Sh Charan Dass, Distt. Mansa V. The Income-tax Officer, MANSA

ITA 405/ASR/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7751 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Keywords: Rejection of books of accounts; Principle of natural justice
• Section: 142(1); 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. T.S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.405(ASR)/2014 ASSESSMENT YEAR:2010- 11 SH. CHARAN DASS, PROP. M/S ARORA ENTERPRISES, SARDULGARH, DIST:- MANSA. PAN:AGZPD-8710H VS. INCOME TAX OFFICER, WARD-1(4), MANSA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SUDHIR SEHGAL RESPONDENT BY: SH. RAHUL DHAWAN (LD. D.R) DATE OF HEARING:21.08.2017 DATE OF PRONOUNCEMENT:25.10.2017 ORDER PER N.K.CHOUDHRY: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 31.03.201 4 PASSED BY THE LD. CIT(A), AMRITSAR, IN APPEAL NO.66-IT/CIT(A)/BTI /13-14 FOR ASST. YEAR:2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN NOT ALLOWING EXPENSES AS DEBITED UNDER THE HEAD PUR CHASE ACCOUNT IN RESPECT OF CLAIMS RECEIVED FROM VODAFONE TO THE TUN E OF RS.28,96,110/- AS APPEARING IN THE GOODS TAX FREE AMOUNT IN THE TRA DING ACCOUNT FOR THE PERIOD ENDING 31.03.2010. 2. THAT THE WORTHY CIT (A) HAS ALSO ERRED IN NOT A LLOWING EXPENSES UNDER THE HEAD PURCHASE ACCOUNT AGAINST THE CLAIM OF RS.7 7,670/- AS CREDITED IN THE GOODS 5% ACCOUNT IN THE TRADING ACCOUNT FILED WITH THE RETURN OF INCOME. 3. THAT THE WORTHY CIT (A) HAS ALSO ERRED IN NOT A LLOWING EXPENSES UNDER THE HEAD PURCHASE ACCOUNT AGAINST THE CLAIM OF RS.1 ,82,834/- AS DEBITED IN GOODS 12.50% ACCOUNT IN THE TRADING ACCOUNT FI LED WITH THE RETURN OF INCOME. ITA NO.405 (ASR)/2014 ASST. Y EAR:2010-11 2 4. THAT THE CIT (A) HAS FAILED TO APPRECIATE THE W RITTEN SUBMISSIONS AS FILED BEFORE HIM AND HAS SUMMARILY CONFIRMED THE AD DITIONS, WHICH IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT THE CONFIRMATION OF ABOVE ADDITIONS AS MAD E BY THE WORTHY CIT (A) IS NOT IN CONFORMITY WITH THE TRADE PRACTICE OF THE ASSESSEE AND WHICH IS IN BUILT IN THE NATURE OF BUSINESS AND WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT EVEN IN THE EARLIER YEAR AND IN THE IMME DIATE SUBSEQUENT YEAR TAKEN UP UNDER SCRUTINY U/S 143 (3). 6. THAT THE FINDING OF THE CIT (A) THAT THE ASSESS EE HAS FAILED TO BRING ANY EVIDENCE ON RECORD EXCEPT FOR ONE BILL FOR THE MONT H OF NOVEMBER, 2009 IS AGAIN OUT OF CONTEXT, SINCE SAMPLE EVIDENCE WAS FUR NISHED BEFORE THE CIT (A) TO SUBSTANTIATE THE MODUS OPERANDI OF CARRYING ON THE BUSINESS AND WHICH THE CIT (A) HAS FAILED TO APPRECIATE. 7. NOTWITHSTANDING THE ABOVE SAID FACT, THE ADDIT ION AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT (A) IN G ROUND NO. 1, 2 & 3 IS NOT WARRANTED SINCE THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED IN THE ORDER AS PASSED U/S 143 (3) AND NO CASE HAS BEEN MADE OUT BY THE LOWER AUTHORITIES FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145 (3). 8. THAT THE CIT (A) HAS ERRED IN CONFIRMING THE A DDITION OF RS.1/5 TH OF, TELEPHONE EXPENSES TO THE TUNE OF RS.13,400/-. 9. NOTWITHSTANDING ABOVE SAID GROUND OF APPEAL, T HE CONFIRMATION OF 1/5 TH OF EXPENSES IS HIGHLY EXCESSIVE. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSES DERIVES INCOME FROM BUSINESS OF DISTRIBUTOR OF PREPAID RECHARGE COUPONS OF AIRTEL AND VODAFONE AND FILED ITS RETURN OF INCOME RELATING TO THE ASST. YEAR: 2010-11 D ECLARING INCOME AT RS.6,65,520/-. IN RESPONSE TO NOTICE U/S 142(1) THE ASSESSEE HAS FILED COMPLETE INFORMATION REGARDING THE INCOME EARNED AND TRANSACTIONS AND FILED THE REQUISITE INFORMATION. THE ASSESSEE WAS DISTRIBUTORS OF PREPAID RECHARGE COUPONS OF AIRTEL AND VODAFONE HAVING ITS HEAD OFFICE AT SAR DULGARH WITH A BRANCH OFFICE AT SIRSA. THE ASSESSEE RECEIVED CLAIMS OF RS.28.96,110/- (SARDULGARH OFFICE) AND RS.2,60,504/- ( SIRSA OFFICE) FROM ITS PRINCIPAL COMPANIES, WHICH HAVE DULY BEE N ITA NO.405 (ASR)/2014 ASST. Y EAR:2010-11 3 REFLECTED IN THE BOOKS OF ACCOUNTS. THE SAID AMOUNTS WERE RECEIVED FROM THE PRINCIPAL WHICH, IN TURN, WERE TO BE DISTRIBUTED TO THE DEALERS/SUBDISTRIBUTORS AND SOME OF SUCH RECEIPTS FR OM THE PRINCIPALS WERE REIMBURSEMENTS IN RESPECT OF THE EXPE NSES INCURRED ON BEHALF OF THE PRINCIPAL COMPANIES. THE LD. AO SOUGHT SOME INFORMATION FROM THE AFORESAID PARENT COMPANIES BU T THE SAME WAS RECEIVED BY THE LD. AO AFTER THE COMPLETION OF ASSESSMENT IN THE ABSENCE OF THE SAID INFORMATION, THE SAME COULD NOT BE CONSIDERED BY THE LD, AO ALTHOUGH THE IMP UGNED AMOUNTS WERE NEVER THE RECEIPTS/INCOME OF THE ASSESSEE. THAT COMPLETE DETAILS AND EVIDENCES WERE SUBMITTED DURING ASSESSMENT PROCEEDINGS. THE ADDITIONS HAVE BEEN MAD E BY THE AO AT RS.28.96,110/- AND RS.2,60,504/- BECAUSE H E COULD NOT GATHER COMPLETE AND CORRECT INFORMATION/FACTS FROM THE PRINCIPAL COMPANIES BEFORE COMPLETION OF ASSESSMENT IN THIS CASE. THE LD AO HAS MADE DISALLOWANCE OF RS.13,400/- OUT OF TELEPHONE EXPENSES, ON ADHOC BASIS WINCH IS UNJUSTIFIED. THE DISALLOWANCE OF RS.75,000/-MADE OUT OF CONVEYANCE, TRAVELLING AND ENTERTAINMENT EXPENSES IS WITHOUT ANY B ASIS. AN ADDITION OF RS.71,500/- HAS BEEN MADE BY ESTIMATING THE HOUSE HOLD EXPENSES WHICH IS NOT IN ORDER. 4. THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT(A), WHO HAVE DELETED SOME OF THE DISALLOWANCES, HOWEVER CON FIRMED THE AMOUNT OF RS.28,96,110/-. 5. ON BEING DISSATISFIED WITH THE ORDER OF LD. CIT(A), T HE ASSESSEE PREFERRED THE INSTANT APPEAL WHICH IS UNDER CONSIDERATIO N. IN SUPPORT OF ITS APPEAL THE LD. AR DRAWN OUR ATTENTION TO THE OBSERVATION OF THE ITA NO.405 (ASR)/2014 ASST. Y EAR:2010-11 4 ASSESSING OFFICER IN THE ASSESSMENT ORDER TO THE EFFECT THAT THE ASSESSEE WAS REQUIRED TO PRODUCE/ FURNISH THE FOLLOWING IN FORMATION. .... 1. PRODUCE COMPLETE BOOKS OF ACCOUNT ALONG WITH BILLS AN D VOUCHERS FOR THE PERIOD 01.04.2009 TO 31.03.2010. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, YOU FURNISH ED MONTHWISE DETAILS IN RESPECT OF AD RENT, ADCCE 1,2, AD PSR, AD SUPPORT, BUFFER SALARY ETC. FOR VERIFICATION, INFOR MATION WAS SOUGHT FROM YOUR SUPPLIER M/S VODAFONE DIGILINK LTD. B UT THE SAME IS STILL AWAITED INSPITE OF SEVERAL REMINDERS. IN TH E ABSENCE OF INFORMATION FROM THE SUPPLIER, THE INFORMATION FU RNISHED CANNOT BE RECONCILED. NON-COMPLIANCE ON THE PART OF YOU R SUPPLIER OF GOODS, SHOWS THAT THE INFORMATION FURNISHED BY YOU IS FABRICATED/FALSE. BEFORE TAKING ANY ADVERSE INFERENCE, YOU ARE REQUIRED TO PRODUCE THE SAME. ...... AND IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THE SAID INFORMATION HAS NOT BEEN RECEIVED TILL THE PASSING OF A SSESSMENT ORDER UNDER REFERENCE I.E., 26.03.2013. THE LD. A.R FURTHE R DRAWN OUR ATTENTION TO THE OBSERVATION OF THE LD. CIT(A) TO TH E EFFECT THAT THE INDEPENDENT ENQUIRY MADE BY THE AO BY CALLING THE IN FORMATION U/S 133(6) FROM M/S VODAFONE DIGILINK LTD. DID NOT YIELD ANY RESULT AS THE COMPANY DID NOT SUPPLY THE REQUISITE INFORMATION, THU S, THE AO HAS EXERCISED THE POWERS VESTED IN HIM BY VIRTUE OF THE PRO VISIONS OF INCOME TAX ACT, 1961, HENCE, THE ADDITION OF RS.28,96,1 10/- + RS.2,60,504/- IS CONFIRMED AND THE GROUNDS OF APPEAL IS DISMISSED. THE LD. AR FINALLY SUBMITTED THAT ALL THE DETAILS WH ATEVER REQUIRED BY THE ASSESSING OFFICER HAVE BEEN DULY SENT TO THE ASSESSING OFFICER BY THE M/S VODAFONE DIGILINK LTD. VIDE REGIS TERED POST ON 22.03.2013 AND THE RECEIPT OF THE SAME HAS BEEN ATTACHE D HEREWITH IN ITA NO.405 (ASR)/2014 ASST. Y EAR:2010-11 5 THE PAPER BOOK AND THE DETAILS OF THE BILLS WERE ALSO BEEN PRODUCED BEFORE THE ASSESSING OFFICER, HOWEVER, MAY BE INADVERTEN TLY OR MISTAKENLY THE ASSESSING OFFICER DID NOT CONSIDER THE SAME AND EVEN OTHERWISE THE LD. CIT(A) ALSO PASSED AN ORDER ON THE WH IMS AND SURMISES BY HOLDING THAT INFORMATION U/S 133(6) FROM M /S VODAFONE DIGILINK LTD. WAS NOT PROVIDED, THEREFORE, THE LD. A R PRAYED THAT THE CASE BE REMANDED TO THE ASSESSING OFFICER TO DECIDE AFRESH AFTER TAKING INTO CONSIDERATION THE DOCUMENTS SUBMITTED BY M/S VODAFONE DIGILINK LTD. 6. ON THE OTHER HAND, THE LD. DR HEAVILY PLACED RELIAN CE ON THE ORDER PASSED BY THE AUTHORITIES BELOW. 7. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCE S OF THE CASE, AS IN THE INSTANT CASE THE ASSESSMENT ORDER WAS PASSED. FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE, THE INFORMATIO N U/S 133(6) OF THE I.T. ACT WAS SOUGHT FROM THE SUPPLIER COMPANY I.E. M /S VODAFONE DIGILINK LTD. VIDE LETTER NOS.1303 AND 1304 DATED 17 .12.2012 AND 18.01.2013 RESPECTIVELY. THE SAID COMPANY INTIMATED THA T THE SAID INFORMATION WILL BE SUPPLIED WITHIN THREE WEEKS TIME AND SUBSEQUENTLY, NOTICES U/S 133(6) WERE ALSO BEEN ISSUED ON 23 RD JANUARY, 2013 AND 22 ND FEB. 2013 FOR SUPPLY OF THE INFORMATION AT THE EAR LIEST, SO THAT THE TIME BARRING ASSESSMENT MAY BE COMPLETED. IT WAS ALSO OBSE RVED BY THE ASSESSING OFFICER THAT THE SAID COMPANY HAD NOT SUPPL IED THE SAID INFORMATION FOR THE BEST REASONS KNOWN TO IT. ACCORDINGL Y, THROUGH NOTICE U/S 142(1) OF THE I.T. ACT, 1961 ISSUED ON 12.03. 2013 WAS CALLED UPON ASSESSEE TO PRODUCE/FURNISH THE DOCUMENTS STATED ABOVE AND WAS ALSO REQUESTED TO PRODUCE COMPLETE BOOKS OF ACCOUN T ALONG WITH BILLS AND VOUCHERS FOR THE PERIOD 01.04.2009 TO 3 1.03.2010. ITA NO.405 (ASR)/2014 ASST. Y EAR:2010-11 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED MONTHWISE DETAILS IN RESPECT OF AD RENT, ADCC E 1,2, AD PSR, AD SUPPORT, BUFFER SALARY ETC. FOR VERIFICATION, INFORMATION WAS SOUGHT FROM YOUR SUPPLIER M/S VODAFONE DIGILINK LTD. BUT THE SAME IS STILL AWAITED INSPITE OF SEVERAL REMINDERS. IN THE A BSENCE OF INFORMATION FROM THE SUPPLIER, THE INFORMATION FURNI SHED CANNOT BE RECONCILED. NON-COMPLIANCE ON THE PART OF YOUR SUPPLIER OF GOODS, SHOWS THAT THE INFORMATION FURNISHED BY YOU IS FABRICAT ED/FALSE. BEFORE TAKING ANY ADVERSE INFERENCE, YOU ARE REQUIRED TO PRODUCE THE SAME. THE ASSESSING OFFICER WHILE FINDING NO OPTION COMPLETED THE ASSESSMENT PROCEEDINGS IN THE ABSENCE OF INFORMATION/SPECIF IC QUERY QUA THE PERSONS, WHO MAKES THE PAYMENT AND MODE OF PAY MENT THEREOF AND UNDER WHOSE THE PAY ROLL EMPLOYEES ARE WO RKING, ALTHOUGH, ONE PAGE OF REPLY WAS RECEIVED FROM THE MS. VODAFONE DIGILINK LTD. IN WHICH THEY SUBMITTED THAT M/S. VODA FONE DIGILINK LTD. IS CURRENTLY IN THE PROCESS OF COLLECTING THE BALANCE DETAILS REQUISITE FOR BY YOUR OFFICE SHALL FURNISH THE SAME SHORTLY AND ON FIN DING THE REPLY OF THE SUPPLIER COMPANY NOT SATISFACTORY, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER WHICH WAS CONFIRMED BY THE LD. CIT(A ). FROM THE POSTAL RECEIPT DATED 22.03.2013 ADDRESSED TO THE IN COME TAX OFFICER, MANSA PIN-151505, IT REFLECTS THAT CERTAIN DOCUM ENTS WEIGHT 535 GMS. HAVE BEEN SENT TO THE ITO, MANSA ON 22.03.201 3 MAY BE WHICH HAVE BEEN RECEIVED BY THE ASSESSING OFFICER ON OR A FTER 26 TH MARCH, 2013, ON WHICH DATE, THE ASSESSMENT ORDER WAS PASSE D AND HENCE, NOT TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICE R AS WELL AS BY LD. CIT(A). IN OUR CONSIDERED OPINION, FOR THE END OF LITIGATION AND JUST DECISION OF THE CASE AND PRINCIPLE OF NATURAL JUSTICE, IT WOULD BE APPROPRIATE TO CONSIDER THE SAID DOCUMENTS AS RELIED UPO N BY THE ASSESSEE TO BE RELEVANT FOR THE ASSESSMENT PROCEEDING, THERE FORE, WE ITA NO.405 (ASR)/2014 ASST. Y EAR:2010-11 7 FEEL IT APPROPRIATE TO SET ASIDE THE ASSESSMENT ORDER TO THE EXTENT OF THE ADDITION MADE BY THE AO AT RS.28,96,110/- WHICH CL AIMED TO HAVE BEEN INCURRED BY THE ASSESSEE ON BEHALF OF THE PRINCIPAL COMPANY AND REIMBURSEMENT OF SUCH EXPENSES BY THE COMPANY IN THE SHAPE OF CREDIT NOTES/RECHARGE COUPONS WERE SUBSEQUENTLY PASSED TO THE ASSOCIATE DISTRIBUTORS. ON THE AFORESAID OBSERVATION, THE CASE IS REMANDED BACK T O THE FILE OF THE ASSESSING OFFICER TO DECIDE AFRESH THE ISSUE UN DER CONSIDERATION IN GROUND NO.1 OF APPEAL AS STATED ABOVE WHILE CONSIDERING THE DOCUMENTS TO BE SUPPLIED BY THE M/S VODAF ONE DIGILINK LTD. BY GIVING PROPER OPPORTUNITIES OF BEING HEARD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.10.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:25.10.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER