Sh. Arun Kumar Seth, Srinagar V. The Dy.Commissioner of Income-tax, Srinagar

ITA 36/ASR/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0005 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-04-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Additional evidence; Corroborative evidences
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 36/ASR/2014 AS SESSMENT YEAR: 2010-11 ARUN KUMAR SETH, MAHARAJ BAZAR, SRINAGAR [PAN: AJBPS 4215K] VS. DY. CIT, CIRCLE-3, SRINAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TARUN BANSAL (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 02.04.2019 DATE OF PRONOUNCEMENT: 30.05.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU ('CIT(A )' FOR SHORT) DATED 29.11.2013, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING HIS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREI NAFTER) DATED 11.3.2013 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE ONLY ISSUE IN APPEAL IS THE SUSTAINABILITY I N LAW, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OF THE DISALLOWANCE OF R S.2 LACS (EACH) OF THE EXPENDITURE ON MACHINERY REPAIR AND FUEL SUSTAINED BY THE LD. CIT(A) VIDE THE IMPUGNED ORDER. ITA NO. 36/ASR/2014 (AY 2010-11) ARUN KUMAR SETH V. DY. CIT 2 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE, SH. BANSAL, WOULD MAKE A PRAYER FOR ADMISSION OF THE ADDITIONAL GROUND, WHIC H READS AS UNDER: THAT THE LD. AO HAS ERRED IN LAW BY NOT REJECTING THE AUDITED BOOKS OF ACCOUNT AND AUDIT REPORT BEFORE CONFIRMING THE ADDITION. THE ASSESSEE, HE CONTINUED, HAS FILED AMENDED GROUN DS, THE FIRST TWO OF WHICH ONLY SURVIVE, THE OTHERS HAVING BEEN ADJUDICATED WHILE D ISPOSING THE REVENUES APPEAL (IN ITA NO. 80/ASR/2018, DISPOSED ON 29/10/2018). T HE SAME READS AS UNDER: 1. THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED ADDIT ION OF RS.2,00,000 ON ADHOC BASIS IN MACHINERY REPAIR OF TWO INDEPENDENT UNITS, JOINTLY, WITHOUT APPRECIATING THE FACT THAT THERE IS NO RELEVANCY IN MACHINERY REPAIR OF BOTH T HE UNITS, DUE TO DIFFERENT KIND OF WORKING AND DIFFERENT KIND OF MACHINERY IN BOTH UNI TS. 2. THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED ADDITI ON OF RS.2,00,000 ON ADHOC BASIS IN FUEL EXPENSES OF TWO INDEPENDENT UNITS, JOINTLY, WI THOUT APPRECIATING THE FACT THAT THERE IS NO RELEVANCY IN FUEL EXPENSES OF BOTH THE UNITS, DUE TO DIFFERENT KIND OF WORKING AND DIFFERENT KIND OF MACHINERY IN BOTH THE UNITS. IT WAS ACCORDINGLY EXPLAINED TO SH. BANSAL THAT IN- AS-MUCH AS THE ASSESSEE HAS RAISED THE ISSUE OF VALIDITY OF THE IMPUGNED DISALL OWANCES, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS OPEN FOR HIM TO, IN ARGUMENT, RAISE ANY PLEA TOWARD THE SAME, INCLUDING THAT BEING NOW SOUGHT TO BE URGED PER A LEGAL GROUN D, AND THAT NO SEPARATE ADDITIONAL GROUND WAS THEREFOR E REQUIRED. RULE 8 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 CLEARLY PROVIDE FOR GROUNDS OF APPEAL TO BE CONCISE AND UNDER SPECIFIC HEADS, I.E. , WITHOUT ANY ARGUMENT OR NARRATIVE. THE MATTER WAS ACCORDINGLY PROCEEDED WIT H. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER (AO), DURING THE ASSESSMENT PROCEEDINGS, CALLED UPON THE ASSESSEE TO PRODUCE BILLS/VOUCHERS IN RESPECT OF MACHINERY REPAIR AND FUEL EXPENSES, CLAI MED IN THE SUM OF RS. 22.61 LACS ITA NO. 36/ASR/2014 (AY 2010-11) ARUN KUMAR SETH V. DY. CIT 3 AND RS.37.15 LACS RESPECTIVELY VIDE ORDER-SHEET ENT RY DATED 21/6/2012. THE ASSESSEE NOT PRODUCING THE SAME EVEN UP TO THE DATE OF THE ASSESSMENT ORDER, THE AO ESTIMATED THE EXTENT OF THE UNVERIFIABLE EXPENDI TURE AND/OR, THEREFORE, THE EXTENT OF INFLATION THEREIN, AT RS. 3 LACS EACH, EF FECTING THUS A TOTAL DISALLOWANCE OF RS.6 LACS, WHICH STANDS REDUCED BY THE LD. CIT(A) I N APPEAL TO RS. 4 LACS. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 5. BEFORE US, IT WAS CONTENDED BY SH. BANSAL THAT N O ADDITION COULD HAVE BEEN MADE BY THE AO AS HE HAD NOT REJECTED THE ASSESSEE S BOOKS OF ACCOUNT. EVEN ON MERITS, THE SAME WAS NOT JUSTIFIED AS THE ASSESSEE HAD PRODUCED BILLS/VOUCHERS BEFORE THE LD. CIT(A), THOUGH, WHILE DECIDING THE I SSUE, HE FAILED TO TAKE THE SAME INTO ACCOUNT, AND TOWARD WHICH HE WOULD DRAW OUR AT TENTION TO THE ASSESSEES REPLY DATED 14/8/2012, REPRODUCED AT PGS. 2 TO 10 OF THE IMPUGNED ORDER, WHICH, AT ITS END (PG. 10), READS AS UNDER: PHOTOCOPIES OF THE BILLS ARE SEPARATELY PRODUCED. THE ASSESSEE, HE CONTINUED, HAD EVEN MADE AN APPLIC ATION FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE APPELLATE TRIBUNAL, ADVERTING TO A COMPILATION CONTAINING 602 PAGES FILED ALONG WITH THE PAPER-BOOK (NUMBERED AS 268 T O 869 OF THE PB). THE MATTER, ACCORDINGLY, IT WAS SUBMITTED, BE RESTORED BACK TO THE FILE OF THE LD. CIT(A) FOR CONSIDERING THE EVIDENCE SOUGHT TO BE ADDUCED BEFORE HIM. IT IS NOT A CASE OF ESTIMATION OF INCOME REQUIRING THE RE JECTION OF ACCOUNTS, BUT OF THE DISALLOWANCE UNDER SECTION 37(1). TWO, THE NON-PROD UCTION OF BILLS/VOUCHERS OF THE IMPUGNED EXPENSES BEFORE THE AO BEING ADMITTED, THE ONLY COURSE (OF ACTION) AVAILABLE WITH THE ASSESSEE WAS TO SEEK ADMISSION O F THE ADDITIONAL EVIDENCE IN TERMS OF RULE 46A OF THE INCOME TAX RULES, 1962 (THE RULES), AND WH ICH HAD ADMITTEDLY NOT BEEN FOLLOWED. HOW COULD, WITHOUT FIRST ADMITTING THE SAME, THE LD . ITA NO. 36/ASR/2014 (AY 2010-11) ARUN KUMAR SETH V. DY. CIT 4 CIT(A) TAKE COGNIZANCE OF THE BILLS/VOUCHERS PRODUC ED BEFORE HIM ? UPON THIS BEING OBSERVED BY THE BENCH, IT WAS EXPLAINED BY SH . BANSAL THAT THE CIRCUMSTANCES FOR NOT PRODUCING THE SAID EVIDENCE B EFORE THE AO WERE ALSO STATED BY THE ASSESSEE TO THE LD. CIT(A). THE MATTER MAY A CCORDINGLY BE RESTORED BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY OR, IN TH E ALTERNATIVE, THE BENCH CONSIDER THE ASSESSEES CASE ON MERITS IN-AS-MUCH AS, ON THE BAS IS OF PAST DATA, NO DISALLOWANCE IS CALLED FOR. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 6.1 THE PLEA THAT A PART OF THE IMPUGNED EXPENDITUR E IS ON MANUFACTURING ACCOUNT, SO THAT NO DISALLOWANCE IN ITS RESPECT COU LD BE MADE WITHOUT REJECTING THE BOOKS OF ACCOUNT, IS WITHOUT BASIS ON FACTS AND IN LAW. TO BEGIN WITH, THERE IS NOTHING ON RECORD TO SHOW THAT A PART OF THE IMPUGN ED EXPENDITURE IS A MANUFACTURING EXPENDITURE. THE DIFFERENCE, EVEN O THERWISE, IS NOTIONAL, AS THE EXPENDITURE IS IN EITHER CASE ALLOWABLE, I.E., IN L AW, U/S. 37(1) OF THE ACT, I.E., WHETHER IT FALLS, IN WHOLE OR IN PART, TO BE CATEGO RIZED AS A MANUFACTURING OR A P&L A/C EXPENDITURE. THE DISALLOWANCE EFFECTED IS ONLY FOR THE REASON OF THE EXPENDITURE BEING TO THAT EXTENT NOT VERIFIABLE AND , THUS, UNPROVED. THE ONLY DIFFERENCE IS THAT A MANUFACTURING/TRADING EXPENDIT URE FORMS PART OF THE COST OF GOODS SOLD AND, THEREFORE, LIABLE TO BE TAKEN INTO ACCOUNT TO THE EXTENT IT RELATES TO THE GOODS UNSOLD AS AT THE YEAR-END, IN VALUING THE CLOSING STOCK TO ENABLE THE CORRECT DETERMINATION OF THE OPERATING RESULTS. REF ERENCE IN THIS CONTEXT MAY BE MADE TO THE ORDERS IN KIRAN MAHAJAN V. ITO (IN ITA NO. 319/ASR/2017, DATED 21/07/2018) AND ABDUL HAFIZ V. DY. CIT (IN ITA NO. 465/ASR/2017, DATED 19/3/2018), TO CITE TWO, ALSO REFERRING TO THE DECI SION IN CIT V. K.S. BHATIA [2004] 269 ITR 577 (P&H) AND ASST. CIT V. ROOPCHAND THIRANI [2012] 249 CTR 326 (CHTT.), AS WELL AS THE ORDERS BY THE TRIBUNAL RELI ED UPON IN THE SAID CASES. ITA NO. 36/ASR/2014 (AY 2010-11) ARUN KUMAR SETH V. DY. CIT 5 6.2 THE LD. CIT(A) HAS, VIDE HIS ORDER, REDUCED THE IMPUGNED DISALLOWANCE OF RS.6 LACS TO RS. 4 LACS, HOLDING AS UNDER: (PGS. 26 -27 OF THE IMPUGNED ORDER): 6.6 GROUND OF APPEAL NO 4 RELATES TO AD HOC ADDITION OF RS 6,00,000/- (RS.3 LACS UNDER EACH HEAD) IN RESPECT OF MACHINERY REPAIRS AND MAIN TENANCE AND FUEL EXPENSES. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS OBS ERVED THAT THE APPELLANT HAD CLAIMED MACHINERY REPAIR AND MAINTENANCE AMOUNTING TO RS. 1 6,10,663/ IN M/S. AAY BEE INTERNATIONAL AND RS. 6,49,683/- IN M/S. SETH & SET H ASSOCIATES. SIMILARLY, A SUM OF RS. 32,24,414/ HAS BEEN CLAIMED AS AN EXPENSES ON ACCOU NT OF FUEL AND RS. 4,91,320/- IN M/S. SETH AND SETH ASSOCIATES. THE AO CALLED UPON THE AP PELLANT TO FURNISH THE LEDGER ACCOUNT OF THESE EXPENSES WITH SUPPORTING BILLS/VOUCHERS. THE AO OBSERVED THAT THE APPELLANT HAS FURNISHED LEDGER BUT NO SUPPORTING BILLS HAVE BEEN PRODUCED TO SUPPORT THE CLAIM OF THE APPELLANT. IT IS OBSERVED THAT THE APPELLANT HAS ALSO PRODUCED ONLY COPY OF LEDGER ACCOUNT DURING THE APPELLATE PROCEEDINGS AND NO SUPPORTING EVIDENCE COULD BE PRODUCED BY THE APPELLANT . THEREFORE, THE ACTION OF THE AO IS MAKING ADHOC D ISALLOWANCE IS JUSTIFIED. HOWEVER, THE AMOUNT OF DISALLOWANCE SEEMS TO BE ON HIGHER SIDE, THEREFORE, I DIRECT TO REDUCE THE ADHOC DISALLOWANCE OF EXPENSES FROM RS.6,00,000 /- TO RS.4,00,000/- (RS.2,00,000/- UNDER EACH HEAD). THIS GROUND OF APPEAL IS PARTLY ALLOWED AND A RELIEF OF RS.2,00,000/- IS ALLOWED. (EMPHASIS, SUPPLIED) IT IS CLEARLY STATED THAT NO SUPPORTING EVIDENCES W ERE PRODUCED BY THE ASSESSEE IN THE APPELLATE PROCEEDINGS. IN WHICH CASE, THEREFORE , THE LD. CIT(A) IS PERFECTLY JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ( UNION OF INDIA V. RAI DEB SINGH BIST [1973] 88 ITR 200 (SC); KALYANI MEDICAL STORE V. CIT [2016] 386 ITR 387 (CAL)). IN FACT, THIS REDUCTION BY HIM, IMPUGNED PER THE IN STANT APPEAL INASMUCH AS IT IS TOTAL, IS, IN THE ABSENCE OF ANY EVIDENCE LED BY TH E ASSESSE BEFORE HIM, AN INDULGENCE BY THE LD. CIT(A), NOT SUPPORTED BY ANY FACTS/MATERIAL. THE REVENUE BEING NOT IN APPEAL, THE SAID ISSUE WOULD THEREFORE ARISE FOR CONSIDERATION UPON CONSIDERING THE ASSESSEES APPEAL ON MERITS, I.E., THE REASONABILITY OF THE DISALLOWANCE/S AS FINALLY SUSTAINED BY THE FIRST AP PELLATE AUTHORITY. THE FIRST ISSUE AND, IN FACT, THE ONLY ONE ARGUED BEFORE US, IS THE NON- CONSIDERATION OF THE EVIDENCE STATED TO BE ADDUCED BY THE ASSESSEE BEFOR E THE SAID AUTHORITY. BOTH THE SIDES, WE ARE AFRAID TO SAY, DID NOT DRAW OUR ATTEN TION TO THE CATEGORICAL FINDING BY THE LD. CIT(A), REPRODUCED SUPRA, I.E., QUA THE NON-PRODUCTION OF ANY EVIDENCE BY ITA NO. 36/ASR/2014 (AY 2010-11) ARUN KUMAR SETH V. DY. CIT 6 THE ASSESSEE BEFORE HIM, WHICH IS VERY UNFORTUNATE; MORE SO AS THIS CONSTITUTES THE PRINCIPAL GRIEVANCE ARGUED. 6.3 WE HAVE, AT THIS STAGE, TWO OPTIONS BEFORE US. THE FIRST IS TO RELY ON THE FINDING BY THE LD. CIT(A), WHICH STANDS REINFORCED BY THE SURROUNDING FACTS AND CIRCUMSTANCES, VIZ. (A) NON-APPLICATION UNDER RULE 46A BEFORE THE FIRST APPELLATE AUTHORITY; (B) NON-RAISING OF ANY GROUND BEFORE US QUA THE NON-ADMISSION OF ADDITIONAL EVIDENCE BY THE FIRST APPELLATE AUTHORITY; AND (C) APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENC E BEFORE THE TRIBUNAL BY THE ASSESSEE. DOING SO WOULD RESULT IN THE CONFIRMATION OF THE IM PUGNED ORDER IN-AS-MUCH AS NO IMPROVEMENT IN HIS CASE HAS BEEN MADE BY THE ASSESS EE BEFORE US; RATHER, THE RELIEF ALLOWED BY THE LD. CIT(A) BEING, AS OBSERVED EARLIE R, SANS ANY BASIS. THE SECOND COURSE AVAILABLE IS TO, AS CONTENDED, REGARD THE AS SESSEE AS STATING THE TRUTH, SO THAT MATERIALS WERE INDEED PRODUCED BEFORE THE LD. CIT(A ). THIS IS PARTICULARLY SO AS IT WOULD BE DIFFICULT TO ESTABLISH THE TRUTH. AS EXPLA INED BY SH. BANSAL DURING HEARING, VOLUMINOUS RECORD OF BILLS/VOUCHERS WERE P RODUCED BEFORE THE LD. CIT(A), SO THAT SAMPLE COPIES, ON HIS ASKING AND AS DESIRED BY HIM, COULD BE SUBMITTED THERETO. THE SECOND REASON, DESPITE THE CORROBORATI NG FACTS BEING AGAINST THE ASSESSEE, FOR ALLOWING THE ASSESSEE THE BENEFIT OF DOUBT IS THAT NO PREJUDICE WOULD STAND TO BE CAUSED TO THE REVENUE. WE MAKE IT CLEAR THAT WE ARE NOT FOR A MOMENT DOUBTING THE VERACITY OF THE FINDING BY THE LD. CIT (A), BUT HAVE, ALL THE SAME, NO REASON TO DISBELIEVE THE ASSESSEE. IF INDEED THE AS SESSEE HAS THE REQUIRED EVIDENCE, WHICH COULD BE SUBJECT TO VERIFICATION BY THE REVEN UE, ADMITTEDLY NOT ADDUCED BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS, HE SHO ULD, FOLLOWING THE DUE PROCESS OF LAW, BE ALLOWED OPPORTUNITY TO PRESENT HIS CASE BEFORE THE LD. CIT(A). ITA NO. 36/ASR/2014 (AY 2010-11) ARUN KUMAR SETH V. DY. CIT 7 6.4 WE, ACCORDINGLY, REMIT THE MATTER BACK TO THE F ILE OF THE LD. CIT(A) TO ALLOW THE ASSESSEE OPPORTUNITY TO PRESENT HIS CASE BEFORE HIM, I.E., FIRSTLY, QUA THE ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A AND , FURTHER, WHERE ADMITTED ON MERITS, ADJUDICATE THE ISSUE ON QUANTUM, AGAIN, FOL LOWING THE DUE PROCESS OF LAW, INCLUDING GRANT OF OPPORTUNITY TO THE PARTIES. WE D ECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 30, 2019 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 30.05.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: ARUN KUMAR SETH MAHARAJ BAZA R SRINAGAR (2) THE RESPONDENT: DY. CIT, CIRCLE-3, SRINAGAR (3) THE CIT(APPEALS), JAMMU (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER