MESSER COTTAGE INDUSTRIES , SRINAGAR V. INCOME TAX OFFICER WARD 3(1), SRINAGAR

ITA 7/ASR/2018

AI Insights

The case involves appeals by M/s Cottage Industries Art Gallery against the orders of the Commissioner of Income Tax (Appeals)-1, Amritsar, concerning the assessment years 2012-13 and 2014-15. The primary issues in the appeals were the additions made by the Assessing Officer (AO) under various heads such as commission, sales promotion, guide fees, and other expenses, which were contested as being made without proper justification or evidence. The Tribunal found that the CIT(A) had not adequately addressed the appellant's objections and had not provided sufficient opportunities for the appellant to present their case, particularly regarding the commission payments. Consequently, the Tribunal decided to remand the commission issue back to the CIT(A) for a detailed examination. For the other expenses, the Tribunal noted that the disallowances were based on vague assertions without specific reasons, leading to the decision to allow the appeals on these grounds.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 114749 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-12-2022
• Assessment Year: misc
• Appeal Filed On: 04-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. Nos. 6 & 7/Asr/2018 Assessment Years: 2012-13 & 2014-15 M/s Cottage Industries Art Gallery, Harwan, Srinagar [PAN: AAEFC 1783A] Vs. Income Tax Officer, Ward 3(1), Srinagar (Appellant) (Respondent) Appellant by : None Respondent by : Smt. Ratinder Kaur, Sr. DR Date of Hearing: 07.12.2022 Date of Pronouncement: 20.12.2022 ORDER Per Dr. M. L. Meena, AM: These appeals have been filed by the assessee against the order dated 27.09.2017 and 20.09.2017 passed by the ld. Commissioner of Income Tax (Appeals)-1, Amritsar in respect of Assessment Years 2012-13 & 2014-15 respectively. ITA Nos. 6&7/Asr/2018 Cottage Industries Art Gallery v. ITO 2 2. ITA No. 6/Asr/2018 (Assessment Year 2012-13): “1. The ld. A.O. has erred in law and facts by making addition of Rs.5,00,000/- on account of “Commission”. The Addition is bad in law and therefore liability needs to be deleted. 2. The ld. A.O. has erred in law and facts by making an adhoc addition of Rs.1,76,839/- on account of sales promotion, guide fees and parchi. Therefore, addition is bad in law and liability needs to be deleted. 3. The ld. A.O. has erred in law and facts by making adhoc addition of Rs.75, 336/- on account of different expenses claimed. Therefore, addition is bad in law and liability to be deleted. 4. The appellant reserves all right to amend, alter, add and modify the grounds of appeal.” 3. ITA No. 7/Asr/2018 (Assessment Year 2014-15) “1. The ld. A.O. has erred in law and facts by making an adhoc addition of Rs.1,78,535/-. The Addition is bad in law and needs to be deleted. 2. The ld. A.O. has erred in law and facts by making an addition of Rs.18,000/-. The Addition is bad in law and needs to be deleted. 3. The ld. A.O. has erred in law and facts by making an addition of Rs.1,29,385/-. The Addition is bad in law and needs to be deleted. 4. The ld. A.O. has erred in law and facts by making an addition of Rs.1,72,544/-. The Addition is bad in law and needs to be deleted. 5. The appellant reserves the right to alter, amend, alter, add delete any grounds of appeal.” 4. An adjournment application filed by the counsel for the assesse has been rejected in view of the petty adhoc additions challenged in the two years except 5.0 lac commission payment, it is decided to hear the Ld. DR and disposed the appeal accordingly. ITA Nos. 6&7/Asr/2018 Cottage Industries Art Gallery v. ITO 3 5. In respect of Assessment Year 2012-13, during the scrutiny proceedings, the AO made the addition of Rs. 500,000/- out of commission expenditure of Rs 37,44,952/- claimed under the head commission. The AO observed from the copy of commission account that the assessee had made commission payments of Rs.100,000/- each in cash on different dates mentioned in the assessment order totaling to Rs.500,000/- and the said payments were made without deduction of TDS u/s 194H of the Act. When confronted by the AO the assessee stated that he had not made any payment of commission in excess of Rs. 10,000/- to each person, but a single entry had been recorded for whole payment on the said date against payments made to various persons. 5.1 The Ld. CIT(A) while confirming the addition, has observed that in the appeal proceedings, the ground of appeal was not pressed and that the said addition of Rs. 500,000/- was confirmed. In our view, the CIT(A) ought to have brought on record corroborative evidence in rebuttal to documentary evidence and written submission filed on record and even otherwise, the appellate authorities are expected to bring on record material evidence to disagree with the objection of the appellant and ought to have issued a notice to take rebuttal of the appellant assessee on the adverse decision of the ld. CIT(A) before releasing the order. In view of ITA Nos. 6&7/Asr/2018 Cottage Industries Art Gallery v. ITO 4 the principles of natural justice, the assesse may be granted sufficient opportunities of being heard by the appellate authorities. Under the facts and circumstances, we consider it deem fit to restore the matter to the file of the CIT(A) to adjudicate the issue claim of commission afresh after granting the assesse sufficient opportunity of being heard. 6. The other grounds of the ITA No. 6/Asr/2018 & grounds of ITA No. 7/Asr/2018 (Assessment Year 2012-13 & 2014-15) pertains to confirmation of adhoc addition made out of expenses claimed under different heads in both the assessment years under appeal. 6.1 The grounds of appeal are being related to confirmation of disallowance of expenses by holding same as ad hoc/estimated nature for want of appropriate bills/vouchers/record. We find that Assessing Officer has made addition for the reason of self generated vouchers without indicating specific reason for the disallowances except that expenses are not completely verifiable as the assessee did not produce material on the record, however, neither the AO nor the CIT(A) did mention the fact regarding the material required to be produced by the assessee to justify the expenses. As such, the observations made by the Assessing Officer are not sufficient to make adhoc addition to the income returned by the assessee. The Ld. CIT(A)’s observation are casual and perverse to the ITA Nos. 6&7/Asr/2018 Cottage Industries Art Gallery v. ITO 5 facts on record and contrary to hold that expenses are not verifiable. We are accordingly not inclined to agree with the finding of the Ld. CIT(A) on this issue of disallowances of expenses in respect of both the assessment years under consideration. Hence, these grounds of the appeal are allowed in respect of both the assessment years. 7. In the result, the subject appeals of the assesse are allowed in the terms indicated as above. Order pronounced in the open court on 20.12.2022 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order