ITO, Ludhiana V. Sh. Rakesh Jain, Ludhiana

ITA 47/CHANDI/2012

• Counselvise Citation: 4721514 RSA 2012
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 13-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MANJEET SINGH
• Keywords: Corroborative evidences
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.47/CHD/2012 ASSESSMENT YEAR: 2004-05 THE ITO, VS SHRI RAKESH JAIN WARD-III,(3), PROP. M/S SHEKAR CHAND JAIN & CO, LUDHIANA LUDHIANA PAN NO. ADXPJ2919F (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI MANJEET SINGH DATE OF HEARING : 17.05.2012 DATE OF PRONOUNCEMENT : ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)-II, LUDHIANA DATED 1.11.2011 RELATING TO ASS ESSMENT YEAR 2004-05 2. IN THIS APPEAL, THE REVENUE HAS TAKEN THE FOLLOW ING GROUNDS:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW IN RESTRICTING THE DISALLOWANCE TO RS.1,00,000/- AS AGAINST RS.7,93,54 1/- MADE ON ACCOUNT OF LABOUR EXPENSES, WHEREAS THE ASS ESSEE HAS CLAIMED PAYMENT OF WAGES FOR THE FINANCIAL YEAR 2002- 03 AND NOT THE YEAR UNDER CONSIDERATION. 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW IN RESTRICTING THE DISALLOWANCE TO RS.50,000/- AS AGAINST RS.1,90,532/ - MADE ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSES, WHERE AS THE ASSESSEE FAILED TO FILE ANY SATISFACTORY EXPLAN ATION IN THIS REGARD BEFORE THE A.O. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN RESTORING B ACK THE MATTER TO THE FILE OF A.O REGARDING DISALLOWANCE OF RS.3,43,477/- MADE ON ACCOUNT OF VIOLATION OF THE PROVISIONS OF SECTION 40A(3) WHEREAS THE CIT(A) IS NOT EMPOWERED TO RESTORE BACK ANY MATTER TO THE FILE OF A.O ACCORDING TO SECTION 251(L)(A) OF THE INCOME TA X ACT, 1961. 3. VIDE GROUND NO.1 OF THE APPEAL, THE REVENUE HAS CHALLENGED THE ACTION OF CIT(A) IN RESTRICTING THE DISALLOWANCE TO RS. 1 LAC AS AGAINST RS. 7,93,541/- MADE ON ACCOUNT OF LABOUR EXPENSES. 4. THE ASSESSEE IS A CONTRACTOR AND DERIVES INCOME FR OM CIVIL CONSTRUCTION WORK AND EARTH WORK ETC. AND IS A PROPRIETOR OF M/S S.C. JAIN & CO., LUDHIANA. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED EXPENSES AMOUNTING TO RS. 35,63,252/- UNDER THE HEA D LABOUR EXPENSES. OUT OF THE ABOVE AMOUNT, THE ASSESSING OFFICER DISALLOW ED RS. 2,09,397/- PLUS RS. 5,88,144/- = RS. 7,93,541/- STATING AS UNDER:- I HAVE CONSIDERED THE ABOVE CONTENTIONS OF THE ASS ESSEE AND AFTER CAREFUL CONSIDERATION THEREOF, THE SAME A RE REJECTED IN VIEW OF THE FOLLOWING REASONS: (A) AS MENTIONED ABOVE, PERUSAL OF THE COMPLETE VOU CHERS PERTAINING TO THIS A/C SHOWS THAT THE ENTIRE ENTRIE S EITHER RELATES TO ASSESSMENT YEAR 2003-04 OR ON WHICH SIGN ATURES OF THE RECEIVER DIFFERS / NO SUPPORTING EVIDENCE HA S BEEN ATTACHED AS PER DEFECT POINTED OUT VIDE LETTER DATE D 3 8.11.2006. THE ASSESSEE HAS NO SUPPORTING BILL ON T HE SELF MADE VOUCHERS AND EXPENDITURE HAS BEEN INCURRED IN CASH AND I AM OF THE CONFIRMED VIEW THAT THESE ACCOUNTIN G ENTRIES ARE UNRELIABLE AND INCOMPLETE AND I AM NOT SATISFIED WITH THE CORRECTNESS & COMPLETENESS OF THIS ACCOUNT . ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT WHICH IS EVIDENCED FROM THE COMMENTS OF THE AUDITOR GIVEN IN THE AUDIT REPORT ANNEXED WITH THE RETURN OF INCOME IN C OLUMN NO. LL(A) OF THE STATUARY AUDIT REPORT IN FORM 3CD DULY SIGNED BY THE CHARTERED ACCOUNTANT SH RAJESH MEHRU FOR M/S RAJESH MEHRU & CO. ON 28.10.2004 DULY ATTACHED WITH THE RETURN OF INCOME FOLLOWING COMMENTS ARE REPORTE D METHOD OF ACCOUNTING EMPLOYED IN THE : MERCANTILE PREVIOUS YEAR ACCOUNTING SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM O F ACCOUNT, THEREFORE, THE ASSESSEE IS NOT PRINCIPALLY SUPPOSED TO CLAIM DEDUCTION FOR WAGES EITHER FOR FEBRUARY & MARCH 2003 IN THE BOOKS OF ACCOUNTS FOR FINANCIAL YEAR 20 02-03 RELEVANT TO ASSESSMENT YEAR 2003-04. HENCE THERE IS APPARENT EXCESS CLAIM IN THIS ACCOUNT. SINCE THE ASSESSEE HAS FAILED TO GIVE ANY SATISFACT ORY EXPLANATION ON THIS ACCOUNT AN ADDICTION OF RS. 7,9 3,541/- IS MADE TO THE RETURNED INCOME. 5. THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF D ISALLOWANCE OF RS. 7,93,541/- AT PAGES 2, 3 & 4 OF THE ASSESSMENT ORDE R. 6. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 7. THE CIT(A) REDUCED THE ADDITION TO RS. 1 LAC OBS ERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF APPELLANT AND OBSERVATIONS OF THE A.O THAT EXPENSES GENUINELY SPE NT AND HAVE BEEN CLAIMED ONCE IN THE LIFETIME SHALL BE ALL OWED KEEPING IN THE VIEW THE NATURE OF THE BUSINESS, OVE RALL 4 CIRCUMSTANCES AND PROOFS OF PAYMENT SUBMITTED BY TH E APPELLANT. FACT THAT APPELLANT HAS CLAIMED FAR LESS EXPENSES IN RATIO TERMS AS COMPARE TO LAST YEAR WHICH WAS AL SO ASSESSED BY SAME A.O GOES WELL WITH THE APPELLANT R EGARDING THE ALLOWABILITY OF LABOUR EXPENSES. FURTHER THE A .O DID NOT CHALLENGE THE NON-PAYMENT AND NON INCURRENCE OF LABOUR EXPENSES. HOWEVER TO PREVENT THE LOSS OF REVENUE LU MPSUM ADDITION OF RS. 1,00,000/- SHALL BE MADE AND ACCORD INGLY ADDITION OF RS. 7,93,5417- MADE BY A.O IS HEREBY RE DUCED TO THE LEVEL OF RS. 1,00,000/-. KEEPING IN THE VIEW O F ABOVE THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. VIDE GROUND NO.2 OF THE APPEAL THE REVENUE HAS C HALLENGED THE ACTION OF CIT(A) IN RESTRICTING THE DISALLOWANCE TO RS. 50 ,000/- AS AGAINST RS. 1,90,532/- MADE ON ACCOUNT OF REPAIR AND MAINTENANC E EXPENSES. 9. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED EXPENSES OF RS. 11,01,956/- UNDER THE HEAD REPAIR AND MAINTENAN CE EXPENSES. OUT OF THE ABOVE EXPENSES, THE ASSESSING OFFICER DISALLOWED RS . 1,90,532/-. THE ASSESSING OFFICER HAS GIVEN DETAILS OF VOUCHERS AT PAGES 5 & 6 OF THE ASSESSMENT ORDER. AS REGARDS 13 VOUCHERS AMOUNTING TO RS. 64,520/- MENTIONED AT PAGE 5 OF THE ASSESSMENT ORDER, THE AS SESSING OFFICER OBSERVED AS UNDER:- PERUSAL OF THE VOUCHER REVEALS THERE IS NO SUPPORT ING DOCUMENT ATTACHED WITH THIS VOUCHER AND ALSO THERE ARE NO SIGNATURES OF RECIPIENT. NO REVENUE STAMP AFFIXE D ON THE VOUCHER. AT PAGE 6 OF THE ASSESSMENT ORDER, THE ASSESSING OF FICER HAS MENTIONED THE DETAILS OF 27 VOUCHERS AMOUNTING TO RS. 1,26,012/-, OBSERVING AS UNDER:- 5 NO EVIDENCE, ONLY WRITTEN SLIPS ARE ON WHICH NAMES OF THE PERSONS APPEARS BUT NO SIGNATURES, NO REVENUE STAMP AFFIXED. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO PR ODUCE SUPPORTING EVIDENCE, THE ASSESSEE CAME FORWARD WITH SELF MADE VOUCHERS HAVING EITHER NO NAME, NO SIGNATURES OF RECIPIENT, NEITHER ANY RE VENUE STAMP WAS AFFIXED OF PAYMENT NOT SUBSTANTIATED BY ANY BILL ETC. ACCORDI NG TO ASSESSING OFFICER, THE ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLAN ATION, THEREFORE, ADDITION OF RS. 64,520/- PLUS RS. 1,26,012/- = RS. 1,90,532/ - WAS MADE. 10. ON APPEAL, THE CIT(A) REDUCED THE ADDITION TO R S. 50,000/-, OBSERVING AS UNDER:- 2.3 KEEPING IN THE VIEW THE FACT THAT A.O DID NOT CHALLENGE THE AUTHENTICITY AND GENUINELY OF EXPENDITURE AND A LSO DID NOT POINT OUT ANY PARTICULAR DISCREPANCY APART FROM THE GENERAL DEFICIENCIES AND MORE OVER DID NOT DENY THE INCURRE NCE OF EXPENDITURE. EVEN THE ADDITIONS IN THE PLANT & MACH INERY HAVE BEEN IGNORED. ENTRIES POINTED OUT IN THE ORDER ARE OF PETTY NATURE AND KEEPING IN REGARD TO THE NATURE OF BUSIN ESS THE SAME SHALL BE CONSIDERED. THUS THE ADDITION MADE BY THE A.O IS ON THE HIGHER SIDE AND A LUMPSUM ADDITION OF RS. 50,00 0/- SHALL BE MADE TO COVER THE LEAKAGE OF REVENUE. HENCE THIS GR OUND OF APPEAL IS PARTLY ALLOWED. 11. THE ABOVE APPEAL WAS FIXED FOR HEARING ON 17.5. 2012. HOWEVER, NOBODY APPEARED ON BEHALF OF THE ASSESSEE DESPITE S ERVICE OF NOTICE BY RAPD. THE ASSESSEE HAS ALSO NOT FILED ANY APPLICAT ION FOR ADJOURNMENT OF THE CASE. UNDER THESE CIRCUMSTANCES, WE ARE CONSTR AINED TO DISPOSE OFF THE 6 APPEAL OF THE REVENUE, OF COURSE, AFTER HEARING THE LD. DR. WE WILL DISPOSE OFF GROUND NOS.1 & 2 OF THE APPEAL IN SUCCEEDING PA RAGRAPHS. 12. SHRI MANJEET SINGH, LD. DR VEHEMENTLY ARGUED TH AT THE CIT(A) HAS NOT GIVEN ANY COGENT REASONS WHILE RESTRICTING THE DISA LLOWANCE TO RS. 1 LAC AS AGAINST RS. 7,93,541/- MADE ON ACCOUNT OF LABOUR EX PENSES. SIMILARLY, CIT(A) WITHOUT ASSIGNING ANY REASON HAS REDUCED THE ADDITION TO RS. 50,000/- AS AGAINST RS. 1,90,532/- MADE ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES. HE FURTHER SUBMITTED THAT THE CIT(A) IS ENJOINED AND INCUMBENT UPON IT TO APPRECIATE THE EVIDENCE, CONSIDER THE RE ASONING OF THE ASSESSING OFFICER AND ASSIGN ITS OWN REASONS AS TO WHY HE DIS AGREES WITH THE REASONS AND FINDINGS OF THE ASSESSING OFFICER. UNLESS ADEQ UATE REASONS ARE GIVEN, MERELY BECAUSE IT IS AN APPELLATE AUTHORITY, IT CAN NOT BRUSH ASIDE THE REASONING OR FINDINGS RECORDED BY THE ASSESSING OFF ICER. SHRI MANJEET SINGH, LD. DR HEAVILY RELIED ON THE DECISION OF HON'BLE BO MBAY HIGH COURT IN THE CASE OF MANEKLAL D. SHAH VS P.K. GUPTA AND OTHERS (2004) 267 ITR 340 (BOM.) WHEREIN HON'BLE HIGH COURT HAS HELD THAT IT IS INCUMBENT UPON THE APPELLATE AUTHORITY TO GIVE REASONS AS TO WHY IT DI SAGREES WITH THE REASONS AND FINDINGS OF THE PRIMARY AUTHORITY. THE RELEVANT O BSERVATION OF THE HON'BLE HIGH COURT ARE AS UNDER:- A RIGHT TO REASONS IS, THEREFORE, AN INDISPENSABLE PART OF A SOUND SYSTEM OF JUDICIAL REVIEW. A REASONED DECISIO N IS NOT ONLY FOR THE PURPOSE OF SHOWING THAT THE CITIZEN IS RECE IVING JUSTICE, BUT ALSO A VALID DISCIPLINE FOR THE AUTHORITY ITSE LF. THEREFORE, STATING OF REASONS IS ONE OF THE ESSENTIALS OF JUS TICE. THE APPELLATE AUTHORITY IS ENJOINED AND IT IS INCUMBENT UPON IT TO APPRECIATE THE EVIDENCE CONSIDER THE REASONING OF T HE PRIMARY 7 AUTHORITY AND ASSIGN ITS OWN REASONS AS TO WHY IT DISAGREES WITH THE REASONS AND FINDINGS OF THE PRIMARY AUTHORITY. UNLESS ADEQUATE REASONS ARE GIVEN, MERELY BECAUSE IT IS A N APPELLATE AUTHORITY, IT CANNOT BRUSH ASIDE THE REASONING OR F INDINGS RECORDED BY THE PRIMARY AUTHORITY. THE ORDER SHOULD BE SELF- EXPLANATORY AND SHOULD NOT KEEP THE HIGHER COURT G UESSING FOR REASONS. THE REASONS PROVIDE A LIVE LINK BETWEEN T HE CONCLUSION AND THE EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARINESS. IT GIVES AN OPPORTUNITY TO THE HIGHE R COURT TO SEE WHETHER OR NOT THE SUBORDINATE COURT OR AUTHORITY O R THE TRIBUNAL CONSIDERED THE RELEVANT MATERIAL. SINCE NO REASONS ARE FOUND IN THE ORDER, WE ARE LEFT WITH NO OTHER ALTERNATIVE B UT TO QUASH AND SET ASIDE THE IMPUGNED ORDER TO THE EXTENT IT IS C HALLENGED AND TO REMIT THE PROCEEDINGS BACK TO THE COMMISSIONER OF INCOME-TAX, CENTRAL-II, MUMBAI, FOR HEARING AND CONSIDERATION A FRESH ON THE MERITS. 13. RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE BOMBAY HIGH COURT (SUPRA), WE SET ASIDE THE ORDER OF CIT(A) AND RESTO RE THE ISSUES TO THE FILE OF CIT(A) WITH A DIRECTION TO DECIDE THE SAME AFRESH O N MERITS IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 1 & 2 OF THE APPEAL ARE AL LOWED FOR STATISTICAL PURPOSES. 14. VIDE GROUND NO.3 OF THE APPEAL THE REVENUE HAS CHALLENGED THE ACTION OF CIT(A) IN RESTORING BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER REGARDING DISALLOWANCE OF RS. 3,43,477/- MADE ON AC COUNT OF VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 8 15. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAS INCURRED A TOTAL AMOUNT OF RS. 17,18,886/- AS AN EXPENDITURE. IN T HE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS POINTED OUT SOME DISCREPANCY REGARDING THE PAYMENT OF SUCH EXPENDITURE. THE ASSESSING OFFICER DISALLOWED 20% OF THE SUCH EXPENDITURE I.E. RS. 3,43,777/-. ON APPEAL, THE CI T(A) RESTORED THE ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE EVIDEN CE OF THE ASSESSEE AND TO DECIDE THE ISSUE ON MERITS. 16. BEFORE US THE LD. DR SUBMITTED THAT U/S 251(1) (A) OF THE ACT THE CIT(A) HAS NO POWER TO RESTORE BACK ANY MATER TO TH E FILE OF ASSESSING OFFICER FOR TAKING A FRESH DECISION ON MERITS. HE, THEREFORE, SUBMITTED THAT THE CIT(A) MAY BE DIRECTED TO DECIDE THE ISSUE ON M ERITS IN ACCORDANCE WITH LAW AFTER AFFORDING A DUE AND REASONABLE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 17. AFTER HEARING THE LD. DR, WE SET ASIDE THE ORDE R OF CIT(A) ON THIS ISSUE AND DIRECT HIM TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. FOR STATISTICAL PURPOSES, THIS GROUND OF APPEAL IS ALLO WED. 18. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF MAY, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 22 ND MAY, 2012 RKK 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR