The ITO, Ward-5(2), Ahmedabad V. Pioneer Irrigation Pvt. Ltd., Ahmedabad

ITA 3359/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7798 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 03-08-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K SHREEDHAR
• Keywords: Additional evidence; Set aside
• Section: 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER) ITA.NO.3359/AHD/2007 [ASSTT.YEAR : 2002-2003] ITO, WARD-5(2) AHMEDABAD. VS. PIONEER IRRIGATION PVT. LTD. 1, SUNRISE SHOPPING CENTRE OPP: INDRAPRASTH TOWER, DRIVE-IN-ROAD, AHMEDABAD. REVENUE BY : SHRI K.SHREEDHAR ASSESSEE BY : NONE O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THERE WAS NO RESPONSE FROM THE ASSESSEE TO THE NOTICE OF HEARING AND THEREFORE THE APPEAL IS DISPOSED OF ON THE BASIS OF THE RECORD AND AFTER HEARING THE LEARNED C IT(DR). 2. THE APPEAL IS BY THE DEPARTMENT AND IT RELATES T O THE ASSESSMENT YEAR 2002-2003. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SUPPLY OF DRIP AND SPRINKLER IRRIGATION SYSTEM AND TAKING CONTRACTS FOR LAYING PIPELINES. IT FILED A RETURN OF INCOME DEC LARING LOSS OF RS.2,91,44,958/-. THE SAME WAS FIRST PROCESSED UNDER SECTION 143(1) O F THE INCOME TAX ACT, BUT LATER NOTICE WAS ISSUED UNDER SECTION 148 ON 8-9-20 05. IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED A LETTER STATING THAT THE RE TURN ORIGINALLY FILED MAY BE TREATED AS A RETURN UNDER SECTION 148. THEREAFTER, SEVERAL NOTICES OF HEARING WERE ISSUED TO THE ASSESSEE CALLING FOR DETAILS IN SUPPORT OF THE RETURN AND THESE ARE SET OUT IN TABULAR FORM IN PARA-5 OF THE ASSESS MENT ORDER. ON THE GROUND THAT THE ASSESSEE DID NOT COMPLY WITH THE NOTICES P ROPERLY, THE AO PROCEEDED TO MAKE THE ASSESSMENT AFTER DISCUSSING THE SAME WITH THE ADDITIONAL CIT UNDER SECTION 144(A). THE ADDITIONAL CIT ISSUED CERTAIN DIRECTIONS AND THE AO COMPLETED THE ASSESSMENT AFTER COMPLYING WITH THE D IRECTIONS OF THE ACIT. HE PAGE - 2 ITA.NO.3359/AHD/2007 -2- DETERMINED THE TOTAL INCOME OF THE ASSESSEE ON A PR OFIT OF RS.33,97,402/- AFTER MAKING THE FOLLOWING ADDITIONS AND DISALLOWANCES TO THE RETURNED LOSS: I) ADDITIONAL FOR CONTRACT INCOME : RS. 3,38,50 8/- II) DISALLOWANCE OF LABOUR SITE EXPENSES : RS.2,11, 13,073/- III) DISALLOWANCE OF SITE VEHICLE EXPENSES : RS.11, 59,997/- IV) DISALLOWANCE OF MACHINERY RENT EXPS. : RS.98,54 ,835/- V) ADDITION OF CASH CREDITS : RS.75,947/- IN SUPPORT OF THE ABOVE DISALLOWANCES/ADDITIONS THE AO HAS GIVEN REASONS, HEAD-WISE, IN THE ASSESSMENT ORDER. 3. THE ASSESSEE FILED AN APPEAL TO THE CIT(A) AND C ONTENDED THAT THE ASSESSMENT WAS INVALID, SINCE IT WAS FRAMED WITH PR EDETERMINED APPROACH AND WITHOUT GIVING ANY OPPORTUNITY TO IT AS CONTEMPLATE D BY THE EXPLANATION BELOW SECTION 144(A). THE CIT(A) NOTED THAT THE AO HAD G IVEN SEVERAL OPPORTUNITIES TO THE ASSESSEE BUT THE ACIT DID NOT GIVE ANY OPPOR TUNITY EVEN THOUGH HE GAVE ADVERSE DIRECTIONS. HE ACCORDINGLY HELD THAT THE A SSESSMENT ORDER CANNOT BE SUSTAINED. NEVERTHELESS HE PROCEEDED TO EXAMINE TH E ASSESSMENT ORDER ON MERITS. 4. THE FIRST GROUND OF THE REVENUE IS THAT THE CIT( A) WAS NOT RIGHT IN LAW IN OBSERVING THAT THE ASSESSMENT ORDER CANNOT BE SUSTA INED. IT IS POINTED OUT BY THE LEARNED CIT(A) THAT UNDER EXPLANATION TO SECTION 144(A) AN OPPORTUNITY IS TO BE GIVEN TO THE ASSESSEE ONLY IF DIRECTIONS ARE ISSUED BY THE ACIT WHICH ARE PREJUDICIAL TO THE ASSESSEE AND THAT IN THE PRESENT CASE THE DIRECTIONS ISSUED BY THE ACIT MERELY GUIDED THE AO IN THE MANNER IN WHIC H THE INVESTIGATION INTO THE CASE HAS TO BE CONDUCTED AND THAT NO DIRECTIONS WERE ISSUED TO THE AO TO DISALLOW OR ADD ANY PARTICULAR ITEM. IT IS CONTEND ED THAT A DIRECTION MERELY AS TO THE MANNER IN WHICH INVESTIGATION IS TO BE CONDU CTED CANNOT BE HELD TO BE A DIRECTION PREJUDICIAL TO THE ASSESSEE. WE SEE A G OOD DEAL OF FORCE IN THE CONTENTION OF THE LEARNED CIT-DR. WE HAVE SEEN THE DIRECTIONS ISSUED BY THE ACIT WHICH ARE FULLY REPRODUCED IN PARA-7 OF THE AS SESSMENT ORDER. A PERUSAL PAGE - 3 ITA.NO.3359/AHD/2007 -3- THEREOF SHOWS THAT THE LEARNED CIT-DR IS RIGHT IN H IS SUBMISSION THAT THE DIRECTIONS ONLY TOUCHED UPON THE MANNER IN WHICH TH E INVESTIGATION INTO THE CASE SHOULD BE CARRIED OUT AND WAS MORE IN THE NATU RE OF GUIDANCE TO THE AO. FURTHER, THE ACIT HAD ONLY DRAWN THE ATTENTION OF T HE AO TO CERTAIN DECISIONS OF THE HIGH COURTS AND HAD ASKED THE AO TO KEEP THE M IN VIEW. THIS ALSO CANNOT BE CONSIDERED TO BE A DIRECTION PREJUDICIAL TO THE ASSESSEE. WE THEREFORE HOLD THAT THE CIT(A) WAS NOT RIGHT IN HOLDING THAT THE ASSESSMENT ORDER WAS BAD IN LAW. WE ACCORDINGLY ALLOW THE FIRST GROUND. 5. THE OTHER GROUNDS NAMELY GROUND NOS.2 TO 6 TAKEN BY THE DEPARTMENT QUESTION THE RELIEF GRANTED BY THE CIT(A) IN RESPEC T OF THE ADDITION MADE TO THE CONTRACT INCOME AND AS CASH CREDITS AND THE DISALLO WANCES THE VARIOUS EXPENSES SUCH AS LABOUR SITE EXPENSES, SITE VEHICLE EXPENSES AND MACHINERY RENT EXPENSES. IN RESPECT OF THE ADDITION FOR CASH CRE DITS, GROUND IS ALSO TAKEN THAT THE CIT(A) ENTERTAINED ADDITIONAL EVIDENCE WITHOUT GOING THROUGH THE PROCEDURE CONTEMPLATED BY THE RULE 46A(3) OF THE IT RULES. IN RESPECT OF ALL THESE GROUNDS WE HAVE HEARD THE LEARNED CIT-DR WHO TOOK US THROUGH THE RELEVANT PORTIONS OF THE ASSESSMENT AND APPELLATE O RDERS AND EXPLAINED THE FACTS. HE CONTENDED THAT WHEREAS THE AO HAS GIVEN DETAILED REASONS IN SUPPORT OF THE ADDITIONS AND DISALLOWANCES, WHICH ARE QUITE SUBSTANTIAL, THE CIT(A) HAS DELETED THEM WITHOUT MUCH OF REASONING AND WITHOUT EXAMINING THE FACTS IN THE MANNER REQUIRED OF HIM. HE FURTHER POINTED OUT THA T THE CIT(A) HIMSELF HAS RECORDED THAT THE ASSESSEE WAS GIVEN SEVERAL OPPORT UNITIES BY THE AO BUT FAILED TO NOTE THAT DESPITE THESE OPPORTUNITIES THE ASSESS EE DID NOT FURNISH THE REQUIRED DETAILS BEFORE THE AO. IT IS SUBMITTED THAT SINCE THERE WAS NO REASONING IN THE ORDER OF THE CIT(A) THE ADDITIONS AND DISALLOWANCES SHOULD BE RESTORED. 6. AFTER HEARING THE LEARNED CIT-DR AND GOING THROU GH THE ORDERS OF THE DEPARTMENTAL AUTHORITIES, IT APPEARS TO US THAT THE MATTER HAS TO RECEIVE FRESH CONSIDERATION IN THE HANDS OF THE AO. AS RIGHTLY P OINTED OUT BY THE LEARNED PAGE - 4 ITA.NO.3359/AHD/2007 -4- CIT-DR, THE CIT(A) HIMSELF HAS OBSERVED IN PARA-2.2 .2 OF HIS ORDER THAT THE AO GAVE SEVERAL OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE DID NOT AVAIL OF THEM PROPERLY AND THOUGH IT WOULD APPE AR THAT SOME DETAILS WERE FURNISHED ON 17-11-2006 AND 23-11-2006, THEY WERE N OT COMPLETE. ON THE OTHER THREE OCCASIONS, THERE WAS NO COMPLIANCE BY T HE ASSESSEE. IT WAS IN THIS BACKGROUND THE AO WAS FORCED TO COMPLETE THE ASSESS MENT ON THE BASIS OF THE RETURN AND THE ACCOMPANYING DOCUMENTS. AFTER GOING THROUGH THEM, HE MADE THE ADDITIONS AND DISALLOWANCES FOR LACK OF EVIDENC E AND DETAILS. ON THE BASIS OF THE SAME DETAILS, THE CIT(A) HAS TAKEN A DIFFERE NT VIEW AND HAS GIVEN RELIEF TO THE ASSESSEE ON THE BASIS OF BROAD OBSERVATIONS SUCH AS THAT THE DISALLOWANCE WAS MADE ONLY ON ASSUMPTIONS AND PRESUMPTIONS, THAT THE AO HAS NOT MADE OUT ANY CASE TO SHOW THAT THE EXPENDITURE WAS NOT I NCURRED FOR THE PURPOSE OF THE BUSINESS, THAT HE HAS NOT ESTABLISHED THAT THE VEHICLES WERE USED FOR THE PERSONAL PURPOSES AND SO ON. IT SEEMS TO US THAT T HE CIT(A) HAS PLACED THE BURDEN ERRONEOUSLY ON THE AO, CONTRARY TO THE WELL SETTLED PROPOSITION THAT IT IS FOR THE ASSESSEE WHO HAS CLAIMED THE EXPENDITURE TO ADDUCE EVIDENCE IN SUPPORT OF ITS ALLOWABILITY. TAKING ALL THESE ASPECTS INTO CONSIDERATION, WE ARE OF THE VIEW THAT THE ORDERS OF THE DEPARTMENTAL AUTHORITIE S REQUIRE TO BE SET ASIDE. WE DIRECT ACCORDINGLY AND RESTORE THE ASSESSMENT TO TH E FILE OF THE AO WHO SHALL COMPLETE THE ASSESSMENT DE NOVO IN ACCORDANCE WITH LAW AND AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD . 7. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS T HUS ALLOWED BUT ONLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT THIS 31 ST OF JULY, 2009. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PAGE - 5 ITA.NO.3359/AHD/2007 -5- PLACE : AHMEDABAD DATE : 31-07-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD