Shri Mukesh Kumar, Bareilly V. ITO, Uttar Pradesh

ITA 1881/DEL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2770 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: SAN T KAPOOR
• Keywords: Opportunity of being heard; Additional evidence
• Section: 44AD; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH E NEW DELHI BEFORE : SHRI C.M. GARG , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1881/DEL./2012 ASSTT. YEAR : 2006 - 07 MUKESH KUMAR, VS. INCOME - TAX OFFICER, C/O SHRI SATNAM SINGH CHAWLA, BUDAUN (U.P.) L - 2/A, RAMPUR GARDEN, BAREILLY. [PAN: ADWPK1801C] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SANT KAPOOR, ADVOCATE RESPONDENT BY : SH. P. DAM KANUNJNA, SR. DR DATE OF HEARING : 01.12.2015 DATE OF PRONOUNCEMENT : 22 .01.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25.01.2012 OF LD. CIT(A), BAREILLY FOR THE ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(APPEALS) HAS GROSSLY ERRED IN CONFIRMING APPLICATION OF RATE @ 6% ON REIMBURSEMENTS RECEIVED BY THE ASSESSEE TO THE TUNE OF RS.20,90,258/ - WITH TOTAL DISREGARD TO THE FACTS CIRCUMSTANCES OF THE CASE. THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE THAT EVEN IN CASES WHERE REIMBURSEMENTS WERE PASSED THROUGH PROFIT AND LOSS ACCOUNT, THERE WILL BE A CREDIT ENTRY IN THE PROFIT AND LOSS ACCOUNT WITH A CORRESPONDING DEBIT ENTRY WITHOUT DISTURBING THE PROFITABLILITY. 2. THE ENTIRE ADD ITION MADE IS UNJUSTIFIED, ILLEGAL AND BAD IN THE EYES OF LAW. ITA NO. 1881/DEL./2012 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29.03.2007 ACCOMPANIED WITH COPY OF AUDIT REPORT. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED ON 25.02.2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE WAS WORKING UNDER ITC CO. LTD. BOTH FOR TOBACCO AND IBD DIVISION. THE APPELLANT INCURRED SOME EXPENDITURE ON BEHALF OF ITC CO. LTD. THE MODUS OPERAND I AS PER AGREEMENT BETWEEN THE ITC (IBD) AND ASSESSEE IS THAT THE COMPANY PURCHASED AGRICULTURAL PRODUCTS FROM FARMERS THROUGH ITS PERSONNEL DEPUTED AT UJHANI CIRCLE AND THE ASSESSEE PROVIDES INFRASTRUCTURE FOR ENCOURAGING, PROMOTING AND SECURING PURCHASE BY THE COMPANY. THE COMPANY, IN TURN, PROVIDES SERVICE CHARGES AT DIFFERENT RATES ON VARIOUS ITEMS. IT IS ALSO THE RESPONSIBILITY OF THE ASSESSEE TO MAKE PAYMENTS TO THE FARMERS, THE COST OF GOODS PURCHASED BY THE COMPANY ON PRODUCTION OF 6RS ISSUED BY THE COMPANY. FURTHER, THE ASSESSEE ALSO PROVIDES LABOUR FOR THE COMPANY ON THE LABOUR RATES FIXED BY THE COMPANY. THE COMPANY HAS MADE TOTAL PAYMENTS TO THE ASSESSEE (CHHABRA BROTHERS) OF RS.29,16,332/ - WHICH INCLUDED PAYMENTS U/S. 194C AND 194H OF THE ACT. T HE TDS WAS DEDUCTED BY THE COMPANY ON RS.8,26,072/ - TOWARDS IBD COMMISSION AND TAX DEDUCTED U/S. 194C ON RS.20,90,258/ - , TOWARDS REIMBURSEMENT OF MISCELLANEOUS EXPENSES, ONWARD ITA NO. 1881/DEL./2012 3 FREIGHT COMMISSION AND LABOUR CHARGES. THE APPELLANT DID NOT DISCLOSE ANY OF SU CH EXPENDITURE IN HIS PROFIT AND LOSS ACCOUNT TO THE REIMBURSEMENT RECEIVED AND HE DISCLOSED ONLY THE BALANCE AMOUNT IN THE BALANCE SHEET UNDER THE HEAD DEBTORS . THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 44AD OF THE IT ACT AND ADDED 8% PROF IT ON RS.20,90,258/ - , AS THE ASSESSEE FAILED TO PRODUCE EITHER AGREEMENT OR VOUCHERS FOR EXPENDITURE ALLEGED TO HAVE BEEN INCURRED, BEFORE THE AO. IN APPEAL BEFORE THE CIT(A), THE LD. CIT(A) REDUCED THE PROFIT RATE TO 6% AS AGAINST 8% APPLIED BY THE ASSESS ING OFFICER. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. AR SUBMITTED THAT THE EXPENDITURE INCURRED, WHATSOEVER, BY THE APPELLANT WERE IN RELATION TO THE PURCHASES MADE BY COMPANY AND THE SAME WERE REIMBURSED BY THE COMPANY TO THE AS SESSEE. THE RELEVANT VOUCHERS WERE PRODUCED BEFORE THE AO, BUT THE AO DENIED TO ACCEPT THE SAID VOUCHERS. HE SUBMITTED THAT THE COPY OF AGREEMENT BETWEEN THE ASSESSEE AND THE COMPANY COULD NOT BE PRODUCED BEFORE THE AO. THE REFORE, AT PAGE 1 TO 8 OF THE PAP ER BOOK, THE ASSESSEE HAS PRODUCED BEFORE THE BENCH THE SAID AGREEMENT AND LETTER OF THE COMPANY AS ADDITIONAL EVIDENCE ALONGWITH APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE U/R 29 OF THE IT RULES, STATING THAT THE SAME WAS NOT AVAILABLE EITHER AT THE TIME OF ASSESSMENT PROCEEDINGS OR BEFORE THE ITA NO. 1881/DEL./2012 4 FIRST APPELLATE AUTHORITY. IT IS A GENERAL ACCOUNTING PRACTICE THAT REIMBURSEMENT OF ANY EXPENDITURE IS NOT AN INCOME. THE INCOME, WHATSOEVER, EARNED BY THE ASSESSEE FROM THE COMPANY HAS BEEN DISCLOSED PROPERLY IN THE PROFIT AND LOSS ACCOUNT AS PER AGREEMENT. 4. THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. REGARDING PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE BENCH, THE LD. DR STATED THAT SUCH EVIDENCES CAN BE EXAMINED ONLY BY THE AO. 5. HAVING C ONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE BEFORE THE BENCH IS TAKEN ON RECORD. A PERUSAL OF IMPUGNED ORDER SHOWS THAT THE VOUCHERS FOR EXPENSES ARE STATED BY THE ASSESSEE TO HAVE B EEN PRODUCED BEFORE THE ASSESSING OFFICER WHEREAS THE ASSESSING OFFICER HAS STATED THAT NO SUCH VOUCHERS WERE PRODUCED BEFORE HIM. THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE IN THE FORM OF AGREEMENT BETWEEN THE ASSESSEE AND THE COMPANY ALSO NEEDS TO BE EXAMINED BY THE AO BEFORE DECIDING THE IMPUGNED ISSUE. IN PRESENCE OF THESE FACTS, WE FIND THAT IT IS A FIT CASE WHICH REQUIRES RESTORATION TO THE FILE OF AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE MATTER TO THE FILE OF AS SESSING OFFICER FOR DECIDING THE ISSUE AFRESH ITA NO. 1881/DEL./2012 5 AFTER EXAMINING ALL THE EVIDENCES WHICH THE ASSESSEE SHALL FURNISH BEFORE THE AO IN SUPPORT OF ITS CLAIM. NEEDLESS TO SAY THE ASSESSEE SHALL BE AFFORDED REASONABLE OPPORTUNITY OF BEING HEARD BEFORE FINALLY DECI DING THE MATTER. THE ASSESSEE IS DIRECTED TO AVOID UNNECESSARY ADJOURNMENTS AND SHALL FULLY COOPERATE WITH THE ASSESSING OFFICER. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2016 . SD/ - SD/ - ( C.M. GARG ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22.01.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI