The ITO, Ward-2(4), Baroda V. Shri Rajnikant R. Swain, Baroda

ITA 1965/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9405 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence; Corroborative evidences
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1965/AHD/2013 (ASSESSMENT YEAR: 2009-10) INCOME-TAX OFFICER, WARD- 2(4),BARODA V/S SHRI RAJNIKANT R SWAIN D- 12, KAMALANAJALI, ABOVE HDFC BANK RADHAKRISHNA CROSSING , AKOTA, BARODA (APPELLANT) (RESPONDENT) PAN: AIIPS7606N APPELLANT BY : SHRI K. MADHUSUDAN, SR. D. R. RESPONDENT BY : MS. URVASHI SHODHAN, A.R. ( )/ ORDER DATE OF HEARING : 17-01-2017 DATE OF PRONOUNCEMENT : 19 -01-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)- II, BARODA DATED 09.04.2013 PERTAINING TO A.Y. 2009 -10 AND THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FOR OUR CONSIDERATION: ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 2 1. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING DISALLOWANCE OF RS. 8,82,235/- TO WARDS COMMISSION EXPENSES BY ADMITTING ADDITIONAL EVIDENCE/SUBMISSION MADE BY TH E ASSESSEE DURING THE COURSE OF APPELLATE STAGE WITHOUT REMANDING THE ASS ESSING OFFICER'S REPORT THEREON. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ID. CIT(A) ERRED IN RESTRICTING THE L/3 RD DISALLOWANCE OF RS. 4,87,567/- OUT OF CONTRACT & S ITE EXPENSES TO RS. 73,135/~ BEING 5% OF THE EXPENSES W ITHOUT APPRECIATING THAT ASSESSEE HAD FAILED TO FURNISH COMPLETE DETAILS OF CONTRACT AND SITE EXPENSES AND SUBSEQUENT PAYMENTS FOR VERIFICATION CORRECTNESS OF THE EXPENSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ID.CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF SUNDRY CREDI TORS OF RS. 56,42,641/- BY ADMITTING ADDITIONAL EVIDENCE/SUBMISSION MADE BY TH E ASSESSEE DURING THE COURSE OF APPELLATE STAGE WITHOUT REMANDING THE ASS ESSING OFFICER'S REPORT THEREON. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ID. CIT(APPEALS) ERRED IN DELETING DISALLOWANCE OF INTEREST EXPENSES OF RS. 3,56,378/-WITHOUT APPRECIATING THAT ASSESSEE WAS NOT MAINTAINING SEPA RATE ACCOUNTS FOR INTEREST BEARING BUSINESS FUND AND THE INTEREST-FREE ADVANCE FUNDS AND HE FAILED TO PROVE THAT THE INTEREST BEARING FUND HAD BEEN USED EXCLUS IVELY FOR BUSINESS PURPOSE. 2. THE ASSESSEE IS IN THE BUSINESS OF TRADING IN LDPE FILM, HDPE FLMS, PE-HD GEOMEMEBRANE, GEOTEXTILE, GEONET, CLAY TILE, AND JO INTING AND LAYING OF THE SAME UNDER THE NAME AND STYLE OF HIS PROPRIETARY CO NCERN M/S. MAHARSHEE GEOSYNTHETICS. THE ASSESSEE ALSO DERIVE SALARY INCO ME FROM M/S. MAHARSHEE GEOMEMBRANE (INDIA) PVT. LTD. AND INTERE ST ON DEPOSITS WITH BANK AND COMPANIES. 3. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED ELECTRONICALLY ON 24.09.2009 DECLARING TOTAL INCOME AT RS. 13,62,490/-. THE ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 3 RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT THROUGH CASS AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE A SSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED RS. 8,82,235/- TOWARD S PAYMENT OF COMMISSION TO THE FOLLOWING PERSONS:- (I) JIBANANANDA RAY RS. 41,400/- (II) MANOJKUMAR NAIK RS. 3,00,000/- (III) RANJIKANT SWAIN-HUF RS. 5,40,835/- 5. IN SUPPORT OF THE CLAIM, THE ASSESSEE FILED COPY OF THE INVOICE FROM MANOJKUMAR NAI AND JIBANANANDA RAY AND IN THE CASE OF RAJNIKANT SWAIN- HUF. THE ASSESSEE FILED COPY OF THE ACKNOWLEDGEMENT OF THE RETURN OF INCOME FILED FOR A.Y. 2009-10. 6. FOR VERIFICATION PURPOSE, THE A.O. ISSUED NOTICES U /S. 133(6) OF THE ACT WHCH WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE RE MARK NOT KNOWN AND NO SUCH PERSON AT THE ADDRESS. 7. THE ASSESSEE WAS ONCE AGAIN ASKED TO FURNISH THE NA ME AND ADDRESS OF THE PARTIES TO WHOM SALES WERE AFFECTED THROUGH THE BRO KERS AND THE AMOUNT INVOLVED. THE ASSESSEE WAS ASKED TO GIVE JUSTIFICAT ION OF COMMISSION PAID TO THE HUF ALSO. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O. DISALLOWED THE CLAIM OF COMMISSION EXPENSE OF RS. 8,82,235/-. ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 4 8. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) AND ONCE AGAIN REITERATED THE CLAIM OF THE PAYMENT OF COMMISSION. 9. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE FURNISHED THE PAN DETAILS ALONG WITH COPY OF BILLS AND CREDIT NOTES. IT WAS E XPLAINED THAT IN THE CREDIT NOTES, THE DETAILS OF PARTY TO WHOM THE MATERIALS I S SOLD ALONG WITH QUANTITY SOLD AND RATE OF COMMISSION IS MENTIONED. IT WAS BR OUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE ASSESSEE HAS DEDUCTED TAX A T SOURCE ON THE IMPUGNED PAYMENTS. 10. ON THE BASIS OF THESE DETAILS AND ON THE BASIS OF T HE TDS MADE THE LD. CIT(A) DELETED THE IMPUGNED ADDITION. THE LD. CIT(A) FURTH ER OBSERVED THAT THE HUF HAS OFFERED THE INCOME IN ITS RETURN OF INCOME, THEREFORE, THE SAME CANNOT BE DISALLOWED. 11. BEFORE US, THE LD. D.R. VEHEMENTLY STATED THAT THE FIRST APPELLATE AUTHORITY HAS CONSIDERED CERTAIN DOCUMENTS WHICH WERE NOT BEF ORE THE A.O. IT IS THE SAY OF THE LD. D.R. THAT THE FIRST APPELLATE AUTHOR ITY DID NOT EVEN CALL FOR ANY REMAND REPORT FROM THE A.O. PER CONTRA, THE LD. COU NSEL FOR THE ASSESSEE STATED THAT THERE IS NO VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC TS IN ISSUE. IT IS NOT IN DISPUTE THAT THE DOCUMENTS RELIED UPON BY THE FIRST APPELLATE AUTHORITY WERE NOT BEFORE THE A.O. IT IS ALSO TRUE THAT THE F IRST APPELLATE AUTHORITY DID NOT CALL FOR ANY REMAND REPORT FROM THE A.O. IN O UR CONSIDERED OPINION, ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 5 THE FIRST APPELLATE AUTHORITY HAS VIOLATED THE PRIN CIPLES OF NATURAL JUSTICE. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY , WE RESTORE THIS ISSUE TO THE FILES OF THE A.O. THE ASSESSEE IS DIRECTED TO F URNISH COMPLETE DETAILS RELATING TO THE PAYMENTS OF THE COMMISSION. THE ASS ESSEE IS ALSO DIRECTED TO DEMONSTRATE THE SALES MADE BY THESE AGENTS FOR W HICH COMMISSION HAS BEEN PAID. THE ASSESSEE IS FURTHER DIRECTED TO PRO VE THAT THESE AGENTS HAVE RENDERED SERVICES. THE A.O. IS DIRECTED TO VERIFY T HE DETAILS AND DECIDE THE ISSUE AFRESH AFTER GIVING A REASONABLE AND PROPER O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 1 IS TREATED AS A LLOWED FOR STATISTICAL PURPOSE. 13. THE SECOND GRIEVANCE RELATES TO THE RESTRICTION OF THE DISALLOWANCE OUT OF CONTRACT AND SITE EXPENSES TO RS. 73,135/-. 14. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. N OTICED THAT THE ASSESSEE HAS SHOWN CONTRACT AND SITE EXPENSES PAYABLE AT RS. 14,62,700/- UNDER THE HEAD SUNDRY CREDITORS. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF CONTRACT AND SITE EXPENSES PAYABLE. THE ASSESSEE WAS ALSO ASKED TO FURNISH THE DETAILS OF PAYMENTS MADE IN SUBSEQUENT YEAR. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O. DISALLOWED 1/3 RD OF THESE EXPENSES AND ADDED RS. 4,87,567/- TO THE TOTAL INCOME. 15. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED THE CLAIM OF CONTRACT AND SITE EXPENSES. ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 6 16. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT NO SPECIFIC DISCREPANCY HAS BEEN POINTED OUT B Y THE A.O. IN THE DETAILS OF EXPENSES FURNISHED. THE LD. CIT(A) RESTRICTED TH E DISALLOWANCE TO RS. 73,135/-. 17. BEFORE US, THE LD. D.R. STATED THAT SINCE THE ASSES SEE DID NOT FURNISH ANY DETAIL OF CONTRACT AND SITE EXPENSES, THE A.O. WAS LEFT WITH NO CHOICE BUT TO MAKE THE IMPUGNED DISALLOWANCE. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 18. WE HAVE CONSIDERED THE ORDERS OF THE AUTHORITIES BE LOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE DID NOT FURNISH THE RELEVANT DETAILS CALLED FOR BY THE A.O. A PERUSAL OF THE LEDGER ACCOUNTS EXHIBITED AT PAGES 21 TO 23 OF THE PAPER BOOK SHOW THAT ALL THE PAYMENTS HAVE BEEN MAD E IN CASH. AS NO CONCLUSIVE EVIDENCES HAVE BEEN BROUGHT ON RECORD IN JUSTIFICATION OF THE EXPENSE SHOWN AS PAYABLE UNDER THE HEAD CONTRACT A ND SITE EXPENSES, IN OUR CONSIDERED OPINION, AN ADDITION OF RS. 1.50 LAC S ON THIS ACCOUNT SHOULD MEET THE ENDS OF JUSTICE. WE, ACCORDINGLY, SET ASID E THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO RESTRICT THE DISALLOW ANCE TO RS. 1.50 LACS. WITH THIS MODIFICATION, GROUND NO. 2 IS ALLOWED. 19. GROUND NO. 3 RELATES TO THE DELETION OF THE ADDITIO N ON ACCOUNT OF SUNDRY CREDITORS OF RS. 56,42,641/-. ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 7 20. WHILE SCRUTINIZING THE BALANCE SHEET OF THE ASSESSE E, THE A.O. NOTICED FOLLOWING CREDITORS:- I. M/S. D.P. WIRES PVT. LTD. RS. 20,24,066/- II. M/S. AYAN ENTERPRISE RS. 7,04,495/- III. SHRI RAJ KISHORE YADAV RS. 7,42,000/- IV. M/S. BHORUKA ROADWAYS (P) LT. RS. 1,38,294/- V. M/S. VISHAL PLASTICS INDUSTRIES RS. 10,57,561/- VI. M/S. JAGNARTH & CO. RS. 9,94,000/- 21. THE A.O. ISSUED NOTICES U/S. 133(6) OF THE ACT TO V ERIFY THE CREDIT BALANCES APPEARING IN THE BALANCE SHEET AND FOUND DISCREPANC IES IN THE BALANCES CONFIRMED BY THE PARTIES. THE DIFFERENCE OBSERVED C AN BE SUMMARIZED AS UNDER:- SR. NO. NAME OF THE CREDITORS S. CREDIT BALANCE CLAIMED BY THE ASSESSEE S. CREDIT BALANCE CONFIRMED BY THE CREDITORS REMARKS 1 M/S D.P. WIRES PVT. LTD. RS.20,24,066/ - NIL DENIED OF ANY TRANSACTION 2 M/S AYAN ENTERPRISE RS.7,04,495 NIL NO CONFIRMATION RECEIVED 3 MR. RAJ KISHORE YADAV RS.7,42,000 NIL NO CONFIRMATION RECEIVED 4 M/S BHORUKA ROADWAYS (INDIA) PVT. LTD. RS.1,38,294/ - 17,775 NO RECONCILIATION 5 M/S VISHAL PLASTIC INDUSTRIES RS. 10,57,561/ - NIL NO CONFIRMATION/ LEDGER A/C, PAN FILED : 6 M/S JAGNARTH & CO. RS.9,94,000 NIL NO CONFIRMATION / LEDGER A/C, PAN FILED RS.56,60,416 - 17,775 = 56,42,641 ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 8 22. THE ASSESSEE WAS ASKED TO RECONCILE THE DISCREPANCI ES NOTICED. ON RECEIVING NO PLAUSIBLE REPLY/RECONCILIATION, THE A.O. MADE TH E ADDITION OF RS. 56,42,641/-. 23. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND FILED RECONCILIATION STATEMENT IN CASE OF EACH CREDITOR SUPPORTED RELATE D DOCUMENTS. ON THE BASIS OF THE RECONCILIATION AND THE EVIDENCES FURNI SHED BY THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION OF RS. 56,42,641/-. 24. BEFORE US, THE LD. D.R. VEHEMENTLY STATED THAT THE FIRST APPELLATE AUTHORITY HAS ADMITTED FRESH EVIDENCES WITHOUT AFFORDING OPPO RTUNITY TO THE A.O. TO REBUT THE SAME. THE LD. COUNSEL FAIRLY CONCEDED THA T ADDITIONAL EVIDENCES WERE FURNISHED BEFORE THE LD CIT(A). 25. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE RIVA L CONTENTIONS QUA THE FACTS IN ISSUES. WE ARE OF THE CONSIDERED OPINION T HAT THE FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION OF RS. 56,42,641 /- IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. IN THE INTERES T OF JUSTICE AND FAIR PLACE, WE RESTORE THIS ISSUE TO THE FILES OF THE A.O. THE ASS ESSEE IS DIRECTED TO FURNISH RECONCILIATION IN RESPECT OF EACH AND EVERY CREDITO R WHERE THE DISCREPANCY HAS BEEN POINTED OUT BY THE A.O. ALONG WITH NECESSA RY SUPPORTING EVIDENCES. THE A.O.IS DIRECTED TO VERIFY THE SAME A ND DECIDE THE ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. GROUND NO. 3 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 9 26. GROUND NO. 4 RELATES TO THE DELETION OF THE DISAL LOWANCE OF RS. 3,56,378/-. 27. THE A.O. NOTICED THAT UNDER THE HEAD INTEREST AND FINANCE CHARGE, THE ASSESSEE HAS DEBITED RS. 13,49,042/-. THE A.O. FURT HER FOUND THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS/ADVANCES/DEP OSITS TO THE FOLLOWING PARTIES:- (I) KUCKOO CHANDIGARH RS. 2,36,460/- (II) PREM BHATIA RS. 3,74,525/- (III) RAJNIKANT SWAIN HUF RS. 17,64,871/- (IV) MGIPL RS. 18,25,000/- 28. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF INTE REST QUA THE INTEREST FREE ADVANCES TO THE AFOREMENTIONED PARTIES. THE ASSESSE E TRIED TO JUSTIFY ITS CLAIM BUT DID NOT FIND ANY FAVOUR WITH THE A.O. 29. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND GOT THE NECESSARY RELIEF. 30. BEFORE US, THE LD D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. THE LD. COUNSEL FOR THE ASSESSEE WHAT HAS BEEN SUBMITTED BE FORE THE LOWER AUTHORITIES. 31. AFTER CAREFULLY CONSIDERING THE FACTS IN ISSUES, WE FIND THAT THE ASSESSEE HAS CAPITAL BALANCE OF RS. 72,82,795/- AND THE IMPUGNED INTEREST FREE LOANS/ADVANCES AMOUNT TO RS. 42,00,856/-. THUS, IT CAN BE SEEN THAT THE ITA NO.1965/ AHD/2013 . A.Y. 2009-1 0 10 INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE FAR MORE IN EXCESS OF THE INTEREST FREE ADVANCES. THE BALANCE OF CONVENIENCE IS TILTED IN FAVOUR OF THE ASSESSEE AS IT CAN BE SAFELY PRESUMED THAT THE INTE REST FREE ADVANCES HAVE BEEN MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE RATIO LAID DO WN FROM THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF RELIANCE UTILIT IES AND POWER LTD. 313 ITR 340 WHICH WAS FOLLOWED IN THE CASE OF HDFC LTD. 366 ITR 505. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 4 IS DISMISSED. 32. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS A LLOWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 19 - 01- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 19/01/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD