ACIT, Circle-1(1), Cuttack V. S.S.Minerals, Jajpur

ITA 32/CTK/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3676 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Assessment record; Block assessment; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PA V AN KUMAR GADALE, JM . / ITA NO. 32 /CTK/201 8 ( [ [ / ASSESSMENT YEAR : 20 1 0 - 20 1 1 ) ACIT - 1(1), CUTTACK VS. M/S S.S.MINERALS, SUKINDA, JAJPUR ./ ./ PAN/GIR NO. : A A E FS 6062 Q ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI SUBHENDU DUTTA, DR [ /AS SESSEE BY : NONE / DATE OF HEARING : 13 / 0 8 /201 8 / DATE OF PRONOUNCEMENT 14 / 0 8 /201 8 / O R D E R PER SHRI PA V AN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) , CUTTACK , DATED 17.10.2017 PASSED IN I.T.AP PEAL NO. 0013 / 1 5 - 1 6 FOR THE ASSESSMENT YEAR 2010 - 2011 . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE CASE WAS CALLED FOR HEARING, NEITHER ANY ADJOURNMENT PETITION IS FILED BY THE ASSESSEE. LOOKING TO THE FACTS AND CIRCUMSTANCES, THE BENCH DECIDED TO D ISPOSE OFF THE APPEAL AFTER CONSIDERING THE MATERIAL FACTS AVAILABLE ON RECORD AND THE SUBMISSION OF LD. DR. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - ISSUE NO. 1 - QUASHING OF ASSESSMENT ORDER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEAL) WAS NOT JUSTIFIED IN QUASHING THE ORDER PASSED U/S 147 OF THE IT ACT ON THE GROUND THAT NO NOTICE U/S 143(2) HAD BEEN ISSUED BEFORE COMPLETING THE ASSESSMENT IN COMPLETE DISREGARD OF THE FACT THAT UNDER THE SCHEME OF THE ACT NO SPECIFIC NOTICE U/S 143 (2) NEEDED TO BE ISSUED IN CASES RE - OPENED U/S 147, AS HELD BY THE DELHI HIGH COURT IN ITA NO. 32 /CTK/201 8 2 THE CASE OF CIT VS. MADHYA BHARAT ENERGY CORPORATION LTD (2011) 337 ITR 389 (DEL). 2. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (APPEAL) WAS NOT JUSTIFIED IN QUASHING THE ORDER PASSED U/S 147 OF THE IT ACT ON THE GROUND THAT NO NOTICE U/S 143(2) HAD BEEN ISSUED BEFORE COMPLETING THE ASSESSMENT WHEN THE EVIDENCE ON RECORD (PLEASE SEE THE ATTACHED ORDER SH EET NOTINGSJ SHOWS THAT THE ASSESSEE'S A.R. HAD BEEN GRANTED ADEQUATE OPPORTUNITIES TO REPRESENT THE CASE BEFORE THE ASSESSING OFFICER. THE A.R. HAD APPEARED BEFORE THE ASSESSING OFFICER ON 05 OCCASIONS BEFORE THE ASSESSMENT WAS COMPLETED IN RESPONSE TO NO TICE U/S 142(1) DATED 10.04.2014 AND 19.06.2014 I.E. ON 30.06.2014, 05.08.2014, 19.08.2014, 25.08.2014 AND 01.09.2014, THUS NO PREJUDICE HAVING BEEN CAUSED TO THE ASSESSEE. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT (APPEAL) HAS ERRED IN QUASHING THE ORDER PASSED U/S 147 OF THE IT ACT BY INCORRECTLY PLACING RELIANCE ON THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF ACIT VS. HOTEL BLUE MOON 321 ITR 362(SC), WHEREIN AT PARA 16, THE SU PREME COURT HAS HELD THAT IF NOTICE U/S 142 IS ISSUED, THEN IT WOULD AMOUNT TO GRANTING OF NECESSARY OPPORTUNITY. THE SAME HAS BEEN DONE IN THIS CASE AS NOTICE U/S 142 WAS ISSUED ON 10.04.2014 AND 19.06.2014 (COPIES ENCLOSED). THE RELEVANT PORTION OF THE S UPREME COURT'S ORDER IS REPRODUCED 'THE CASE OF THE REVENUE IS THAT THE EXPRESSION *SO FAR AS MAY BE APPLY' INDICATES THAT IT IS NOT EXPECTED TO FOLLOW THE PROVISIONS OF SECTION 142, SUB - SECTIONS 2 AND 3 OF SECTION 143 STRICTLY FOR THE PURPOSE OF BLOCK AS SESSMENTS. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE REVENUE, SINCE WE DO NOT SEE ANY REASON TO RESTRICT THE SCOPE AND MEANING OF THE EXPRESSION 'SO FAR AS MAY BE APPLY'. IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE RETURN FILED UNDER SECTION 158 BC(A) PROCEEDS TO MAKE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISIONS OF SECTION 142, SUB - SECTIONS (2) AND (3) OF SECTION 143.' 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (APPEAL) HAS ERRED IN QUASHING THE ASSESSMENT ORDER PASSED U/S 147 OF THE IT ACT FOR WANT OF ISSUE OF NOTICE U/S 143(2) OF THE IT ACT WHEREAS AS PER THE SUPREME COURT'S DECISION IN THE CASE OF CIT V. JAI PRAKASH SINGH [219 ITR 737 (SC)], OMISSION TO SERVE A NOTICE U/S 143(2) DID NOT INV ALIDATE AN ASSESSMENT ORDER; RATHER, BEING A PROCEDURAL ERROR, THE SAME CAN BE RECTIFIED FROM THE STAGE AT WHICH SUCH PROCEDURAL E RROR CREPT IN. ISSUE NO. 2 - DISALLOWANCE OF RS. 65,60,782/ - U/S 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE : ITA NO. 32 /CTK/201 8 3 5. ON THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (APPEALS) HAS WRONGLY GRANTED RELIEF ON PAYMENT OF RS. 65,60,782/ - TOWARDS HIRE CHARGES FOR VEHICLES BY GIVING FACTUALLY ERRONEOUS FINDING THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON PAYMENTS MADE TO VEHIC LE OWNERS AND IT HAD SUBMITTED RELEVANT PROOF IN SUPPORT OF THE SAME BEFORE THE AO. BUT NO SUCH DETAILS /EVIDENCE ARE AVAILABLE IN ASSESSMENT RECORDS EXCEPT WHERE THE ASSESSEE IS A DEDUCTEE/PAYEE. HENCE THE CIT (APPEALS) ORDER IS PERVERSE ON FACTS. 6. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, ADD TO OR DELETE ANY OF THE GROUNDS TAKEN ABOVE. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MINE CONTRACTOR/EXTRACTOR AND FILED THE RETURN OF INCOME ON 15.10.2010 FOR THE A .Y. 201 0 - 201 1 DECLARING TOTAL INCOME OF RS. 57,04,850/ - . THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT. S UBSEQUENTLY THE CASE WAS SELECTED UNDER SCRUTINY AND NOTICES U/S.143(2) & 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE OF THE SAME, LD. AR APP EARED BEFORE THE AO AND CASE WAS DISCUSSED. THEREAFTER T HE AO COMPLETED THE ASSESSMENT AND PASSED ORDER U/S. 147/ 143(3) OF THE I.T.ACT , DATED 26.02.2015 MAKING VARIOUS ADDITIONS . 4 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS THE CIT(A) AFTER CONSIDERING THE FINDINGS OF THE AO AND SUBMISSIONS OF THE ASSESSEE , ALLOWED THE APPEAL OF THE ASSESSEE. 5 . AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 6 . BEFORE US, LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED IN ANNULLING THE ASSESSMENT ORDER U/S.147 OF THE ACT ON THE GROUND THAT NO NOTICE U/S.143(2) OF THE ACT HAD BEEN ISSUED BEFORE COMPLETING THE ASSESSMENT. ITA NO. 32 /CTK/201 8 4 8 . WE HAVE HEARD SUBMISSIONS OF LD. DR AND PERU SED THE MATERIALS AVAILABLE ON RECORD. THE SOLE CRUX OF THE DISPUTED ISSUE OF THE REVENUE IS WITH RESPECT TO THE RELIEF GRANTED BY THE CIT(A) ON THE GROUND THAT NO NOTICE U/S.143(2) OF THE ACT HAD BEEN ISSUED BEFORE COMPLETING THE ASSESSMENT. WE FIND THAT THE CIT(A) HAS CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE FINDINGS OF THE AO AND OBSERVED AS UNDER : - 2.1 I HAVE CONSIDERED THE MATTER AT LENGTH. THE ASSESSMENT RECORDS HAVE ALSO BEEN REQUISITIONED FROM THE AO AND PERUSED, IT IS A FACT THAT THE AO HAS NOT ISSUED ANY NOTICE U/S. 143(2) AFTER THE ASSESSEE SUBMITTED A LETTER ON 25.4.2014 REQUESTING THE AO TO TREAT THE ORIGINAL RETURN FILED BY THE ASSESSEE ON 15.10.2010 ONLINE AS RETURN FILED IN RESPONSE TO THE NOTICE U/S.148. THOUGH THE DECISION OF TH E FHON'BLE APEX COURT IN THE CASE OF HOTEL BLUE MOON WAS DELIVERED IN THE CONTEXT OF BLOCK ASSESSMENT U/S.L53A, THE HON'BLE DELHI A HIGH COURT FOLLOWING THIS CASE OF THE HON'BLE APEX COURT HAS HELD IN THE CASE OF THE PRINCIPAL CIT V SHRI JAI SHIV SANKAR T RADERS (P) LTD. THAT THE FAILURE OF TH.E AO, IN REASSESSMENT PROCEEDINGS, TO ISSUE NOTICE U/S. 143(2), PRIOR TO FINALIZING THE REASSESSMENT ORDER, CANNOT BE CONDONED BY REFERRING TO SECTION 292BB OF THE ACT. FAILURE OF THE AO TO ISSUE A NOTICE TO THE ASSES SEE U/S. 143(2) SUBSEQUENT TO RECEIPT OF THE LETTER FROM THE ASSESSEE TO TREAT THE ORIGINAL RETURN AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148 IS FATAL TO THE ORDER OF REASSESSMENT AND THE REASSESSMENT IS LIABLE TO BE QUASHED FOR THE SAME. THE HON'BLE H IGH COURT OF GUJARAT HAS ALSO EXPRESSED THE SAME VIEW IN THE CASE OF THE CIT V. SUKHIN P. MODI, 367 ITR 882. IT IS ALSO FOUND THAT IN THE CASE OF ODISHA MINING CORPN.(OMC) V DCIT, CIRCLE - L(L), BHUBANESWAR IN ITA IMOS.371, 374 & 375/CTK/2015 FOR THE AY 2008 - 09, 2010 - 11 & 2011 - 12, THE HON'BLE ITAT, CUTTACK BENCH HAS QUASHED REASSESSMENT PROCEEDINGS FOR THREE YEARS SINCE NO NOTICE U/S. 143(2) WAS ISSUED BEFORE COMPLETION OF THE REASSESSMENTS. BEING AN ORDER OF THE JURISDICTIONAL ITAT, THE SAME IS BINDING ON CI T(A) AS PER THE DECISION OF THE HON'BLE ODISHA HIGH COURT IN THE CASE OF NALCO. AS PER THE DECISION OF THE HON'BLE ITAT, CUTTACK BENCH IN THE CASE OF OMC, THE REASSESSMENT IN THIS CASE IS LIABLE TO BE QUASHED. .3. IN GROUND NO,3, THE ASSESSEE CHALLENGES T HE 3 DISALLOWANCES MADE IN THE ASSESSMENT ORDER OF RS.65,60,782/ - , RS.11,24,139/ - AND RS.41,75,153/ - . THE SAME ARE ADJUDICATED BELOW ISSUE WISE ON MERIT EVEN THOUGH THE REASSESSMENT ORDER IS LIABLE TO BE QUASHED. DISALLOWANCE OF RS.65,60,782/ - U/S.40(A)(I A) FOR NON - DEDUCTION OF TAX AT SOURCE: ITA NO. 32 /CTK/201 8 5 4. THE AO HAS DISALLOWED AN AMOUNT OF RS.65,60,782/ - BEING PAID AS HIRE CHARGES FOR VEHICLES HIRED FROM OUTSIDE. IN ABSENCE OF DETAILS, THE AO PRESUMED THAT THE ASSESEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE ABOVE PAYMENTS AND IN THE ABSENCE OF ANY EVIDENCE OF TAX DEDUCTION, DISALLOWED THE PAYMENT U/S.40(A)(IA). THE RELEVANT PORTION OF THE AO'S ORDER IN THIS CONNECTION IS REPRODUCED BELOW: '. 3 . AS REGARDS NO TDS HAVING BEEN MADE IN RESPECT OF EXPENSES CLAIMED UNDE R HEAD RUNNING AND MAINTENANCE EXPENSES TO RS. 1,59,92,432/ - WHICH VIOLATE THE PROVISION OF SECTION 40(A)(IA) OF THE IT ACT. IN THIS CONTEXT THE A/R OF THE ASSESSEE SHRI M. UDAYPURIA ADVOCATE APPEARED AND FURNISHED WRITTEN EXPLANATION WHERE IN STATING THAT THE ASSESSEE MAINTAINS FLEET OF VEHICLES ON ITS OWN, THE SUM IN DISPUTE IS EXPENSES INCURRED FOR RUNNING, MAINTAINING AND REPAIR OF ALL SUCH VEHICLES AND IS NOT SUBJECT TO TDS. BUT THE STATEMENT AS WELL AS ASSESSMENT RECORD SPEAKS THAT OUT OF THE EXPENSES INCURRED TOWARDS RUNNING AND MAINTAINS A SUM OF RS.94,31,650/ - IS FOR MAINTAINING ASSESSEE OWN VEHICLE AND REMAINING EXPENSE TO THE TUNE OF RS.65,60,782/ - (1,59,92,432/ - - 94,31,650/ - ) WAS PAID FOR VEHICLES HIRED FROM OUTSIDE ON WHICH ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE FOR CLAIMING THIS EXPENDITURE. THE EXPLANATION FURNISHED BY THE ASSESSEE SHOWS THAT THERE WAS NO TDS DEDUCTED FOR THE ABOVE EXPENSES. HENCE THE ABOVE EXPENSE OF RS.65,60,782 IS LIABLE TO BE DISALLOWED U/S.40(A)(IA) OF THE IT ACT 1961 ADDITION:RS.65,60,782/ - ' 4.1 IN THE COURSE OF APPEAL HEARING, THE ASSESSEE HAS POINTED THAT IT IS NOT CORRECT ON THE PART OF THE AO TO PRESUME THAT TAX WAS NOT DEDUCTED AT SOURCE ON THE PAYMENTS OF HIRE CHARGES FOR TRUCKS HI RED FROM OTHERS. IT IS ALSO SUBMITTED THAT THE RELEVANT DETAILS OF TAX DEDUCTION ON THE ENTIRE AMOUNT OF RS.65,60,782/ - WAS SUBMITTED BEFORE THE AO BUT THE AO WHILE PASSING THE ORDER HAD NOT SEEN THOSE DETAILS AND HAD PASSED THE ORDER IN A CALLOUS MANNER. 4.2 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. THE FACTS HAVE BEEN PERUSED. THE ASSESSMENT RECORDS HAVE ALSO BEEN CALLED FOR AND EXAMINED. IT IS FOUND THAT THE ASSESSEE HAD PAID HIRE CHARGES TOTALING RS.65,60,782/ - TO THE FOLLOWING TWO PARTIES AND HAD D ULY DEDUCTED TDS ON THE PAYMENTS AS PER REQUIREMENT OF LAW. COPIES OF QUARTERLY RETURNS AND TDS CERTIFICATES IN THIS REGARD HAVE BEEN FILED BEFORE THE AO AND ARE VERY MUCH LYING IN THE ASSESSMENT RECORDS. COPIES OF THE SAME HAVE ALSO BEEN FILED AT THE TIME OF APPEAL HEARING. THE DETAILS OF PAYMENTS AND TAX DEDUCTION AT SOURCE ON THE IMPUGNED PAYMENTS ARE AS UNDER: NAME OF THE PARTY AMOUNT OF HIRE CHARGES PAID TDS MADE --------------------- ------------------------------------ ---------------- 1) DASHM ESH CONSTN RS.19,33,958/ - RS.19,340/ - BERHAMPUR. 2)GRAND MOVERS INDIA RS.46,26,824/ - RS.48,514/ - CUTTACK ITA NO. 32 /CTK/201 8 6 SINCE THE ASSESSEE HAD DEDUCTED TAX AT SOURCE, THERE IS NO JUSTIFICATION FOR MAKING DISALLOWANCE U/S.40(A)(IA). HENCE, THE ADDITION OF RS.6 5,60,782/ - IS DELETED. DISALLOWANCE OF RS.11,24,139/ - U/S.40(A)(IA) FOR NON - DEDUCTION OF TAX: 5. THE AO DISALLOWED AN AMOUNT OF RS.11,24,139/ - U/S.40(A)(IA) ON THE GROUND THAT THE ASSESSEE HAD MADE PAYMENTS OF TRANSPORTATION CHARGES TO THA T EXTENT WITHOUT DEDUCTION OF TAX AT SOURCE. THIS DISALLOWANCE WAS MADE FOR THE OSTENSIBLE REASON THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE FOR TAX DEDUCTION. IN THE COURSE OF APPEAL HEARING, THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT OF RS.11,24,13 9/ - IS THE SUM TOTAL OF ALL PAYMENTS MADE TO DIFFERENT TRUCK OWNERS FOR EVERY SINGLE TRIP MADE. IT IS ALSO CLARIFIED BY THE ASSESSEE THAT ALL THE TRANSACTIONS WERE WITH SINGLE TRUCK OWNERS AND THE AMOUNTS PAID WERE MUCH LESS THAN RS.30,000/ - IN EAC H CASE TO INDIVIDUAL TRUCK OWNERS AS PER THE SECTION 194C(5) AND 194C(6) OF THE ACT. IT IS ALSO SUBMITTED THAT THE RELEVANT DETAILS IN SUPPORT OF THE ABOVE SUBMISSION OF THE ASSESSEE WERE SUBMITTED BEFORE THE AO AT THE TIME OF ASSESSMENT. A COPY OF THE SAME HAS ALSO BEEN FILED AT THE TIME OF APPEAL HEARING. 5.1 I HAVE CONSIDERED THE MATTER WITH REFERENCE TO THE FACTS AND MATERIALS ON RECORD. THE CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT ON PERUSAL OF THE DETAILS SUBMITTED. SINCE PAYMENT MADE TO INDIVIDUAL TRUCK OWNERS DID NOT EXCEED RS.30,000/ - IN ANY CASE, THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE U / S .194C. HENCE, THE DISALLOWANCE OF RS.11,24,139/ - U/S.40(A)(IA) IS DELETED . DISALLOWANCE OF RS.41,75,153/ - ; 6. THE AO HAS MADE THE ABOVE DI SALLOWANCE FOR THE FOLLOWING REASONS MENTIONED IN THE ASSESSMENT ORDER: '5. AS REGARDS THE EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT UNDER HEAD ELECTRICITY CHARGES & SALARIES OF RS.41,75,153/ - THOUGH THE ABOVE EXPENSES WERE BORNE BY THE MINES OWNER .T O ASCERTAIN WHETHER THE ABOVE EXPENSES WERE INCLUDED IN THE GROSS RECEIPT OF THE ASSESSEE ,FURTHER,VERIFICATION OF THE TAX AUDIT REPORT WAS MADE & FOUND THAT THE ASSESSEE HAS RAISED TOTAL BILLS AT RS.12/64,01,599/ - , OUT OF THIS BILL MINES OWNER HAD PAID RS .41,75,153/ - (ELECTRICITY CHARGES OF RS.37,78,275/ - & SALARY ' OF RS.3,96,878/ - WHICH WERE CLAIMED IN THE P & L A/C). ON BEING ASKED IN COURSE OF RE ASSESSMENT TO THE A/R OF THE ASSESSEE WHETHER THE AMOUNT OF RS.41,75,153/ - CLAIMED IN THE P & L A/C, WAS IN CLUDED IN THE GROSS RECEIPT OR NOT. IN REPLY THE A/R OF THE ASSESSEE STATED THAT 'AS PER AGREEMENT THE MINE OWNER HAS TO PAY CERTAIN EXPENSES AS THE FACILITIES WERE INSTALLED BY HIM AND THE UTILITY STAND IN HIS NAME LIKE ELECTRICITY AND SOME STAFF IN MINES ~WERE - EMPLOYED BY HIM ALSO. SUCH EXPENSES PAID BY MINE - OWNER WERE RECOVERED BY HIM FROM THE ASSESSEE FROM HIS BILLS. THEREFORE SUCH EXPENSES WHICH ARE IN REALITY PAID BY THE ASSESSEE HAVE BEEN CLAIMED BY HIM IN HIS P & L ITA NO. 32 /CTK/201 8 7 A/C'. DURING THE WHOLE COURSE OF RE ASSESSMENT PROCEEDING THE A/R OF THE ASSESSEE FAILED TO FURNISH SATISFACTORY EXPLANATION WITH DOCUMENTARY EVIDENCES REGARDING THE AMOUNT OF RS.41,75,153/ - CLAIMED IN THE P & L A/C WHETHER INCLUDED IN THE GROSS RECEIPT OR NOT. A/R OF THE ASSESSEE IN HIS ST ATEMENT ADMITTED THAT EXPENSES PAID BY MINE OWNER ARE RECOVERED BY THEM FROM THE BILL PAID TO THE ASSESSEE. HENCE THE EXPENSES CLAIMED UNDER THE ABOVE HEAD IN THE PROFIT & LOSS ACCOUNT IS DISALLOWED AND ADDED BACK THE TOTAL INCOME OF THE ASSESSEE, AD DITION :RS.41,75,153/ - 6.1 IN THE COURSE OF APPEAL HEARING, THE ASSESSEE HAS CONTESTED THE - ABOVE DISALLOWANCE STATING AS UNDER IN A WRITTEN SUBMISSION: '3) ADDITION OF RS.41,75,153/ - OUT OF EXP ENSES CLAIMED. IT WAS ALLEGED THAT THE ABOVE EXPENSES WER E PAID BY THE MINEOWNER BUT WERE CLAIMED BY THE ASSESSEE IN HIS PROFIT & LOSS ACCOUNT. IT WAS EXPLAINED THAT PAYMENT FOR ELECTRICITY BILL AND SALARY TO SOME STAFF IS MADE BY THE MINEOWNER BECAUSE THE UTILITIES STAND IN THE NAME OF THE MINEOWNER BUT ARE ACT UALLY UTILIZED BY THE ASSESSEE. AFTER PAYMENT OF SUCH EXPENSES, THE MINEOWNER RECOVERS THE ABOVE EXPENSES FROM THE ASSESSEE'S BILLS AND GETS SUCH PAYMENTS REIMBURSED FROM THE ASSESSEE. THIS SIMPLE LOGIC COULD NOT BE APPRECIATED BY THE LEARNED ASSESSING OFF ICER AND HE CONCLUDED THAT THE ASSESSEE'S EXPLANATION WAS NOT SATISFACTORY. HE DISALLOWED SUCH EXPENSES (RS.37,78,275/ - FOR ELECTRICITY AND RS.3,96,878/ - PAID TOWARDS SALARY OF STAFF) AMOUNTING TO RS.41,75,153/ - . THE DISALLOWANCE IS WHOLLY ARBITRARY AND UN REASONABLE AND IS THE RESULT OF POOR APPRECIATION OF FACTS, ACCOUNTS AND LAW AND THE ADDITION SHOULD BE DELETED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. (DETAILS ENCLOSED). IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS SUBMITTED THE ASSESSMENT AS M ADE IS DEVOID OF ANY MERIT, IS JUDICIALLY UNTENABLE AND SHOULD BE DECLARED AS NULL AND VOID; AND FOR THIS ACT OF KINDNESS, THE ASSESSEE SHALL BE EVER GRATEFUL.' 6.2 THE ISSUE HAS BEEN CONSIDERED THREAD BARE. THE RELEVANT DETAILS AND ACCOUNTS HAVE BEEN PER USED. IT IS FOUND THAT IN THE COURSE OF ASSESSMENT, IT WAS CLEARLY STATED BEFORE THE AO BY THE ASSESSEE THAT AS PER AGREEMENT THE MINE OWNER HAD TO INCUR CERTAIN EXPENSES ON THE UTILITIES CREATED BY HIM AND THE SAME WAS TO BE REIMBURSED BY THE ASSESSEE. TH E AMOUNT OF EXPENDITURE THUS REIMBURSED TO THE MINE OWNER HAS BEEN CLAIMED BY THE ASSESSEE AS EXPENDITURE IN THE P&.L ACCOUNT. I DO NOT FIND ANY FLAW IN SUCH CLAIM OF EXPENDITURE. THE AO HAS DISALLOWED THE EXPENDITURE FOR THE FOLLOWING REASON MENTIONED IN THE ASSESSMENT ORDER . '... DURING THE WHOLE COURSE OF RE ASSESSMENT PROCEEDING THE A/R OF THE ASSESSEE FAILED TO FURNISH SATISFACTORY EXPLANATION WITH DOCUMENTARY EVIDENCES REGARDING THE AMOUNT OF RS.41,75,153/ - CLAIMED IN THE P & L A/C WHETHER INCLUDED I N THE GROSS RECEIPT OR ITA NO. 32 /CTK/201 8 8 NOT. A/R OF THE ASSESSEE IN HIS STATEMENT ADMITTED THAT EXPENSES PAID BY MINE OWNER ARE RECOVERED BY THEM FROM THE BILL PAID TO THE ASSESSEE. HENCE THE EXPENSES CLAIMED UNDER THE ABOVE HEAD IN THE PROFIT & LOSS ACCOUNT IS DISALLOWED AND ADDED BACK (TO) THE TOTAL INCOME OF THE ASSESSEE.' 6.2.1 IT IS NOT UNDERSTOOD WHY THE AO WANTED TO FIND OUT WHETHER THE EXPENSES REIMBURSED TO THE MINE OWNER WERE INCLUDED IN THE GROSS RECEIPT. GROSS RECEIPT CAN NEVER INCLUDE ANY EXPENDITURE, THE ASSE SSEE HAD TO MAKE PAYMENTS FOR THE EXPENSES INCURRED BY THE MINE OWNER ON ASSESSEE'S BEHALF AND THE MINE OWNER HAD RECOVERED THE SAME BY WAY OF DEDUCTION FROM THE BILLS RAISED BY THE ASSESSEE. THERE IS NOTHING ABNORMAL OR UNUSUAL IN THE ENTIRE PROCESS. IT A PPEARS THAT THE AO HAS NOT UNDERSTOOD THE NATURE OF THE EXPENSES REIMBURSED TO THE MINE OWNER BY THE ASSESSEE. THE AO HAS MADE THE DISALLOWANCE OUT OF UTTER CONFUSION. KEEPING IN VIEW THE ABOVE DISCUSSION, THE DISALLOWANCE OF RS.41,75,153/ - IS DELETED. 7. IN THE RESULT, THE APPEAL IS ALLOWED BOTH ON LEGAL AND FACTUAL GROUNDS. LD. DR COULD NOT BRING ANY NEW MATERIAL FACT S TO CONTROVERT THE ABOVE FINDINGS OF THE CIT(A) AND ONLY SUPPORTED THE ORDER OF AO. HENCE, WE DO NOT SEE ANY REASON TO INTERFERE WITH TH E ORDER OF CIT(A) AND UPHOLD THE SAME. ACCORDINGLY, WE DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 14 / 0 8 / 201 8 . SD/ - ( N.S.SAINI ) SD/ - ( PAVAN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 14 / 0 8 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - ACIT - 1(1), CUTTACK 2. / THE RESPONDENT - M/S S.S.MINERALS,SUKINDA, JAJPUR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. [ / GUARD FILE. //TRUE C OPY//