Mascon Multiservices Pvt. Ltd., Baroda V. The ACIT, Circle-4, Baroda

ITA 278/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7133 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Set aside
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 278/AHD/2015 (ASSESSMENT YEAR: 2005-06) MASCON MULTISERVICES PVT. LTD. 7 TH FLOOR, GALAV CHAMBERS, SAYAJIGUNJ, BARODA-390005 V/S ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-4, BARODA (APPELLANT) (RESPONDENT) PAN: AABCM 2827R APPELLANT BY : SHRI MANISH J. SHAH, AR RESPONDENT BY : SHRI PRAVEEN KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 14 -02-201 9 DATE OF PRONOUNCEMENT : 25 -03-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-2, VADODARA DATED 28.11.2014 PERTAINING TO A .Y. 2005-06 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 278/ AHD/2015 . A.Y. 2005-06 2 1. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN L AW IN CONFIRMING THE ADDITION OF RS. 16,24,750/- BEING EXPENDITURE INCURRED FOR EARN ING INCOME FROM EPIC PROJECT. 2. THE LEARNED C.I.T.(APPEALS) HAS FAILED TO CONSIDER THE SPECIFIC DIRECTION OF HON'BLE I.T.A.T. GIVEN IN ITS ORDER DATED 15.07.201 1. 3. THE HON'BLE I.T.A.T. IN ITS ORDER DATED 15 .07.2011 SPECIFICALLY DIRECTED THE ASSESSING OFFICER TO EXAMINE ALLOWABILITY OF EXPENS ES INCURRED FOR EARNING INCOME FROM EPIC PROJECT IN ASST. YEAR 2004-05 IF SAME HAS BEEN OFFERED IN THE ASST. YEAR 2004-05. 2. IN THIS CASE, ADDITION OF RS. 16,24,750/- WAS MADE ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES, HOLDING THAT SINCE THIS E XPENDITURE RELATES TO INCOME BOOKED BY THE APPELLANT IN EARLIER YEARS, HENCE, IT CANNOT BE ALLOWED AS A DEDUCTION IN THE CURRENT YEAR. THE APPELLANT FILED AN APPEAL BEFORE LD. CIT(A) WHO DIRECTED A.O. TO ALLOW THE SAME IN ASSESSMENT Y EAR 2004-05, IF THE SAME WAS INCURRED FOR THE PURPOSE OF IF THE SAME WAS INC URRED FOR THE PURPOSE OF BUSINESS. THEREAFTER, DEPARTMENT FILED AN APPEAL BE FORE ITAT AGAINST THE ORDER OF THE LD. CIT(A) AND ITAT AHMEDABAD SET ASIDE THE ISSUE RELATING TO PRIOR PERIOD EXPENSES TO FILE OF THE AO WITH FOLLOWING DI RECTION :- 'WE MODIFY THE DIRECTION OF LD. CIT(A). WE DIRECT TH E AO TO FIRST EXAMINE THE VERACITY OF THIS CONTENTION OF THE ASSESSEE THAT IN COME ON ACCOUNT OF EPIC PROJECT WAS ACCOUNTED FOR IN ASSESSMENT YEAR 2004-05 BUT EX PENSES FOR THE SAME WERE NOT ACCOUNTED FOR IN THAT YEAR. THEREFORE, IF IT IS FOUND THAT'S THIS CONTENTION IS CORRECT, THEN HE SHOULD EXAMINE THE ALLOWABILITY OF THESE EXPENSES I N THAT YEAR AND ALLOW THE SAME TO THE EXTENT FOUND ALLOWABLE AN D PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE,' 3. THEREAFTER ASSESSING OFFICER STATED IN HIS ORDER AS FOLLOWS: '2. NOW, THE HON. ITAT VIDE THEIR ORDER IN ITA N0.73 3/AHD/2009 DATED 15.07.2011 HAS SET-ASIDE THE ISSUE RELATED TO PRIOR EXPENSES OF RS.16,24,750/- ITA NO. 278/ AHD/2015 . A.Y. 2005-06 3 HOLDING THAT 'WE MODIFY THE DIRECTION OF LD. CIT(A) . WE DIRECT THE AO TO FIRST EXAMINE THE VERACITY OF THIS CONTENTION OF THE ASSE SSEE THAT INCOME ON ACCOUNT OF EPIC PROJECT WAS ACCOUNTED FOR IN ASSESSMENT YEAR 2 004-05 BUT EXPENSES FOR THE SAME WERE NOT ACCOUNTED FOR IN THAT YEAR. THEREAFTE R, IF IT IS FOUND THAT'S THIS CONTENTION IS CORRECT, THEN HE SHOULD EXAMINE THE A LLOWABILITY OF THESE EXPENSES IN THAT YEAR AND ALLOW THE SAME TO THE EXTENT FOUND ALLOWABLE AND PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 2.1 ACCORDINGLY, VIDE THIS OFFICE LETTER DATED 11.0 1.2013, THE ASSESSEE WAS GIVEN AN OPPORTUNITY OF BEING HEARD. THE HEARING WAS FIXE D ON 17.01.2013. THE ASSESSEE HAS FILED A LETTER DATED 17.01.2013 AND RE QUESTED FOR ADJOURNMENT TO FIX ANOTHER DATE IN THE NEXT WEEK. THEREFORE, THE REQUE ST FOR ADJOURNMENT OF THE ASSESSEE WAS CONSIDERED AND THE HEARING WAS RE-FIXE D ON 23.01.2013. BUT ON THE SAID DATE NEITHER ANYBODY ATTENDED NOR FILED ANY WR ITTEN SUBMISSION. NO ADJOURNMENT WAS ALSO SOUGHT FOR. FURTHER, OPPORTUNI TY OF BEING HEARD WAS GIVEN TO THE ASSESSEE VIDE THIS OFFICE NOTICE DATED 26.02 .2013, FIXING HEARING ON 01.03.2013 AT 12.30 PM. 2.2 IN RESPONSE TO THIS, THE ASSESSEE HAS FURNISHED ITS REPLY VIDE LETTER DATED 01.03.2013. THE CRUX OF THE REPLY OF THE ASSESSEE I S AS UNDER: 'WE HEREBY PRODUCE THE PROJECT WISE WORKING AND BIFU RCATION OF INCOME & EXPENSES FOR THE AY 2004-05 I.E. F.Y. 2003-04 WHICH WAS ALREADY BEEN FURNISHED AS THE SCRUTINY ASSESSMENT. LOOKING TO THE WORKSHEE T, IT IS CLEAR THAT PROFIT FROM THE EPIC PROJECT WAS RECORDED RS.13,96,617/- @ 25.5 0% G.P RATIO (I.E. 13.97/54.80 X 100). ASSESSEE HAS BEEN ALLOTTED WORK ORDER CALLED EPIC PROJECT VIDE DIFFERENT WORK ORDERS. WE HEREBY PRODUCE THE C OPIES OF WORK ORDERS SHOWING WORK AND RATE AT WHICH EPIC WORK HAS BEEN A LLOTTED.' 2.3 THE REPLY FURNISHED BY THE ASSESSEE WAS DULY CO NSIDERED. HOWEVER, THE SAME HAS NOT BEEN FOUND TENABLE. SINCE, THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS NOT BOOKED THESE EXPENSES IN EARLIER YEARS. THE SUBMISS ION FURNISHED BY THE ASSESSEE IS SIMILAR TO SUBMISSION FURNISHED BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS. THUS, NOTHING NEW HAS BEEN FURNISHED B Y THE ASSESSEE, THE SUBMISSION OF THE ASSESSEE ALSO NOT FOUND IN THE LI NE OF DIRECTION GIVEN BY THE HON'BLE ITAT. THE DETAILS FURNISHED BY THE ASSESSEE IS NOT SUFFICIENT ENOUGH TO PROVE THE CONTENTION OF THE ASSESSEES. THE HON'BLE ITAT HAS HELD AT PARA 10 OF ITS ORDER THAT 'THIS IS SOMETHING STRANGE THAT SOME EXPE NDITURE ARE NOT DEBITED TO THE P&L ACCOUNT BUT ARE INCLUDED IN THE VALUE OF CL OSING STOCK OF , W.I.P .' THEREFORE, MERELY FURNISHING THE G.P. ANALYSIS IS N OT SUFFICIENT ENOUGH TO PROVE THE CONTENTION OF THE ASSESSEE.' ITA NO. 278/ AHD/2015 . A.Y. 2005-06 4 4. THEREAFTER, ASSESSEE PREFERRED FIRST STATUTORY APPE AL BEFORE THE LD. CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUG NED ORDER. THE SECOND ROUND BEFORE THE ITAT AND IN EARLIER ORDER ITAT CLE ARLY DIRECTED THE ASSESSING OFFICER THAT HOWEVER AS REGARDS ALTERNATE CLAIM THAT THE EXPENS E HAS BEEN ACTUALLY INCURRED FOR EARNING THE INCOME IN 2004-05 THEREFORE, THE SA ME SHOULD BE ALLOWED IN THAT YEAR IF NOT ALLOWED IN THE CURRENT YEAR, I FIND MERIT. WHEN THE GENUINENESS AND BUSINESS PURPOSE OF THE EXPENSE IS NOT DISPUTED, THE CLAIM OF EXPENSE HAS T O BE ALLOWED IN THE RELEVANT YEAR, IF THE SAME IS DISALLOWED DURING THE YEAR, IF THE EXPENSE IS NOT ALLOWED AT ALL, THEN IT WOULD BE DISALLOWANCE OF GENUINE BUSINESS EXPENSE. I THEREFO RE DIRECT THE ASSESSING OFFICER TO VERIFY THE EXPENSE AND ALLOW THE SAME IN A.Y 2004-05, IF THE S AME IS INCURRED FOR THE PURPOSE OF BUSINESS. 6. AS WE CAN SEE, ASSESSEES BOOKS OF ACCOUNT ARE DULY AUDITED AND HIS EXPENSES ARE NOT DOUBTED BY THE REVENUE. LD. CIT(A) HAS ALS O ADMITTED THE FACT THAT EXPENSES WERE INCURRED DURING THE FINANCIAL YEAR 20 03-04 PERTAINING TO A.Y. 2004-05. 7. IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED AN ORD ER OF CO-ORDINATE BENCH IN ITA NO. 26/AHD/1984 WHEREIN IN SIMILAR CIRCUMSTANCE S, APPEAL OF THE ASSESSEE WAS ALLOWED AND OPERATIVE PARA OF THE JUDGMENT IS R EPRODUCED: 7. ONE ANOTHER ASPECT WHICH REQUIRED THE CLAIM TO BE ADJUDICATED UPON BY THE REVENUE AUTHORITIES. BOTH THE ITO AS ALSO THE CIT(A ) DISALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS THAT THE LIABILITY IN RESPECT OF THE EARLIER TWO YEARS HAVE NOT BEEN PROVIDED OR CLAIM COULD NOT BE ALLOWED IN 1979 . BUT THEN, WAS IT NOT THEIR DUTY TO GRANT DEDUCTION TO THE ASSESSEE-FIRM BY REC OURSE TO S. 154 ESPECIALLY WHEN THE PAYMENT ITSELF IS NOT DOUBTED AND FOUND CO MMENSURATE WITH THE ITA NO. 278/ AHD/2015 . A.Y. 2005-06 5 SERVICES BY THE ASSESSEE-FIRM. AFTER ALL, RECOURSE TO S. 154 CAN ALSO BE MADE SUO MOTU AND IF IN SUCH CASES, THE DISCRETION IS NOT IN VOKED WHEN THE CIRCUMSTANCES DEMAND OF THE SAME, WE FAIL TO UNDERSTAND HOW THE D EPARTMENT IS MAKING EFFORTS TO ASCERTAIN THE CORRECT INCOME OF THE ASSE SSEE FOR THE PURPOSE OF COLLECTING ONLY LEGITIMATE TAXES BY WAY OF REVENUE. 8. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT( A) ON BOTH THE GROUNDS AND DIRECT THE ITO TO ALLOW THE DEDUCTION AS CLAIMED A ND MODIFY THE ASSESSMENT IN THE CASE OF THE FIRM AS ALSO PASS APPROPRIATE ORD ERS IN THE CASE OF PARTNERS. 9. IN THE RESULT, THE APPEAL IS ALLOWED. 8. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING PARITY WITH THE JUDGMENT OF CO-ORDINATE BENCH, WE ALLOW THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 03- 2019 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 25/03/2019 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