MRS.Tarlikaben J. Mehta, Ahmedabad V. The Income Tax Officer,(OSD)II, Ahmedabad

ITA 3079/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1797 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Assessee Lawyers: A P NANAVATI
• Keywords: Principle of natural justice
• Section: 154

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.3079 AND 3080/AHD/2015 / ASSTT. YEAR: 2009-10 AND 2010-11 MRS.TARLIKABEN J. MEHTA NANAVATY & ASSOCIATES A/18, 3 RD FLOOR, NARAYAN CHAMBERS ASHRAM ROAD AHMEDABAD 380 009. VS ITO (OSD) - II AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI A.P. NANAVATI REVENUE BY : SHRI SANTOSH KARNANI, SR.DR / DATE OF HEARING : 07/04/2016 / DATE OF PRONOUNCEMENT: 08/04/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT APPEALS ARE DIRECTED AGAINST SEPARATE O RDERS OF EVEN DATED I.E. 22.9.2015 PASSED BY THE LD.CIT(A)-5, AHM EDABAD FOR THE ASSTT.YEARS 2009-10 AND 2010-11 RESPECTIVELY. 2. WE HAVE HEARD BOTH THESE APPEALS TOGETHER, BECAU SE GROUND NO.2 TAKEN BY THE ASSESSEE IN BOTH THE YEARS IS COMMON. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN BOTH THE YEARS ARE NOT IN CONSONANCE WITH ITA NO.3079 AND 3080/AHD/2015 2 THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUNAL) R ULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. HOWEVER , THE ASSESSEE HAS CONCISED HER GRIEVANCE IN THE RELIEF CLAUSE, WHICH READS AS UNDER IN BOTH THE YEARS: ASSTT.YEAR 2009-10 1. TO DELETE ADDITION OF RS.38,11,370/- RA SALES BILL NO.10 AND 2 ACCOUNTED FOR IN A.Y.2008-2009 MAY BE JUSTIFIED IN LAW, FACTS AND EVIDENCE. 2. TO DELETE ADDITION OF RS.6,59,000/- OF GUARANTEE WA RRANTEE; 3. IF AFORESAID RELIEF IS NOT GRANTED ALTERNATIVE GROU NDS MAY BE ALLOWED. ASSTT.YEAR 2010-11 1. TO DELETE ADDITION OF GUARANTEE WARRANTEE OF RS.2,0 5,728/- OR ALTERNATIVE GROUND MAY BE ALLOWED. 3. FOR THE FACILITY OF REFERENCE, WE TAKE THE FACTS FROM THE ASSTT.YEAR 2009-10. BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE HAS FILED HER RETURN OF INCOME ON 29.9.2009 DECLARING TOTAL INCOME AT RS .11,56,540/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T THE ASSESSEE HAS DONE WORK OF ELECTRIFICATION WITH GOODS OF M/S.NEESA LEI SURE LTD. THIS WORK WAS CARRIED OUT AT THREE DIFFERENT SITES OF M/S.NEE SA LEISURE LTD. A PERUSAL OF THE DETAILS, IT WAS NOTICED BY THE AO TH AT A SUM OF RS.38,11,370/- AND RS.21,59,660/- HAVE NOT BEEN ACC OUNTED FOR BY THE ASSESSEE. THEREFORE, HE ISSUED SHOW CAUSE NOTICE . THE ASSESSEE HAS FILED A DETAILED REPLY AND RECONCILED THE ALLEGED D ISCREPANCY. AFTER GOING THROUGH THE REPLY OF THE ASSESSEE, THE LD.AO HAS OB SERVED THAT STAND OF ITA NO.3079 AND 3080/AHD/2015 3 THE ASSESSEE IS THAT A SUM OF RS.38,11,370/- RELATE S TO RUNNING BILL NOS.1 AND 2, WHICH WAS ACCOUNTED FOR IN THE ACCOUNTING YE AR F.Y.2007-08. MEANING THEREBY, THE SALES TO THIS EXTENT HAVE BEEN RECOGNIZED IN THE ASSTT.YEAR 2008-09. THE LD.AO HAS REJECTED THIS ST AND OF THE ASSESSEE ON THE GROUND THAT SHE FAILED TO FURNISH ANY EVIDEN CE IN SUPPORT OF HER CONTENTION. SIMILARLY, WITH REGARD TO THE AMOUNT O F RS.21,59,660/-, THE ASSESSEE HAS CONTENDED THAT THIS AMOUNT HAS BEEN AC COUNTED FOR THE ASSTT.YEAR 2010-11, AND THEREFORE, IT AMOUNTS TO DO UBLE ADDITION. THE LD.AO HAS REJECTED THE CONTENTIONS OF THE ASSESSEE AND MADE ADDITION OF RS.59,71,030/-. 4. DISSATISFIED WITH THE ASSESSMENT ORDER, THE ASSE SSEE FILED AN APPLICATION UNDER SECTION 154 OF THE INCOME TAX ACT . THIS APPLICATION WAS ALLOWED BY THE AO, AND HE DELETED THE ADDITION OF RS.21,59,660/- ON THE GROUND THAT THIS AMOUNT HAS BEEN ACCOUNTED FOR IN THE ASSTT.YEAR 2010-11. AS FAR AS THE ADDITION OF RS.38,11,370/ - IS CONCERNED (RS.59,71,030/- MINUS RS.21,59,660/-), THE LD.AO DI D NOT ENTERTAIN THE PLEA OF THE ASSESSEE MOVED UNDER SECTION 154 OF THE INCOME TAX ACT. 5. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE ADDIT ION. THE FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: 6.7. THE SUBMISSIONS OF THE APPELLANT, FACTS OF TH E CASE AND THE ASSESSMENT ORDER ARE CONSIDERED. THE ASSESSING OFFI CER HAS ADDED THIS AMOUNT AS UNRECORDED SALES IN THE YEAR UNDER C ONSIDERATION ON THE GROUND THAT THE ASSESSEE HAS RAISED BILL IN THE F.Y. 2008-09 AND M/S.NEESA LEISURE LTD. HAS ALSO ACCOUNTED FOR T HESE BILLS IN THE ACCOUNTING YEAR 2008-09. THE DATE OF R.A. BILLN OS.10 &R.A. BILLNO.2 IS DTD. 12.5.2008 WHICH PERTAINS TO ACCOUN TING YEAR 2008- ITA NO.3079 AND 3080/AHD/2015 4 09 RELEVANT TO A.Y. 2009-10. THE CONTENTION OF THE APPELLANT IS THAT THESE BILLS HAS ACCOUNTED FOR IN ACCOUNTING YEAR 20 07-08 IS NOT ACCEPTABLE AS THE BILLS RAISED IN ACCOUNTING YEAR 2 008-09 THEN HOW IT CAN BE ACCOUNTED FOR IN F.Y. 2007-08. THE APPELL ANT HAS FAILED TO CONTROVERT THIS FACT. THE APPELLANT HAS ALSO NOT ABLE TO SHOW THAT THESE BILLS ARE PART OF TURNOVER OF ACCOUNTING YEAR 2007-08. IN THE LIGHT OF ABOVE DISCUSSION, I AM OF THE OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY ADDED THE AMOUNT PERTAINING TO THESE BILLS AS UNRECORDED SALES. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. THUS, THE GROUNDS OF APPEAL ARE DISMISSED. 6. WHILE IMPUGNING THE ORDERS OF THE REVENUE AUTHOR ITIES IN THE ASSTT.YEAR 2009-10 UNDER RELIEF CLAUSE-I, THE LD.CO UNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS PLACED ON RECORD CO PY OF THE SALE REGISTER STARTING FROM 1.4.2007 TO 31.3.2008. SUCH DOCUMENT S ARE AVAILABLE AT PAGE NOS.124 TO 128. HE TOOK US THROUGH PAGE NO.12 8 AND APPRAISED US THAT VOUCHER NOS.109 AND 112 ARE THE INVOICES WHICH WERE RAISED BY THE ASSESSEE AT M/S.NEESA LEISURE LTD. THESE ARE DATED 12.3.2008 AND 24.3.2008. COPIES OF THE INVOICES ARE BEING PLACE D AT PAGE NOS.1 AND 2 OF THE PAPER BOOK. SIMILARLY, OTHER DETAILS ARE AL SO PUT AT PAGE NO.6 OF THE PAPER BOOK. HE POINTED OUT THAT TWO BILLS BEAR ING NOS.112 AND 109 ARE RELATED TO AMOUNT OF RS.18.25 LAKHS AND RS.18.5 0 LAKHS. THEY ARE RUNNING BILL NO.1 AND 2. THESE BILLS ARE BEING REC OGNIZED ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING, THAT IS BEING RAIS ED BEFORE 31.3.2008, THE PAYMENTS HAVE BEEN RECEIVED IN THE MONTH OF MAY , 2008. THUS, ON THE BASIS OF ACCRUAL SYSTEM OF ACCOUNTING, THE SALE S HAVE BEEN RECOGNIZED BEFORE 31.3.2008, AND THEREFORE, THEY SHOULD FORM P ART OF THE ASSESSMENT YEAR 2008-09. THE AO HAS ERRED IN INCLUDING THESE AMOUNTS IN THE ITA NO.3079 AND 3080/AHD/2015 5 ASSTT.YEAR 2009-10. ON THE OTHER HAND, THE LD.DR C ONTENDED THAT THE FINDING RECORDED BY THE AO IS THAT THESE DETAILS WE RE NOT SUBMITTED BEFORE HIM. THE ASSESSEE HAS ANNEXED A CERTIFICATE IN THE PAPER BOOK, WHEREIN IT HAS BEEN CERTIFIED THAT THESE DOCUMENTS HAVE BEEN FILED BEFORE THE LD.CIT(A), BUT AGAIN THE ASSESSEE HAS NOT FILED ANY APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, MEANING THEREBY, THAT THEY WERE NOT ENTERTAINED BY THE LD.CIT(A) ALSO, OTHERWISE, AS PE R SUB-RULE 3 OF RULE 46A, A REMAND REPORT MUST HAVE BEEN CALLED FROM TH E AO. HE FURTHER CONTENDED THAT THESE DOCUMENTS SHOULD NOT BE READ I N EVIDENCE, BECAUSE THESE DOCUMENTS WERE NOT BROUGHT ON THE RECORD AS P ER THE PROCEDURE PROVIDED IN I.T. RULES, 1962. IN THE ABSENCE OF TH E SAME, THERE IS NOTHING ON RECORD WHICH CAN SUPPORT THE CLAIM OF TH E ASSESSEE. 7. WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PE RUSAL OF THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO WOUL D REVEAL THAT THE STAND OF THE ASSESSEE FROM THE BEGINNING WAS THAT T HESE SALES HAVE BEEN RECOGNIZED IN THE ACCOUNTING YEAR 2007-08 I.E. IN T HE ASSTT.YEAR 2008-09. IF THESE SALES HAVE ACTUALLY BEEN ACCOUNTED FOR THE ASSTT.YEAR 2008-09, THEN IT WILL AMOUNT TO DOUBLE ADDITION. THE AO OUG HT TO HAVE VERIFIED THESE FACTS. BEFORE THE LD.CIT(A), THE ASSESSEE HA S SUBMITTED DETAILS, THOUGH, WITHOUT A FORMAL PRAYER UNDER RULE 46A, BUT IN THE INTEREST OF JUSTICE, THE FACTS COULD HAVE BEEN VERIFIED. THERE FORE, WE SET ASIDE THIS ISSUE IN THE IMPUGNED ORDER AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION THAT THE LD.AO SHALL VERIFY THE CLAI M OF THE ASSESSEE WITH THE ACCOUNTS PERTAINS TO F.Y.2007-08, AND IF ITS DI SCERNIBLE THAT THESE SALES WERE ACCOUNTED FOR BY THE ASSESSEE, IN THAT Y EAR, THEN THE ADDITION ITA NO.3079 AND 3080/AHD/2015 6 SHOULD NOT BE MADE IN THE PRESENT YEAR. IN ALL CIR CUMSTANCES, THE DOUBLE ADDITION SHOULD BE AVOIDED. 8. THE OBSERVATIONS MADE BY US WILL NOT IMPAIR OR I NJURE THE CASE OF THE AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFE NCE/EXPLANATION OF THE ASSESSEE. 9. IN THE NEXT FOLD OF GRIEVANCE, THE ASSESSEE HAS PLE ADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.6,59,000/- IN THE ASSTT.YEAR 2009-10 AND RS.2,05,728/- IN THE ASSTT.Y EAR 2010-11. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS M ADE A PROVISION FOR GUARANTEE AND WARRANTY. ACCORDING TO THE ASSESSEE, SHE HAS CARRIED OUT ELECTRICAL WORKS FOR A NUMBER OF RENOWNED COMPANIES . IN ORDER TO MAINTAIN GOOD RELATIONS, SHE HAS TO CHANGE CERTAIN PARTS IN WHICH DEFECTS HAVE OCCURRED. THE ASSESSEE HAD MADE A PROVISION A T THE RATE OF 2% OF THE SALES, WHEREAS, THE ACTUAL REPLACEMENT ON ACCOU NT OF THE DEFECTS OF THE PARTS WERE MUCH HIGHER. THE LD.AO DID NOT FIND ANY MERIT IN THE CONTENTIONS OF THE ASSESSEE. THE LD.CIT(A) HAS ALS O CONCURRED WITH THE CONCLUSIONS OF THE AO. THE FINDING RECORDED BY THE CIT(A) IN THE ASSTT.YEAR 2009-10 ON THIS ISSUE IS WORTH TO NOTE. IT READS AS UNDER: 6.4. I HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSION MADE BY THE APPELLANT. THE APPELLANT HAS CONTENDED THAT THE ASSESSEE HAS MERELY PROVIDED 2% AS DEDUCTION FROM P ROFIT AND LOSS ACCOUNT ON ACCOUNT OF DEFECTIVE, SHORT AND FINAL PE RFORMANCE UPTO PARTICULAR STANDARD. IT IS FURTHER CONTENDED THAT T O MAINTAIN APPROPRIATE BUSINESS RELATIONS IT IS NOT ADVISABLE TO IGNORE DEFECTIVE OR SHORT SUPPLIES AND LACK OF FINAL PERFO RMANCE UPTO ITA NO.3079 AND 3080/AHD/2015 7 PARTICULAR STANDARD HENCE IT IS NECESSARY TO PROVID E SUCH EXPENDITURE. 6.5. FROM THE FACTS OF THE CASE, IT IS NOTICED THAT THERE IS A PROVISION FOR RETENTION MONEY BETWEEN THE ASSESSEE AND M/S.NEESA LEISURE LTD. ONE OF THE CLIENT OF THE ASSESSEE. WHA TEVER WORK DONE AND BILL RAISED BY THE ASSESSEE, OUT OF THAT, SOME AMOUNT IS PAID IN THE NEXT YEAR OR AT THE COMPLETION OF THE PROJECT W HICH IS CALLED RETENTION MONEY. IN THE F.YRS.2008-09 & 2009-10, NO DEDUCTION ON ACCOUNT OF GUARANTEE AND WARRANTEE CHARGES HAS BEEN MADE BY M/S.NEESA LEISURE LTD. THE CONTENTION OF THE APPELL ANT THAT ASSESSING OFFICER HAS VIOLATED PRINCIPAL OF NATURAL JUSTICE BY RELYING UPON LETTER DATED 27.8.2011 OF NEESA LEISUR E LTD. WHICH WAS NOT MADE AVAILABLE TO APPELLANT IS NOT TENABLE. THE NEESA LEISURE LTD. HAS SIMPLY STATED THE TERMS OF AGREEME NT BETWEEN THESE TWO PARTIES WHICH IS IN FULL KNOWLEDGE OF THE ASSESSEE. AS M/S.NEESA LEISURE LTD. HAS NOT MADE ANY DEDUCTION F OR GUARANTEE AND WARRANTY CHARGES,' THE CLAIM OF THE ASSESSEE IS RIGHTLY REJECTED BY THE ASSESSING OFFICER. THEREFORE, THE ADDITION M ADE BY THE A.O. IS JUSTIFIED AND THE SAME IS CONFIRMED. 10. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS NOT MADE THE PROVISION BASED ON ANY SCIENTIFIC STUDY OR ON THE BASIS OF HI STORICAL DATA. SHE HAS NOT PLACED ON RECORD THE DETAILS OF THE DEFECTS IN TERMS OF THE VALUE, OCCURRED IN THE PAST WHICH REQUIRED REPLACEMENT. T HE DETAILS, WHICH HAVE BEEN PLACED ON RECORD, REPRESENT THE ACTUAL RE PLACEMENT UNDERTAKEN DURING THE YEAR. BUT THAT WOULD NOT JUSTIFY FOR MA KING A PROVISION AND CLAIMING THE DEDUCTION. THE LD.REVENUE AUTHORITIES HAVE RIGHTLY REJECTED THE CLAIM OF PROVISION FOR WARRANTEE, HOWEVER, IT I S MADE CLEAR THAT ACTUAL REPLACEMENT WOULD NOT BE EFFECTED BY DISALLO WANCE OF THIS CLAIM. IF THE ASSESSEE HAS CARRIED OUT ANY REPAIR IN CONNE CTION WITH HER SALES MADE DURING THE COURSE OF BUSINESS, THEN, ALLOWANCE OF SUCH EXPENDITURE ITA NO.3079 AND 3080/AHD/2015 8 WOULD BE CONSIDERED IN TERMS OF BUSINESS EXIGENCY, AND FACTS AT THAT PARTICULAR TIME. WITH THE ABOVE OBSERVATIONS, THIS GROUND OF THE APPEAL IS REJECTED IN BOTH THE ASSESSMENT YEARS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR T HE ASSTT.YEAR 2009-10 PARTLY ALLOWED FOR STATISTICAL PURPOSE, WHEREAS, AP PEAL FOR THE ASSTT.YEAR 2010-11 IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 8 TH APRIL, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER