Ganpat Rai Kewal Ram Trading Company, Chandauli V. ITO, Ward - 03(03), Chandauli

ITA 171/VNS/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9634 (ITAT-VARANASI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 30-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT “SMC” BENCH, VARANASI (THROUGH VIRTUAL COURT), BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER ITA No.171/VNS/2019 Assessment Year: 2012-13 Ganpat Rai Kewal Ram, Trading Co., 303, Mahmoodpur, Kalashpuri, Mughalsarai, Chandauli, PAN- AADCG0707A v. Income Tax Officer, Ward-3(3) Chandauli (Appellant) (Respondent) Appellant by: Mr. O.P. Shukla, Adv. Respondent by: Mr. Amit Nigam, Sr. DR Date of hearing: 24.01.2022 Date of pronouncement: 27.01.2022 O R D E R PER SHRI VIJAY PAL RAO, JUDICIAL MEMBER: This appeal by the assessee is directed against the order dated 1 st May, 2019 of CIT(A) for the assessment year 2012-13. The assessee has raised the following grounds:- 1. Because, the Ld. Commissioner of Income Tax (A) was not justified to conform the disallowance Rs 14,265.00/- and 9,80,972.00/- total s. 9,95,237.00/- of debit note issued by the assessee in the name of Abhinav Steel Pvt. Ltd. abnd Amba Shakti Ispat Ltd. respected. 2. Because, the ld. Commissioner of Income Tax (A) was not justified to confirm the said addition though the appellant was already submitted the conformetry stamen of account duly signed by the parties and without consider the fact the Ld. CIT(A) has confirmed the said addition which is not justified in the light of juridical judgment. ITA No. 171/VNS /2019 Asstt. Year-2012-13 2 3. Because, the Ld. Commissioner of Income Tax (A) was not justified to disallow the coal Exps Rs. 1,69,818.00/- out of the total exps debited to the p/L Account. The said exps. Has duly been disallowed by the AO only on lumb-sumb basis. 4. Because, the appellant craves for a right to raise any additional ground during the course of hearing of the case. 5. Because, the order passed by the Ld. Commissioner of Income Tax (A) is erroneous, bad in law and on facts and is liable to be deleted. 2. Ground Nos. 1 and 2 are regarding the addition made by the AO by disallowing the debit note issued by the assessee on account of transit loss. The assessee is engaged in the trading of coal and filed its return of income on 27 th September, 2012 declaring total income of Rs. 3,95,200/- During the limited scrutiny assessment, the AO noted that the assessee has claimed loss in transit amounting to Rs. 30,62,004/- in the profit and loss amount. The assessee filed copies of debit notes issued by the purchasers of coal during assessment proceedings. In order to verify the fact and debit notes. the AO issued notices under Section 133(6) to the parties to whom debit notes were issued by the assessee. In response the AO received information from 1 party M/s. Heinz India Private Limied, Gaziabad admitting the deduction of Rs. 38,112/- due to poor quality of coal as against the claim of deduction by the assessee of Rs. 52,377/- Accordingly, the differential amount of Rs. 14,265/- was added in respect of the debit notes issued of M/s. Heinz India Private Limited. Since no reply has been received from the other parties/purchasers of coal in response to the notices under Section 133(6) therefore, the AO made the additions of the amount of claim of debit notes. The AO thus made a total addition of Rs. 9,95,237/- on this account. The assessee challenged the action of the AO before the CIT(A) but could not succeed. 3. Before the Tribunal the Ld. AR of the assessee has submitted that due to the shortage of time, the AO has made the addition in haste without even asking the assessee to furnish the confirmation of the debit notes issued in respect of the purchasers. He has further submitted that the assessee furnished the confirmation of accounts from these purchasers, which are not considered by the CIT(A) while ITA No. 171/VNS /2019 Asstt. Year-2012-13 3 confirming the addition made by the AO. He has referred to the confirmation of accounts placed at Page No. 2 to 7 of the written synopsis filed by the assessee. Thus, the Ld. AR has submitted that in the ledger account of each party there are entries of debit notes which have been confirmed by the respective parties and therefore, the addition made by the AO and confirmed by the CIT(A) is contrary to the facts and records. 4. On the other hand, the Ld. DR has submitted that the Assessing Officer has conducting the inquiry by issuing the notices under Section 133(6) but there was no response from these parties except one parties, which is also confirmed only a part of the amount. He has relied upon the orders of the authorities below. 5. I have considered the rival submissions as well as relevant material on records. There is no dispute that the assessee has duly shown the debit notes in the ledger accounts of the purchasers and claimed the same on account of loss in transit. In order to verify the correctness of the claim, the AO issued notices under Section 133(6) of the Income Tax Act. However, except one party namely M/s Heinz India Private Limited Gaziabad, none has responded to the notices issued by the AO under Section 133(6). The AO has mentioned in the assessment order that the assessment is time barring on 31 st March, 2015 and accordingly the remaining claim of the loss in transit was added for want of any material in support of the claim. Thus, it is clear that the AO has not asked the assesssee to furnish confirmation because of time constrain as the impugned order was passed on 30 th March, 2015 just one day before the limitation, which is also mentioned by the AO in the assessment order at the bottom of Page No. 2. Before the CIT(A) the assessee submitted the confirmation of the purchasers regarding the debit notes on account of loss in transit however, the CIT(A) has confirmed the addition made by the AO in Para 5 as under: “5. I have considered the submissions of the appellant and have gone through the fact of the case. The appellant has not been able to satisfactorily explain the ITA No. 171/VNS /2019 Asstt. Year-2012-13 4 discrepancies pointed out be the AO with respect to debit notes issued to Abhinav Steel Pvt. Ltd. Amba Shakti Ispat ltd. Further discrepancy with Heinz Pvt. Ltd. amounting to Rs. 14,265/- has also not been explained. The submission of copies of accounts of these person in the books of accounts of the assessee is no evidence of genuineness of the debit notes. Accordingly, the additions of Rs. 995,237/- is made by the A.O. is sustained.” 6. It is clear that the CIT(A) has not even considered the confirmation filed by the assessee while deciding this issue. Thus, it is apparent from the record that neither the AO has conducted a proper inquiry to verify the correctness of the claim due to time constrain nor the CIT(A) has considered the confirmations filed by the assessee. Accordingly, in the facts and circumstances of the case this issue is set aside to the record of the AO for proper verification and fresh adjudication after giving an opportunity of hearing to the assessee as well as considering the confirmation filed by the Assessee. 7. Ground No. 3 is regarding disallowance of Coal Handling Expenses. During the course of scrutiny assessment the AO noted that the assessee has claimed Coal Handling Expenses of Rs. 22,84,236/-. The assessee filed ledger account of the expenses for the verification part of the AO. The AO has noted that the assessee has made payment of coal handling charges @ 20/- per MT. The AO asked the assessee to explain the reasons for increase in coal handling expenses, the assessee filed its reply and explained that the payment is made by the assessee to persons who are engaged in the coal handling against sales @Rs. 20 per MT, the assessee further explained this is a normal increase of costs due to inflation which is reasonable. The AO was not satisfied with the reply of the assessee and noted that the assessee has received coal of 1,05,721/- MT and soled coal quantity of 1,04,591/- MT during the year under consideration. Applying the rate of 20/- per MT as Coal Handling charges on the purchased quantity of 1,05,721/- MT. the AO arrived to the amount of Rs. 21,14,420/- ITA No. 171/VNS /2019 Asstt. Year-2012-13 5 only as against the claim of 22,84,236/-. Consequently, the AO made the addition of the differential of Rs. 1,69,816/- on account of disallowing the coal handling expenses. The assessee challenged the action of the AO before the CIT(A) but could not succeed. 8. Before the Tribunal the Ld. AR of the assessee has submitted that the AO made ad-hoc disallowance on account of coal handing expenses. He has further submitted that the assessee has claimed coal handling expenses based on the gross amount of purchases whereas, the AO has calculated the coal handling expenses at the net amount of purchases after reducing the transit loss. The Ld. AO has given the details of purchase of coal by assessee at 1,14,211/- MT after the shortage/loss whereas the actual coal was received at 1,5,721/- MT. Therefore, the difference of the amount which is added by the AO is only due to the coal handling expenses paid by the assessee on the gross quantity of coal and not on the net quantity. Hence, the Ld. AR has submitted that the addition made by the AO is not sustainable and liable to be deleted. 9. On the other hand, the Ld. DR has relied upon the orders of the authorities below and submitted that the AO accepted the rate of coal handling charges as explained by the assessee. However, there is excess claim on the part of the assessee when the net amount of coal is shown by the assessee in the books is considered and the differential amount is rightly added to the income of the assessee. 10. I have considered the rival submissions as well as relevant material on record. As pointed out by the Ld. AR of the assessee, there is a difference in the gross amount of coal purchased by the assessee and coal handling charges are claimed to have been paid on the gross amount and not on the net amount. The AO computed the coal handling charges on the net quantity. However, this point was not raised by the assessee either before the AO or before the CIT(A). Therefore, these facts of gross amount and net amount of coal purchase during the year under consideration were unverified at the level of AO as well as CIT(A). ITA No. 171/VNS /2019 Asstt. Year-2012-13 6 11. Accordingly, in the facts and circumstances of the case, this issue is set aside to the record of the AO for reconsideration the same after giving an appropriate opportunity of hearing to the assessee. 12. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 27.01.2022 through video conferencing. Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED: 27/01/2022 Kd. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar