THE ASSESSING OFFICER BY CALLING FOR A REMAND REPORT WHEN AFTER ADJOURNING THE CASE FOR HEARING HELD THAT THERE WAS A DELAY OF SIX DAYS IN FILING BOTH THE APPEA LS BEFORE HIM W ITHOUT ADJUDICATING ON THE MERITS OF THE ASSESSEES CASE WHICH HE HAD PROPOSED TO CONSIDER BY CALLING FOR A REMAND REPORT AND DOCUMENTS WERE PREPARED BY THE ASSESSEE FOR PRODUCING BEFORE THE ASSESSING OFFICER AS PER THE PAPER BOOK SUBMITTED BEFORE THE TRIBUNAL IS NOT MENTIONED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SURVEY RESULTED IN ASSESSING OFFICER CALLING FOR CONFIRMATION OF THE PAYEES OF COMMISSION FOR THE RESPECTIVE AYS WHEN OUT OF ELEVEN, SEVEN PARTIES HAD CONFIRME D THE MODUS OPERANDI THAT SERVICES WERE RENDERED TO THE ASSESSEE AND THE COMMISSION WAS EARNED BY THEM WAS ACCEPTABLE TO THE ASSESSING OFFICER. HE SUBMITTED THAT IT WAS NOT THE ASSESSING OFFICER REASON TO BELIEVE THAT THE COMMISSION HAD NOT BEEN PAID BUT W AS OPINED AS SHAM TRANSACTIONS TO REDUCE THE PROFIT MARGIN WHEN HE NOTED THAT THE GROSS MARGIN INCREASED DUE TO INCREASE IN TURNOVER CANNOT BE STATED TO BE ON PAYMENT OF MORE COMMISSION IN THE IMPUGNED AYS. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSING AUTHORITIES PROCEEDED ON A BELIE F THAT THE COMMISSION HAS BEEN PAID TO REDUCE THE GROSS MARGIN WHICH IS NOT THE CASE OF THE ASSESSEE. THE COMMISSION WAS PAID ON SALES WHICH HAS INCREASED AND THE INCREASE IN THE GROSS MARGIN HAS RESULTED ON AC COUNT OF HIGH TURNOVER HA S NO BEARING TO THE COMMISSION PAID INSOFAR AS THE ASSESSEE HAD ALL THE REQUISITE DETAILS AVAILABLE WITH RESPECT TO PAYMENT TO RESPECTIVE COMMISSION AGENTS WHO WERE GENUINE, CREDITWORTHY AND IDENTIFIABLE AND NOT MERELY I.T.A.NO. 165 AND 166 /CTK/ 2011 3 NAME - LENDER S. HE SUBMITTED THAT A PERUSAL OF THE ORDER WOULD CLEARLY INDICATE THAT THE ASSESSING OFFICER HAS STEPPED INTO THE SHOES OF THE BUSINESS ENTITY TO APPLY PRUDENCY TO A BUSINESS TRANSACTION WHICH AS ITS OWN RAMIFICATIONS AND CONTRADICTIONS. FOR THIS PROPOSIT ION HE RELIED ON THE FULL BENCH DECISION OF HONBLE APEX COURT IN THE CASE OF TIN BOX COMPANY V. COMMISSIONER OF INCOME - TAX [2001] 249 ITR 216 (SC) WHERE IT CONSIDERED THAT THE MATTER WHICH HAS NOT BEEN CONSIDERED APPROPRIATELY EITHER BY THE CIT(A) OR BY T HE TRIBUN AL ON FACTS WAS TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER GIVING ASSESSEE APPROPRIATE OPPORTUNITY OF BEING HEARD. SIMILARLY, ITAT, CUTTACK BENCH IN THE CASE OF M/S.MARSHAGHAI SUPPLY AGENCIES V. ITO IN ITA NO .147/CTK/2005 DT.16.3.2005 HAD NOTED THAT CREATION OF DEMAND SHOULD BE ON THE BASIS OF PROPER ADJUDICATION BY THE CIT(A) WHEN THE ASSESSEE HAVE ADEQUATE EVIDENCES AND MATERIALS TO SUPPORT ITS CLAIM WAS NEITHER CONSIDERED BY THE FIRST APPELLATE AUTHORITY AND FURTHER MORE COULD NOT BE RESTORED BY THE FIRST APPELLATE AUTHORITY TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION WAS CONSIDERED BY THE TRIBUNAL FIT TO BE CONSIDERED BY THE ASSESSING OFFICER ON SETTING ASIDE THE ORDER OF THE CIT(A). A COPY OF THE SAID ORDER IS BEING FURNISHED AND PLACED RECORD. HE PRAYED THAT ON HAVING SUFFERED A HUGE DEMAND, THE ASSESSEE HAD PREPARED ALL THE MATERIAL WHICH WERE TO BE FURNISHED BY HIM ON THE BASIS OF A REMAND REPORT CALLED FOR BY THE LEARNED CIT(A) AND IN VIEW OF T HE FACT THAT THE SAME WAS AVAILABLE TO THE CIT(A) MAY KINDLY BE TAKEN ON RECORD IN ORDER TO ASSIST THE ASSESSING OFFICER INSOFAR AS THE ASSESSING OFFICER HAS PROCEEDED TO DISALLOW THE WHOLE OF THE CLAIM ON PURE ASSUMPTIONS AND PRESUMPTIONS FOR A FEW COMMIS SION AGENTS ONLY . 4. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE INDICATING T HAT THE ASSESSING OFFICER HAD CO ME TO THE FINDING THAT I.T.A.NO. 165 AND 166 /CTK/ 2011 4 THE SAID TRANSACTIONS ARE SHAM TRANSACTIONS AND MERE PAYMENT BY CHEQUE COULD NOT JUSTIFY THE CLAIM OF EXPENSE FOR THE BENEFIT OF REDUCTION OF TAX. THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAVE CONSIDERED THAT THE INCREASE IN TURNOVER RESULTING IN MORE PROFIT WAS BALANCED BY CLAIMING PAYMENT OF COMMISSION WAS A MATTER OF ADJUSTMENT BY THE A SSESSEE WAS THEREFORE RIGHTLY CONSIDERED APPROPRIATE BY THE LEARNED CIT(A) TO DISMISS THE APPEAL FOR HAVING FILED BELATE LY BEFORE HIM. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED ON THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF ASSAM PESTICIDES AND AGRO CHEMICALS V. CIT (227 ITR 846) WHEN ON THE BASIS OF THE SUBMISSIONS IT WAS HELD THAT MERE PAYMENT BY ITSELF WOULD NOT ENTITLE AN ASSESSEE FOR CLAIMING OF DEDUCTION IN VIEW OF THE FACT THE ONUS LIED ON THE ASSESSEE TO ESTABLISH BEYOND DOUBT THAT T HE PAYMENT HAD BEEN FOR JUST AND VIABLE BUSINESS TRANSACTIONS AS THE LAW DOES NOT PRESCRIBE ANY QUANTATIVE TEST TO FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN PROPERLY DISCHARGED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LEARNED CIT(A) HAS DISMISSED THE APPEALS ON THE GROUND THAT THE ASSESSEE WAS NOT HAVING SUFFICIENT CAUSE FOR THE DELAY OF SIX DAYS IN FILING THE APPEALS BEFORE HIM. IN THE PETITION FOR CONDONATION OF DELAY, THE ASSESS EE HAD STATED, AS QUOTED IN THE APPELLA TE ORDER, THAT THE APPEALS BEFORE THE CIT(A) WERE REQUIRED TO BE FILED ON OR BEFORE 17.2.2009, BUT THE ASSESSEE COULD NOT FILE THE APPEALS IN TIME BECAUSE MR. ISHWERLAL MEHTA, THE CHAIRMAN OF THE ASSESSEE COMPANY WHO WAS LOOKING AFTER THE ACCOUNTS AND INCOME - TAX MATTER, SUDDENLY FELL ILL ON 10.2.2009, WHO WAS SUFFERING FROM HYPERTENSION & CARDIAC PROBLEM AND TREATING DOCTOR ADVISED HIM COMPLETE BED REST FOR AT LEAST 10 DAYS AND AS SUCH HE COULD NOT I.T.A.NO. 165 AND 166 /CTK/ 2011 5 CONTACT HIS COUNSEL TO GIVE NECESSARY INFORMATION RELATING TO THE CASE MATTER ON OR BEFORE 17.2.2009. THE LEARNED CIT(A) HAS NOT DISPUTED THE ABOVE FACTS BUT HOWEVER, OBSERVING THAT SINCE THE ASSESSMENT ORDER WAS RECEIVED BY THE ASSESSEE ON 19.1.2009, THERE WAS NO PAUCITY OF TIME IN FILING THE APPEAL. HE THEREFORE, DID NOT CONDONE THE DELAY OF SIX DAYS IN FILING THE APPEALS BEFORE HIM. LAW IS WELL SETTLED THAT THE DELAY IS TO BE CONDONED IF SUFFICIENT CAUSE PERSISTS IN A GIVEN CASE FOR NOT FILING THE APPEAL IN TIME. THIS HAS A LSO BEEN SO HELD EVEN BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. RAM MOHAN KABRA (257 ITR 773) AS RELIED ON BY THE LEARNED CIT(A) THAT WHERE THE LEGISLATURE SPELLS OUT A PERIOD OF LIMITATION AND PROVIDES FOR POWER TO CONDONE THE DELAY AS WELL, THEN SUCH DELAY CAN BE CONDONED ONLY FOR SUFFICIENT AND GOOD REASONS SUPPORTED BY COGENT AND PROPER EVIDENCE. LAW IS ALSO WELL SETTLED THAT IN EXERCISING DISCRETION UNDER SECTION 5 OF THE LIMITATION ACT THE COURTS SHOULD ADOPT A PRAGMATIC APPROACH. A DISTINCTION MUST BE MADE BETWEEN A CASE WHERE THE DELAY IS INORDINATE AND A CASE WHERE THE DELAY IS OF A FEW DAYS. WHEREAS IN THE FORMER CASE THE CONSIDERATION OF PREJUDICE TO THE OTHER SIDE WILL BE A RELEVANT FACTOR SO THE CASE CALLS FOR A MORE CAUTIOUS APPROACH BUT IN THE LATTER CASE, NO SUCH CONSIDERATION MAY ARISE AND SUCH A CASE DESERVES A LIBERAL APPROACH. NO HARD AND FAST RULE CAN BE LAID DOWN IN THIS REGARD. THE COURT HAS TO EXERCISE THE DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONSTRUING THE EXPRESSION 'SUFFICIENT CAUSE', THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANCE. [SEE - VEDABAI ALIAS VAIJAYANTABAIBABURAO PATIL VS. SHANTARAM BABURAO PATIL & ORS. 253 ITR 798 (SC)]. IN THE PRESENT CASE ON HAND, CONSIDE RING THE FACTS STATED IN THE PETITION FILED BEFORE THE LEARNED CIT(A), WE ARE OF THE CONSIDERED VIEW THAT THE REASON STATED BY THE ASSESSEE IN ITS PETITION FOR CONDONATION OF DELAY ARE SUFFICIENT CAUSE FOR CONDONATION OF THE I.T.A.NO. 165 AND 166 /CTK/ 2011 6 DELAY OF SIX DAYS , WHICH THE LEARNED CIT(A) SHOULD HAVE CONDONED . THEREFORE, WE CONDONE THE DELAY IN FILING THE APPEALS BEFORE THE LEARNED CIT(A) LATE BY SIX DAYS . 6. IN VIEW OF OUR ABOVE DECISION , SINCE THE LEARNED CIT(A) HAS DISMISSED THE APPEALS BEFORE HIM, THE LEARNED DR INSIST ED BEFORE US THAT THE MATTER MAY BE RESTORED TO THE LEARNED CIT(A) FOR CONSIDERATION OF THE APPEALS AFRESH BY HIM ON MERIT S . BUT WE ARE UNABLE TO ACCEPT THIS PROPOSITION OF THE LEARNED DR IN VIEW OF THE FACT THAT THE LEARNED COUNSEL OF THE ASSESSEE HAS REL IED ON THE FULL BENCH DECISION OF HONBLE APEX COURT IN THE CASE OF TIN BOX COMPANY V. COMMISSIONER OF INCOME - TAX [2001] 249 ITR 216 (SC) (SUPRA) AND ALSO THE DECISION OF ITAT,CUTTACK BENCH IN THE CASE OF M/S.MARSHAGHAI SUPPLY AGENCIES V. ITO, AS DISCUSSED SUPRA. WE HAVE PERUSED THE IMPUGNED ORDERS OF THE ASSESSING OFFICER AND FIND THAT THE ASSESSING OFFICER IN HIS PROCEEDINGS U/S.147/148 HAD ASSUMED JURISDICTION BY HOLDING THE SAME AS SHAM TRANSACTIONS . WHATEVER LITTLE EVIDENCES OR EXPLANATION, HE COULD GA THER FROM THE ASSESSEE AND ON THE BASIS OF INFORMATION GATHERED BY HIM, HE PROCEEDED TO ASSUME A ROLE OF PRUDENT BUSINESSMAN ON THE BASIS OF FACT AS TO HOW AN EXPENDITURE SHOULD HAVE BEEN INCURRED . R ELYING ON THE FINANCIAL STATEMENTS OF THE ASSESSEE, HE PR ESUMED THAT THE ASSESSEE DID NOT ACT AS A PRUDENT BUSINESSMAN. THIS FINDING, TO OUR MIND, DOES NOT HAVE ANY LOGIC IN LSE . THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE ASSESSEES APPEAL ON MERIT WHEN THE DELAY OF SIX DAYS WAS CONSIDERED AS SUFFICIENT FOR DISMISSING THE ASSESSEES APPEALS WITHOUT DELIBERATING ON MERITS. HAVING SUFFERED TAXATION ON THE BASIS OF ASSESSMENT U/S.143(3)/147, THE LEARNED CIT(A) OUGHT TO HAVE GIVEN A CONSIDERATION THAT IT WAS NOT PAYMENT ALONE WHICH REQUIRED CONSIDERATION INSOFAR AS HIS CALLING FOR A REMAND REPORT WAS TO VERIFY THE I.T.A.NO. 165 AND 166 /CTK/ 2011 7 PURPOSE OF HOLDING THAT INCOME HAS ESCAPED ASSESSMENT WITHOUT SUFFERING TAX. THE ASSESSEE HAS DEDUCTED TAX AT SOURCE FROM ALL THE PAYMENTS, THEREFORE, CANNOT BE CONSIDERED AS SHAM TRANSACTIONS. THE ASSE SSING OFFICER PROCEEDED TO HOLD THE REIN S OF CONDUCTING THE BUSINESS IN HIS OWN HAND WHICH WE ARE UNABLE TO ACCEPT BECAUSE HE HAS RELIED ON THE FINANCIAL RESULT ALONE TO HOLD THAT THE ASSESSE COULD HAVE DONE WITHOUT THESE PAYMENTS. THIS CLEARLY RESULTS INT O THE ASSESSING OFFICER HOLDING A BI A S AGAINST THE ASSESSEE THAT SEVERAL PARTIES ARE INVOLVED FOR CREATING FICTITIOUS ENTRIES WITHOUT SUFFERING TAX. IN OTHER WORDS, THE ASSESSING OFFICER LOST SIGHT OF THE FACT THAT THE AMOUNT IN QUESTION HAS SUFFERED TAX M ORE THAN WHAT OUGHT TO HAVE BEEN OTHERWISE REFUNDED TO THE RESPECTIVE PARTIES. HONBLE APEX COURT IN THE CASE OF TIN BOX COMPANY V. COMMISSIONER OF INCOME - TAX (SUPRA) HAVE CLEARLY DELIBERATED ON THE ISSUE BY INDICATING THE ASSESSEE OUGHT TO BE GIVEN A PROP ER OPPORTUNITY WHEN THE ASSESSEE COULD HAVE BALANCED THE EVIDENCE EITHER BEFORE THE FIRST APPELLATE AUTHORITY OR THE TRIBUNAL WAS REALLY WAS NO CONSEQUENCE FOR IT WAS THE ASSESSMENT ORDER THAT COUNTED. THE ORDER OUGHT TO BE MADE AFTER THE ASSESSEE HAD BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD WHEN HE FORTIFIED ITSELF WITH THE NECESSARY DOCUMENTS AND EVIDENCES NOT BECAUSE WHAT THE ASSESSING OFFICER FEELS WOULD HAVE BEEN A PROPER BUSINESS TRANSACTION BUT BECAUSE INVOLVEMENT OF THIRD PARTIES REQUIRES CONSIDERATION ESPECIALLY WHEN THE ASSESSING OFFICER ISSUES NOTICE U/S.147/148. WITHOUT GOING INTO THE NITTY - GRITTY OF THE LEGAL ISSUES INVOLVED HEREIN, WE ARE OF THE CONSIDERED VIEW THAT IN THE INTEREST OF JUSTICE, AND IN ORDER TO AVOID UNNECESSARY MULTIPL ICITY OF LITIGATIONS AND SAVE TIME, THE MATTER SHOULD BE CONSIDERED BY THE ASSESSING OFFICER AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE OF BEING HEARD ESPECIALLY WHEN THE LEARNED CIT(A) HAS NOT INDICATED A SINGLE POINT ON MERITS FOR CONSIDERATI ON. I.T.A.NO. 165 AND 166 /CTK/ 2011 8 WE, THEREFORE, SET ASIDE THE ORDERS OF THE LEARNED CIT(A) PASSED FOR THE BOTH THE AYS UNDER CONSIDERATION AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION OF THE SAME AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE O F BEING HEARD. 7 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 28 TH APRIL, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DAT E: 28 TH APRIL, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SHREE MAHAVIR CARBON LIMITED, PLOT NO.85, PHASE I II, NEW INDUSTRIAL ESTTE, JAGATPUR, CUTTACK. 2 / THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX,CIRCLE 1(1), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.