Madhyanchal Vidyut Vitran Nigam Ltd, Lucknow V. TRO, Lucknow

ITA 51/LKW/2010

• Counselvise Citation: 5123714 RSA 2010
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 19-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER ITA NO. 51/ LKW/2010 ASSESSMENT YEAR: 2004 - 05 MADHYANCHAL VIDYUT VITARAN NIGAM LTD. 4A, GOKHLEY MARG LUCKNOW V. T AX R ECOVERY O FFICER RANGE I LUCKNOW PAN: AAECM0108J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RAJESH JAIN, C.A. RESPONDENT BY: SHRI. PRAVEEN KUMAR, CIT (DR) DATE OF HEARING: 17.05.2012 DATE OF PRONOUNCEMENT: 26.06.2012 O R D E R PER S UNIL KUMAR YADAV : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) ON VARIOUS GROUNDS, INTER - ALIA, AS UNDER: - 1 . BECAUSE THE TAX RECOVERY OFFICER PASSING THE ASSESSMENT ORDER LACKED THE JURISDICTION TO CONDUCT THE ASSESSMENT AND HENCE THE LEARNED 1 ST APPELLATE AUTHORITY OUGHT TO HAVE CANCELLED THE ASSESSMENT ORDER. 2 . BECAUSE THE LEARNED 1 ST APPELLATE AUTHORITY OUGHT TO HAVE HELD THAT THE LEARNED ASSESSING OFFICER HAD NO WARRANT TO ORDER SPECIAL AUDIT UNDER SECTION 142 (2A) OF THE INCOME TAX ACT, AS NONE OF THE REQUIREMENTS AND CONDITIONS OF THIS SECTION FOR ORDERING THE SPECIAL AUDIT HAD BEEN MET. : - 2 - : 3 . BECAUSE THE LEARNED 1 ST APPELLATE AUTHORITY OUGHT TO HAVE UPHELD THE ASSESSEE'S CONTENTION THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE DONE ASSESSMENT UNDER SECTION 144 OF THE INCOME TAX ACT, 1961. 4 . BECAUSE THE LEARNED 1 ST APPELLATE AUTHORITY OUGHT TO HAVE UPHELD THE ASSESSEE'S CONTENTION THAT FINDING OF THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE WAS UNABLE TO PRODUCE THE BOOKS OF ACCOUNT IS ERRONEOUS. WITHOUT PREJUDICE TO THE ABOVE: 5(A). BECAUSE THE LEARNED 1 ST APPELLATE AUTHORITY ERRED IN UPHOLDING THE DISALLOWANCE OF 0.1% OF EXPENSES INCURRED BY THE ASSESSEE AND THEREBY AN ADDITION OF RS. 1,01,03,473 / - MADE BY THE LEARN ED ASSESSING OFFICER. 5(B). BECAUSE THE CONCLUSION DRAWN BY THE LEARNED ASSESSING OFFICER THAT 0.1% OF THE EXPENSES BY ESTIMATE ARE NOT MADE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES ON THE BASIS OF OBSERVATION OF AUDITORS AND UPHELD BY THE LEARNED 1 ST APPELLATE AUTHORITY IS ERRONEOUS AND WITHOUT ANY BASIS. 2 . WITH REGARD TO GROUNDS NO.1 TO 4 OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THROUGH THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE BASIC JURISDICTION OF THE TAX RECOVERY OFFICE R (ASSESSING OFFICER) TO FRAME THE ASSESSMENT AND ALSO TO MAKE REFERENCE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT) BEFORE THE LD. CIT(A) , BUT THE LD. CIT(A) DID NOT DISPOSE OF THE SAME AND H AS MENTIONED IN HIS ORDER THAT THESE GROUNDS WERE NOT PRESSED BY THE ASSESSEE. WHEREAS THE ASSESSEE HAS EMPHATICALLY DISPUTED THE BASIC JURISDICTION OF THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AND ALSO TO MAKE REFERENCE FOR SPECIAL AUDIT. : - 3 - : 3 . THE LD. D.R ., ON THE OTHER HAND, HAS CONTENDED THAT BEFORE THE LD. CIT(A) THESE GROUNDS WERE NOT PRESSED BY THE ASSESSEE, BUT NO EVIDENCE TO THIS EFFECT WAS PLACED BEFORE US DURING THE COURSE OF HEARING. 4 . HAVING CAREFULLY PERUSED THE ORDER OF THE LD. CIT(A) IN THE LIG HT OF ASSESSEES CONTENTION, WE FIND THAT THE LD. CIT(A) HAS DISMISSED THESE GROUNDS ONLY FOR THE REASON THAT THESE GROUNDS WERE NOT PRESSED BY THE ASSESSEE. BUT BEFORE US THE ASSESSEES COUNSEL HAS EMPHATICALLY ARGUED THAT THE ASSESSEE HAS QUESTIONED THE BASIC JURISDICTION OF THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AND ALSO TO MAKE REFERENCE FOR SPECIAL AUDIT. ON RECEIPT OF THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS ALSO MOVED AN APPLICATION UNDER SECTION 154 OF THE ACT BEFORE THE LD. CIT(A) WIT H THE SUBMISSION THAT AT NO STAGE IN THE PROCEEDINGS BEFORE THE LD. CIT(A) THE ASSESSEE HAD CONTENDED OR AGREED NOT TO PRESS THESE GROUNDS. IN FA CT HE HAS ALSO FILED SUBMISSION DATED 19.11.2009 ON THESE GROUNDS. 5 . KEEPING IN VIEW OF THESE FACTS, WE ARE OF T HE CONSIDERED OPINION THAT THESE GROUNDS REQUIRE PROPER ADJUDICATION BY THE LD. CIT(A) IN ORDER TO RESOLVE THE CONTROVERSY RAISED BEFORE US. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) IN THIS REGARD AND RESTORE THE MATTER TO HIS FILE TO RE - ADJUD ICATE THE ISSUE BY PASSING A SPEAKING ORDER AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6 . APROPOS GROUND NO. 5, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE AT 0.1% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE AND MAD E AN ADDITION OF ` 1,01,03,473 ON THE BASIS OF AUDITORS REPORT IN WHICH T HE AUDITOR HAS POINTED OUT UNDER THE HEAD MISCELLANEOUS COMMENTS THAT THERE ARE SOME IRREGULARITIES IN THE EXPENDITURE S BY THE COMPANY WHICH COVER HUGE EXPENSES. 7 . THE ASSESSEE PREFER RED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE AUDITOR HAS GIVEN A GENERAL COMMENT WITH REGARD TO THE ACTIVITIES OF THE ASSESSEE, BUT T HE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE CLAIM OF EXPENDITURE MADE BY THE AS SESSEE. THEREFORE, DISALLOWANCE OF 0.1% OF THE TOTAL EXPENSES ON THE BASIS OF AUDITORS REPORT IS NOT JUSTIFIABLE. THE LD. CIT(A), RE - EXAMINED THE ISSUE IN THE LIGHT OF NOTING OF THE : - 4 - : AUDITOR UNDER THE HEAD MISCELLANEOUS COMMENTS IN AUDITORS REPORT AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 8 . NOW THE ASSESSEE IS BEFORE US WITH THE SUBMISSION THAT TO MAKE DISALLOWANCE OF 0.1% OF THE EXPENDITURE CLAIMED BY THE ASSESSEE ON THE BASIS OF AUDITORS REPORT IS NOT PROPER. IF THE ASSESSING OFFI CER HAS ANY DOUBT WITH RESPECT TO THE NATURE OF EXPENSE S , HE HIMSELF SHOULD HAVE EXAMINED THESE EXPENSES INSTEAD OF MAKING DISALLOWANCE ON THE BASIS OF AUDITORS REPORT . 9 . THE LD. D.R., ON THE OTHER HAND, HAS CONTENDED THAT THE ASSESSING OFFICER HAS MADE DIS ALLOWANCE ON THE BASIS OF THE AUDITORS REPORT IN WHICH THE AUDITOR HAS POINTED OUT SPECIFIC DEFECT IN VARIOUS VOUCHERS OF EXPENSES CLAIMED BY THE ASSESSEE, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER THIS HEAD IS PROPER AND NO INTERFER ENCE IS CALLED FOR. 10 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS IN THE LIGHT OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE AUDITOR HAS MADE A SPECIFIC COMMENT WITH REGARD TO THE NATURE OF EXPENSES. THE COMMENTS MADE BY THE AUDITOR ARE REPRODUCED BY THE LD. CIT(A) IN HIS ORDER AND FOR THE SAKE OF REFERENCE WE EXTRACT THE SAME AS UNDER: - 10. MISCELLANEOUS (I) AS REPORTED BY FAIZABAD ZONE AUDITORS MISCELLANEOUS ADVANCE TO EMPLOYEES FOR MATERIAL AND OTHERS (AG 28) INCLUDES AM OUNT DUE SINCE LATE 70S AND EVEN RECOVERABLE FROM RETIRED/EXPIRED EMPLOYEES. NO PROPER AND COMPLETE EMPLOYEE - WISE DETAILS HAD BEEN PROVIDED FOR VERIFICATION. (II) THE PARAMETERS FOR ALLOTMENT OF WORKS HAVE NOT BEEN FOLLOWED BY ED D BAHRAICH. FOR EXAMPLE TH E WORK OF TECHNICAL NATURE WAS ALLOTTED TO M/S. GYAN SECURITY AGENCY AND THE COMPANY IS NOT REGISTERED WITH U.P. TRADE TAX ACT. THE TOTAL AMOUNT OF WORK ALLOTTE D DURING THE PERIOD IS RS. 176186.00. : - 5 - : (III) IN FAIZABAD ZONE SOME CASES HAVE BEEN REPORTED WHERE BILLS WERE REVISED ON THE GROUND OF BOGUS BILLING, IN SOME CASES AMOUNT HAS BEEN WAIVED OFF AS SHOWN IN THE REGISTER BUT NO RECORD HAS BEEN PROVIDED EVEN THERE WAS NO P. D . REPORT PREPARED BY THE CONCERNED AUTHORITY. FOR EXAMPLE M/S. ANOOP INDUSTRIES - ED D JAGDISHPUR (CONN. NO. 047145), M/S. MANOJ INDUSTRY - ED D JAGDISHPUR (CONN. NO. 067046). (IV) IN LESA ZONE IT HAS BEEN REPORTED THAT MISUSE OF FUNDS IS BEING MADE THROUGH TEMPORARY IMPREST / TEMPORARY ADVANCE AT LARGE SCALE. DUR ING THE YEAR A TOTAL SUM OF RS. 1.22 CRORE HAS BEEN ADJUSTED THROUGH T.I. / T.A. IT HAS BEEN OBSERVED THAT ADJUSTMENT OF EXPENSES IS BEING MADE BY SPLITTING THE VOUCHERS OF THE SAME PARTY I NTO MULTIPLES OF RS. 100/ - BY PREPARING SELF MADE HAND RECEIPT (FORM - 28) IN BUNCH WHICH SEEMS P RIMA FACIE NOT CORRECT. (V) IN LESA ZONE IT HAS BEEN REPORTED THAT FINANCIAL POWERS FOR ALLOTMENT OF W ORK HAS BEEN MISUSED IN NUMBER OF CASES BY SPLITT ING THE WORK ORDERS OF THE SAME PARTY ON THE SAME DAY INTO TWO OR MORE ORDERS, SO THAT THE SINGLE ORDER DOES NOT EXCEED RS. 10.000/ - . FURTHER FINANCIAL POWERS FOR THE ALLOTMENT OF PAPER ORDERS HAS BEEN MISUSED BY SPLITTING THE PAPER ORDERS OF THE SAME PARTIES ON THE SAME DAY, SO THAT THE SINGLE ORDER DOES NOT EXCEED RS. 5,000/ - (VI) AT ED D ALIGANJ, LESA ZON E IT HAS BEEN REPORTED BY THE RESPECTIVE BRANCH AUDITOR THAT REVENUE AND WORKS CASH BOOK WERE NOT PRODUCED BEFORE THEM FOR VERIFICATION OF BALANCE OF CASH IN HAND ON 31 - 03 - 2004 WHICH IS OBJECTIONABLE . : - 6 - : (VII) AS REPORTED BY THE ZONAL AUDITORS THAT PROVISION S FOR EXPENSES ARE NOT D ONE AT VARIOUS UNITS AND IN SOME UNITS THE DETAILS OF THE PROVISIONS HAVE NOT BEEN PROVIDED TO THE AUDITORS. WE HAVE BEEN INFORMED THAT THE NECESSARY P ROVISIONS HAVE BEEN DONE AT HEAD OFFICE LEVEL, HOWEVER, IN THE ABSENCE OF NE CESSA RY DETAILS WHICH ARE AVAILABLE ONLY AT ZONAL LEVELS, WE ARE UNABLE TO CO MMENT ON THE ADEQUACY OF THE PROVISIONS MADE.' 11 . THE ASSESSING OFFICER HAS MADE DISALLOWANCE ON THE BASIS OF AUDITORS REPORT. NO DOUBT THE AUDITORS REPORT IS SUFFICIENT EVIDENCE TO D OUBT THE NATURE OF EXPENSES CLAIMED BY THE ASSESSEE. BUT T O MAKE A DISALLOWANCE , THE ASSESSING OFFICER SHOULD HAVE MADE HIS OWN INVESTIGATION OR ENQUIRY WITH REGARD TO THE NATURE OF EXPENSES AND O N ENQUIRY IF HE FINDS THAT THE EXPENSES ARE BOGUS OR NOT OP EN FOR VERIFICATION, THE ASSESSING OFFICER WOULD BE AT LIBERTY TO MAKE REASONABLE DISALLOWANCE. BUT ON THE BASIS OF AUDITORS REPORT, DISALLOWANCE CANNOT BE ESTIMATED. WE ARE, THEREFORE, OF THE VIEW THAT THIS ISSUE WAS NOT PROPERLY EXAMINED BY THE ASSESS ING OFFICER AND WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE - ADJUDICATE THE ISSUE AFRESH AFTER MAKING NECESSARY INVESTIGATION /ENQUIRY IN THE EXPENSES C LAIMED BY THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO EXTEND ALL SORTS OF CO - OPERATION TO THE ASSESSING OFFICER IN THIS REGARD. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.6.2012. SD/ - SD/ - [ S. V. MEHROTRA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26.6.2012 JJ: 0506 : - 7 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSI STANT REGISTRAR