M/s. Oriental Distributors, Cuttack V. ITO, Ward-2(3), Cuttack, Cuttack

ITA 204/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81472 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 27-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: P K MISHRA
• Keywords: Unexplained expenditure; Opportunity of being heard; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI S.V.MEHROTRA (AM) AND GEORGE MATHAN (JM) I.T.A. NOS.204 & 205/CTK/2013 ASSESSMENT YEAR: 2006-07 M/S. ORIENTAL DISTRIBUTORS, AT: TINIKONIA BAGICHA, PO: BUXIBAZAR, DIST: CUTTACK PA NO.AACFT 0662 K VS ITO, WARD - 2(3), CUTTACK APPELLANT RESPONDENT FOR THE APPELLANT: SHRI P.K.MISHRA FOR THE RESPONDENT: SHRI S.C. MOHANTY DATE OF HEARING: 17/10/.2014 DATE OF PRONOUNCEMENT: /10/2014 ORDER PER S.V.MEHROTRA, AM BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS DATED 8..1.2013 OF LD CIT(A), CUTTACK FOR THE ASSESSMEN T YEAR 2006-07. ITA NO.204/CTK/2013 IS IN THE MATTER OF ASSESSMENT UNDER SECTION 254/144 OF T HE I.T.ACT AND I.T.A. NO.205/CTK/2013 IS IN THE MATTER OF ASSESSMENT U/S.254/115WF OF THE IN COME TAX ACT, 1961. 2. THE ASSESSING OFFICER HAS PASSED THE IMPUGNED OR DER AS PER THE DIRECTION OF THE ITAT CUTTACK BENCH VIDE ITS ORDERS DATED 10.2.2010 IN ( ITA NO.267/CTK/2009) AND (ITA NO.268/CTK/2010). THE AO COMPLETED THE ASSESSMENTS UNDER SECTION 254/144, AND UNDER SECTION 254/115WF, INTER ALIA, OBSERVING AS UNDER: THE TIME PETITION OF THE ASSESSEE EXTRACTED ABOVE, CONSIDERATION OF THE TIME PETITION AND ADJOURNMENT OF THE COMPLIANCE DATED FR OM 23.11.2010 TO 13.12.2010 AND NO COMPLIANCE TILL THE DATE OF ADJUD ICATION PROVE ITSELF THAT ASSESSEE DID NOT COOPERATE IN THE ASSESSMENT PROCEE DINGS IN SPITE OF HIS PRAYER WAS HEARD AND ACCORDINGLY DIRECTION WAS ISSUED BY T HE HONBLE TRIBUNAL. AS THE 2 PROCEEDINGS OF ADJUDICATION ARE TO GET TIME BARRED BEYOND 31.12.2010, I FIND NO OTHER OPTION BUT TO COMPLETE THE PROCEEDINGS. 3. LD CIT(A) DISMISSED THE ASSESSEES APPEALS. 4. BEING AGGRIEVED, ASSESSEE HAS, INTER ALIA, TAKEN THE FOLLOWING GROUNDS IN ITA NO.204/CTK/2013: 1. FOR THAT THE IMPUGNED ORDERS SO PASSED BY THE L EARNED FORUMS BELOW ARE NOT JUST AND PROPER UNDER THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND HENCE IS LIABLE TO BE QUASHED IN THE INTEREST OF JU STICE. 2. FOR THAT THE LEARNED A.O. SHOULD NOT HAVE PASSED TH E IMPUGNED ORDER OF ASSESSMENT U/S.144 OF THE I.T. ACT 1961 WITHOUT PRO VIDING AN EFFECTIVE REASONABLE OPPORTUNITY OF BEING HEARD. 3. THE LEARNED A.O SHOULD NOT HAVE DISALLOWED THE SALA RY AND INTERS: PAID TO PARTNERS AMOUNTING TO RS.3, 61,299.00 TREATING THE STATUS OF THE FIRM AS A.O.P INSTEAD OF PARTNERSHIP FIRM. 4. FOR THAT THE LEARNED C.I.T (A) SHOULD NOT HAVE CONF IRMED THE EX-PARTY ASSESSMENT ORDER AND ADDITIONS MADE THEREIN BY DISA LLOWING THE SALARY AND INTEREST PAID TO PARTNERS AND ALSO SHOULD NOT HAVE CONFIRMED THE STATUS OF THE APPELLANT AS A.O.P, WHEN THE COUNSEL FOR THE APPELLANT APPEARED AND PRODUCED THE RELEVANT REQUIRED DOCUMENTS. 5. FOR THAT THE LEARNED A.O SHOULD NOT HAVE DISALLOWED THE CLAIM O BUSINESS PROMOTION EXPENSES OF RS.13,67,276.00 AND ADDED BAC K THE SAME TREATING THE SAME AS UNEXPLAINED EXPENDITURE IGNORING THE BASIC FACTS AND SUBMISSIONS OF THE ASSESSEE/APPELLANT A N EFFECTIVENESS OF THE EXPENDITURE. 6. FOR THAT THE LEARNED C.I.T(A) SHOULD NOT HAVE CONFI RMED THE SAME BLINDLY SIMPLY RELYING ON THE VERSION OF THE LEARNED A.O WI THOUT EXAMINING THE FACT THAT THE SAID EXPENDITURE IS NECESSARY AND REQUIRED IN THIS LINE OF BUSINESS. 7. FOR THAT LD A.O SHOULD NOT HAVE DISALLOWED THE BANK INTEREST OF RS.3,56,697.00 PAID AND CLAIMED IN THE PROFIT AND L OSS ACCOUNT IGNORING THE BANK STATEMENT AVAILABLE WITH HIM WHILE COMPLETING THE ASSESSMENT. 3 8. FOR THAT THE LD CIT(A) SHOULD NOT HAVE CONFIRMED TH E DISALLOWANCE OF BANK INTEREST PAID AND CLAIMED IN THE PROFIT AND LOSS AC COUNT WITHOUT EXAMINING THE ASSESSMENT RECORD AND WITHOUT CONSIDERING THE S UBMISSION OF THE APPELLANT. 9. FOR THAT SINCE THE IMPUGNED ADDITIONS ARE ILLEGAL A ND NOT SUSTAINABLE IN THE EYE OF LAW IS LIABLE TO BE DELETED IN THE INTEREST OF JUSTICE. 5. THE ASSESSEE HAS, INTER ALIA, FOLLOWING GROUNDS OF APPEAL IN ITA NO.205/CTK/2013: 1. FOR THAT THE IMPUGNED ORDERS SO PASSED BY THE L EARNED FORUMS BELOW ARE NOT JUST AND PROPER UNDER THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND HENCE IS LIABLE TO BE QUASHED IN THE INTEREST OF JUSTICE. 2. FOR THAT THE LEARNED A.O. SHOULD NOT HAVE PASSED TH E IMPUGNED ORDER OF ASSESSMENT U/S.254/115WF OF THE I.T. ACT 1961 WITHO UT PROVIDING AN EFFECTIVE REASONABLE OPPORTUNITY OF BEING HEARD. 3. FOR THAT THE LEARNED C.I.T (A) SHOULD NOT HAVE CONF IRMED THE ASSESSMENT ORDER WHEN THE COUNSEL FOR THE APPELLANT APPEARED AND PRODUCED THE RELEVANT RE QUIRED DOCUMENTS. 4. FOR THAT THE LEARNED A.O SHOULD NOT HAVE DISALLOWED 20% OF THE EXPENSES CLAIMED UNDER THE HEAD TELEPHONE EXPENSES OF RS.3 ,600.00, SALES PROMOTION EXPENSES OF RS.1,80,842.0, CONVEYANCE, TOUR AND TRA VEL EXPENSES OF RS.25,590.00 AND EMPLOYEES WELFARE EXPENSES OF RS.7 ,118.00 TREATING THE SAME AS FRINGE BENEFITS, PARTICULARLY WHEN THE SAME ARE NOT COMING WITHIN THE AMBIT OF SECTION 115WF OF THE I.T.ACT, 1961. 5. FOR THAT THE LEARNED C.I.T(A) SHOULD NOT HAVE CONFI RMED THE ADDITION OF RS.2,90,450.00 AS MADE BY LEARNED A.O BY TREATING T HE SAME AS FRINGE BENEFITS WITHOUT ASSIGNING ANY COGENT REASON AND SIMPLY RELY ING ON THE AOS OBSERVATION. 6. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSES SEE SUBMITTED THAT ONE MORE OPPORTUNITY BE AFFORDED TO THE ASSESSEE BECAUSE THE ASSESSING O FFICER MERELY REPEATED THE ADDITIONS MADE IN THE EARLIER ASSESSMENTS. HE SUBMITTED THAT ASSE SSEE UNDERTAKES TO COOPERATE WITH THE DEPARTMENT AND IN CASE ASSESSEE FAILS TO ADHERE TO THE UNDERTAKING, ADVERSE INFERENCE MAY BE DRAWN. IN VIEW OF THE UNDERTAKING GIVEN BY THE ASSE SSEE TO COOPERATE WITH THE DEPARTMENT ,WE, IN THE INTEREST OF JUSTICE, SET ASIDE THE ORDERS OF LD CIT(A) AND RESTORE BACK THE FILES TO THE AO 4 WITH A DIRECTION TO DECIDE THE ISSUE DENOVO. WE MA Y HERE POINT OUT THAT IF THE ASSESSEE FAILS TO COOPERATIVE THE DEPARTMENT, THE AO WILL BE AT LIBER TY TO PASS THE ASSESSMENT ORDERS AS PER LAW. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2014. SD/- SD/- ( GEORGE MATHAN) (S.V.MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, CUTTACK 21 /10/2014 B.K.PARIDA, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: M/S. ORIENTAL DISTRIBUTORS,AT: TINI KONIA BAGICHA, PO: BUXIBAZAR, DIST: CUTTACK 1. THE RESPONDENT: ITO, WARD-2(3),CUTTACK 2. THE CIT, CUTTACK 3. THE CIT(A), CUTTACK 4. DR, CUTTACK BENCH 5. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, CUTTACK