M/s Reliance Components, Bhubaneswar V. ITO, Bhubaneswar

ITA 393/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4403 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2010
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: P C SETHI
• Keywords: Depreciation; Opportunity of being heard
• Section: 68; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO S . 393 AND 394/CTK/2010 / ASSESSMENT YEAR 2005 - 06 M/S.RELIANCE COMPONENTS, 98, SAHIDNAGAR, BHUBANESWAR PAN: AAHFR 3764J - - - VERSUS - INCOME - TAX OFFICER, WARD 2(1), BHUBANE SWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI P.C.SETHI, AR / FOR THE RESPONDENT: / SHRI PARAMITA TRIPATHY, DR / ORDER . . , , SHRI K.K.GUPTA, A CCOUNTANT MEMBER. THESE APPEALS BY THE ASSESSEE AGITATE THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE ADDITIONS/DISALLOWANCE COMPUTED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 144 AND CONSEQUENT PENALTY LEVIED U/S.271(1)(C) OF THE INCOME - TA X ACT,1961 BY THE ASSESSING OFFICER AS ALSO CONFIRMED BY THE LEARNED CIT(A). 2. THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE FIRM DERIVING INCOME FROM MINING BUSINESS FILED RETURN OF INCOME DECLARING LOSS ON 31.10.2005 WHEN IT CAS E WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) WAS ISSUED ON 24.10.2006. INSPITE OF SEVERAL OPPORTUNITIES GRANTED THE ASSESSING OFF ICER COULD NOT SEEK EXPLANATION TO HIS NOTICE U/S.142(1) AND PROCEEDED TO PASS THE ORDER U/S.144. THE ASSESSEE HA D SHOWN R ECEIPTS OF 93,73,900 ON ACCOUNT OF JOB BILLS FROM MINING OPERATIONS AND 3,16,762 ON ACCOUNT OF INCOME FROM TRANSPORTATION JOB. THE ASSESSEE HAD CLAIMED EXPENSES AMOUNTING TO 96,59,230. THE ASSESSING OFFICER, IN THE ABSENCE OF BOOKS OF ACCOUNT, DISALLOWED EXPENSES CLAIMED PARTLY AMOUNTING I.T.A.NOS. 393 AND 394/CTK/2010 2 TO 27,09,000. HE PERUSED THE BALANCE SHEE T AND DISALLOWED CURRENT LIABILITIES AMOUNTING TO 45,30,310. HE ALSO HELD THAT THE TRADING LOSS FORMING PART OF THE TOTAL LOSS CLAIMED INCLUDE 75,094 TOWARDS LOSS WAS UNACCEPTABLE ALSO LED TO DISALLOWANCE OF DEPRECIATION OF 3,15,977, INTRODUCTION OF CAPITAL OF 2,08,021 AND 85,696 AS PROVIDED FOR EXPENSES WERE ADDED TO ITS INCOME. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHEN NONE APPEARED BEFORE THE LEARNE D CIT(A). THE LEARNED CIT(A) CONFIRMED THE ADDITIONS ON ACCOUNT OF CURRENT LIABILIT IES , PARTNERS CAPITAL ACCOUNT, PROVISIONS AND ALSO CONFIRMED THE DISALLOWANCE OF DEPRECIATION BUT REDUCED THE DISALLOWANCE OF EXPENSES TO 15% AS AGAINST 28% AD HOC DISALLOWE D BY THE ASSESSING OFFICER. THE ADDITION OF 45,30,311 WAS NOT ADJUDICATED UPON BY THE LEARNED CIT(A) IN HIS EXPARTE ORDER. 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PREFERRED NOT TO PRESS THE LEGAL GROUND WITH RESPECT TO JURISDICTION OF ISSU ING NOTICE U/S.143(2) BEYOND THE STIPULATED PERIOD AND ALSO TO THE EFFECT THAT THE ASSESSMENT ORDER HAS BEEN SERVED BEYOND THE DUE DATE AS PROVIDED IN THE SAID SECTION. ON MERITS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRAYED THAT THE DISALLOWANCES/ ADDIT IONS AS CONFIRMED PARTLY BY THE LEARNED CIT(A) REQUIRE CONSIDERATION TO THE EXTENT THAT HAVING NOT ADJUDICATED THE FATE OF ADDITIONS REGARDING THE CURRENT LIABILITY WHICH HAVE BEEN TAXED BY THE ASSESSING OFFICER INTERALIA REQUIRE CONSIDERATION W ITH RESPECT TO THE WORK CARRIED OUT AGAINST ADVANCE FROM TAUR ION IRON AND STEEL STANDS DISAL LOWED BY T HE ASSESSING OFFICER OUGHT NOT TO BE TAXED AGAIN BEFORE ADJUSTMENT OF THE EXPENSES. IN VIEW THAT BOTH THE AUTHORITIES HAVING DISPOSED OF THE ASSESSEES CONTENTION E XPARTE PRAYED FOR A SUITABLE DIRECTION FOR CONSIDERATION BY THE AUTHORITIES BELOW AS THE ASSESSEE HAS PRESENTLY CLOSED SHOP AND THE PARTNERS HAV E DIVERSIFIED THEIR INTEREST WOULD ACCEPT TO SETTLE I.T.A.NOS. 393 AND 394/CTK/2010 3 THE ISSUE IN ACCORDANCE WITH THE LAW FOR COMPUTATION OF INCO ME THEREI N. A CONSEQUENTIAL DIRECTION MAY ALSO BE GIVEN ON THE LEVY OF PENALTY LEVIED U/S.271(1)(C). 4. THE LEARNED DR STRONGLY OBJECTED TO THE PRAYER OF THE LEARNED COUNSEL FOR THE ASSESSEE. HAVING PRAYED FOR NOT PRESSING THE ISSUE REGARDING THE ISSUE OF NOTICE U/S.143(2), SHE SOUGHT TO HIGHLIGHT THE INABILITY OF THE ASSESSEE TO PRESENT ITSELF BEFORE THE AUTHORITIES BELOW INSPITE OF SEVERAL OPPORTUNITIES GRANTED AS CAN BE PERUSED IN THE ORDERS OF THE AUTHORITIES BELOW. NOW THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS INDICATED THAT THE FIRM STANDS CLOSED AND THE PARTNERS HAVE DIVERSIFIED AND ARE KEE N TO SETTLE THE ASSESSMENT WHICH HAS BEEN SPECIFICALLY SELECTED FOR SCRU TINY MAY BE DIRECTED TO COMPLY TO THE NOTICE S FOR HEARING ON THE DIRECTION OF THE TRIBUN AL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN HIS WISDOM THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE ISSUE RELATING TO THE JURISDICTION OF NOTICE U/S.143(2) AND THE ORDER NOT HAVING BEEN SERVED UPO N IN ACCORDANCE WITH THE PROVISIONS OF THE ACT WHICH HE HAS NOTED ON THE BODY OF THE GROUNDS OF APPEAL. THE ISSUE THEREFORE, ON MERITS REMAINS TO BE ADJUDICATED INSOFAR AS THE LEARNED ASSESSING OFFICER AND THE LEARNED CIT(A) WERE NOT ASSISTED BY THE ASSES SE AND THE APPELLANT RESPECTIVELY. ON OUR PERUSAL OF THE ORDERS, WE DO FIND THAT THE INCOMES SOUGHT TO BE TAXED EXPARTE HAVE BEEN TAXED OVER RIDING EACH OTHER AS UNDER THE PROVISIONS OF SECTION 68 AND UNDER THE DEEMING PROVISIONS OF SECTION 69. THE DISALLO WANCE OF EXPENSES HIGHLIGHTED AND PARTIALLY REDUCED BY THE LEARNED CIT(A) INDICATE THAT ESTIMATION FOR DISALLOWANCE ON PERCENTAGE BASIS TOTALLY RULED OUT THE POSSIBILITY OF APPORTIONING INCOME AGAINST THE VERY EXPENSES WHICH HAVE BEEN CLAIMED THEREFORE REQ UIRES CONSIDERATION ON THE I.T.A.NOS. 393 AND 394/CTK/2010 4 BASIS OF THE SOURCE OF INFORMATION AVAILABLE TO THE ASSESSING OFFICER VIS - - VIS THE AUDITED FINANCIAL STATEMENT DULY CERTIFIED BY THE CHARTERED ACCOUNTANT. IF THE INCOME HAS TO BE ESTIMATED ON THE BASIS OF GROSS RECEIPT, NO DISALLOWANCE ON ACCOUNT OF EXPENSES OR ADDITIONS U/S.68 OR 69 COULD BE MADE HAS TO BE SCRUPULOUSLY FOLLOWED WHI CH BOTH THE AUTHORITIES HAVE FAILED TO COMPUTE. ON THE ASSURANCE OF THE LEARNED COUNSEL FOR THE ASSESSEE , THEREFORE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTO RE THE ISSUES ON MERITS TO BE CONSIDERED BY THE ASSESSING OFFICER AF RESH AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ON THE APPREHENSION OF THE LEARNED DR, WE ALLOT A TIME FRAME FOR FRAMING THE ASSESSMENT I.E., WITHIN THREE MONTHS HENCE , DURING WHICH PERIOD THE ASSESSEE FIRM SHOULD ABLE TO PRESEN T ITS CASE SO AS TO COMPUTE THE TAXABLE INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT WHICH FIRST OPPORTUNITY SHOULD BE AVAILED OF BY THE ASSESSEE WITHOUT FAIL . THE ASSESSING OFFICER IS AT LIBERTY TO PROCEED WITH THE ASSESSMENT AFTER OBSERVING NON - CO OPERATION , IF ANY, BY THE ASSESSEE IN ASSISTING HIM TO COMPUTE THE INCOME , IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. 6. IN VIEW OF THE ABOVE, THE CONSEQUENTIAL LEVY OF PENALTY U/S.271(1)(C) STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR C ONSIDERATION AFRESH. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 13 TH MAY, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DAT E: 13 TH MAY, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NOS. 393 AND 394/CTK/2010 5 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.RELIANCE COMPONENTS, 98, SAHIDNAGAR, BHUBANES WAR 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(1), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY