Kasim Hussain, Sonebhadra V. DCIT, , Mirzapur

ITA 23/ALLD/2021

AI Insights

The case involves an appeal by Kasim Hussain against the order of the CIT(A) (National Faceless Appeal Centre, Delhi) for the assessment year 2014-15. The primary contention revolves around the ad-hoc disallowances and additions made by the AO, which were confirmed by the CIT(A). The AO had made disallowances of 10% on various expenses and additions of 50% on sundry creditors, citing lack of adequate response and supporting evidence from the assessee. The Tribunal found that the CIT(A) had not adequately verified the records and directed a fresh examination of the case.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 114342 (ITAT-ALLAHABAD)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2022
• Assessment Year: misc
• Appeal Filed On: 24-05-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Corroborative evidences; Set aside
• Section: 271(1)(c); 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No.23/ALLD/2021 Assessment Year: 2014-15 Kasim Hussain, 190, Gyanmati Bhawan Robarstganj, Sonebhadra-231216 PAN-ABPPH1042M v. Deputy Commissioner of Income Tax, Mirzapur (Appellant) (Respondent) Appellant by: Sh. Praveen Godbole, C.A. Respondent by: Sh. A.K. Singh, Sr. D.R. Date of hearing: 05.12.2022 Date of pronouncement: 05.12.2022 O R D E R SHRI VIJAY PAL RAO, J.M.: This appeal by the assessee is directed against the order dated 17.10.2021 of CIT(A) (National Faceless Appeal Centre, Delhi) for the assessment year 2014-15. 2. The assessee has raised the following grounds of appeal:- “1. That in any view of the matter order passed under section 143(3) of the Act on income of Rs.70,02,400/- by order dated 30.11.2016 is bad both on the facts and in law. 2. That in any view of the matter the learned C.I.T appeal (National Faceless Appeal Centre) was wrong in passing the order ex-parte without providing reasonable opportunity to the assessee nor assessee was aware about fixation of appeal hence the order passed is not speaking order in the eyes of law. 3. That in any view of the matter during appellate proceeding in physical hearing voluminous paper book was filed but subsequently the appeal was transferred under faceless scheme and the same was decided without providing opportunity the assessee hence the assessee was debarred from getting justice. 4. That in any view of the matter the assessing officer was wrong in making addition /disallowances on ad-hoc /percentage basis which is ITA No. 23/ALLD/2021 Kasim Hussain 2 not permissible under the act hence the addition made in arbitrary manner is not correct and unjudicious as per law. 5. That in any view of the matter disallowance of Rs. 11,99,231/- out of expenses under various heads on ad-hoc basis as made by the assessing officer and confirmed by CIT appeal is highly unjustified. 6. That in the any view of the matter disallowance of Rs. 11,99,231/- which is 10% of expenses claimed under the head labour, salary and wages, repair and maintenance, oil and lubricants when the said expenses are recorded in books of account hence 10% disallowance made by the assessing officer and confirmed by C.I.T. appeal is highly unjustified. 7. That in the any view of the matter addition of Rs.25,26,973/- with regard to sundry creditors by disallowing 50% on estimated basis as made by the assessing officer and confirmed by C.I.T. appeal is highly unjustified. 8. That in the any view of the matter the addition of Rs.25,26,973/- is not correct as the parties are genuine parties, they have Pan No., there are income tax assessee, some of the parties are old hence without ascertaining the facts the addition made by the assessing officer and confirmed by C.I.T. appeal is highly unjustified. 9. That in the any view of the matter the addition of Rs.2,24,010/- out of disallowance of 10% expense in the firm M/s Janta Construction as made by the assessing officer and confirmed by C.I.T. appeal is highly unjustified. 10. That in the any view of the matter addition of Rs. 20,17,608/- with regard to sundry creditors in the case of M/s Janta Construction is not correct as the addition was made by making addition of 50% of sundry creditors as reflected in the balance-sheet on estimated basis as made by the assessing officer and confirmed by C.I.T. appeal is highly unjustified. 11. That in the any view of the matter the addition of Rs.20,17,608/- in the firm M/s Janta Construction is not correct as the parties are genuine parties, they have Pan No., there are income tax assessee, some of the parties are old hence without ascertaining the facts the addition made by the assessing officer and confirmed by C.I.T. appeal is highly unjustified. 12. That in the any view of the matter addition/disallowances under different head as made by the assessing officer and confirm by C.I.T. appeal is highly unjustified. 13. That in any view of the matter the appellant reserves her right to take any fresh ground before hearing of the appeal.” 3. At the outset, the learned AR of the assessee has submitted that the AO has made adhoc disallowances of expenditure @ 10% while framing the ITA No. 23/ALLD/2021 Kasim Hussain 3 assessment whereas the assessee is maintaining the regular books of accounts which are duly audited. The AO has not disputed purchases and sales of the assessee and therefore, the making an adhoc disallowances @ 10% of expenses is highly arbitrary and unjustified. The assessee has filed a detailed reply before the CIT(A) however, the CIT(A) has confirmed the disallowance made by the AO without appreciating the facts as well as the record in this respect. The learned AR has further submitted that the AO has also made an addition of 50% of sundry creditors on lump sum basis despite the fact that all the sundry creditors are representing the purchase of material, labour expenses, rent, consumables etc,. These are running expenses incurred in the regular books of accounts of civil contract business of the assessee and duly reflected in the balance-sheet year after year. Thus, the learned AR has submitted that making an adhoc disallowances to the extent of 50% of the sundry creditors without disputing the purchasing and sales is also unjustified. The CIT(A) has confirmed both the actions of the AO without considering the relevant facts as well as record in the shape of the books of account and supporting evidence. Thus, the learned AR has submitted that the impugned order of the CIT(A) may be set aside. 4. On the other hand, the learned DR has submitted that the AO has issued a detailed questionnaire to the assessee to furnish the relevant details and supporting evidence in respect of the expenditure as well as the sundry creditors claimed in the books of proprietary concerned M/s M J A Enterprises and M/s Janta Constructions. Despite the show cause notice issued by the AO, there was no compliance on behalf of the assessee and consequently the AO has made the respective disallowances and additions as the assessee failed to explain that the expenditure has been incurred wholly and exclusively for the purpose of business. Further the sundry creditors shown in the books of accounts are not proved being representing ITA No. 23/ALLD/2021 Kasim Hussain 4 the genuine transactions and their identity, creditworthiness and genuineness were not explained by the assessee. He has relied upon the orders of the authorities below. 5. Having considered the rival submissions as well as relevant material on record, we note that the assessee is a proprietor of M/s M J A Enterprises and M/s Janta Constructions engaged in the business of civil contract. The assessee filed his return of income on 28.11.2014 declaring total income of Rs. 10,34,580/-. During the scrutiny assessment, the AO issued a detailed questionnaire on 19.08.2016 under section 142(1) but there was no response from the assessee. The AO repeatedly issued the notices under section 142(1) of the Act and the last notice was issued on 16.11.2016 whereby the assessee was asked to furnish the details and explanation with respect to the expenditure claimed as well as the sundry creditors shown in the balance-sheet of M/s M J A Enterprises as well as M/s Janta Constructions. Since there was no response from the assessee to the notices issued by the AO therefore, the AO has made disallowances @ 10% of the expenditure claimed and addition of 50% of sundry creditors shown in the books of M/s M J A Enterprises and M/s Janta Constructions. The relevant finding of the AO in para 3.1 to 3.4 is as under:- “3.1 The assessee has failed to furnish reply till date. Accordingly addition of Rs 11,99.231/- is being made on account of disallowances of expenses claimed against receipts of M/s MJA Enterprises as in Para 3(i) of notice dt 16.11.2016 above. Addition Rs 11,99,231/- I am satisfied that the assessee has furnished inaccurate particulars of its income. Hence, penalty proceeding u/s 271(1)(c) is initiated on this issue. 3.2 As stated above in Para 3(ii) of notice dt 16.11.2016 above, addition of Rs 25,26,973/- is being made on account of unexplained sundry creditors of M/s MJA Enterprises. Addition Rs 25,26,973/- ITA No. 23/ALLD/2021 Kasim Hussain 5 I am satisfied that the assessee has concealed the particulars of its income. Hence, penalty proceeding u/s 271(1)(c) is initiated on this issue. 3.3 Addition is being made on account of disallowances of expenses of Rs 2,24,010/- claimed against receipts of M/s Janta Contruction as stated in Para 3(iii) of notice dt 16.11.2016 above. Addition Rs 2,24,010/- 3.4 As stated above in Para 3(iv) of notice dt 16.11.2016 above, addition of Rs 20,17,608/- is being made on account of unexplained sundry creditors of M/s Janta Construction. Addition Rs 20,17,608/- I am satisfied that the assessee has concealed the particulars of its income. Hence, penalty proceeding u/s 271(1)(c) is initiated on this issue.” 6. Thus, the AO made the disallowance @ 10% of the expenditure for want of details and explanation on behalf of the assessee in support of the claim as well as 50% of the sundry creditors shown in the balance sheet of the two proprietary concerned as the assessee failed to explain the identity, creditworthiness and genuineness of the sundry creditors. The assessee challenged the action of the AO before the CIT(A) and in the faceless appeal proceedings, the assessee filed the reply in respect of both the issues which is reproduced by the CIT(A) at page nos. 10 to 12 of the impugned order. The CIT(A) has confirmed the disallowances and additions made by the AO on the ground that the assessee has though submit the submissions however, the assessee has not produced books of accounts and other details as well as supporting evidence before the AO as well as before CIT(A). At the outset, we note that the AO has made the adhoc disallowances and additions for want of the details and explanation as well as supporting evidence on behalf of the assessee because the assessee did not respond to the notices issued by the AO. The said action of the AO has been confirmed by the CIT(A) on the similar grounds of non-production of supporting evidence but without verifying and examining the relevant record and details which could have been called from the assessee for examination and verification. ITA No. 23/ALLD/2021 Kasim Hussain 6 Therefore, in the facts and circumstances of the case, we are of the considered view that the issue involved in this appeal requires a proper verification and examination of the correctness of the claim of the assessee by considering the relevant facts, records / evidence including the books of accounts to be produced by the assessee. Accordingly, in the interest of justice, we set aside the impugned order of the CIT(A) and remand the matter to the record of the AO for adjudication of the same afresh after giving opportunity of hearing to the assessee as well as considering the relevant details, record and books of accounts to be filed by the assessee. 7. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open Court on conclusion of hearing on 05.12.2022 at Allahabad and the same is reduced in writing and signed on the date indicated below. Sd/- Sd/- [RAMIT KOCHAR] [VIJAY PAL RAO] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:07/12/2022 Allahabad sh Copy forwarded to: 1. Appellant-Kasim Hussain 2. Respondent-DCIT, Mirzapur 3. CIT(A), Allahabad 4. CIT 5. DR By order Sr. P.S.