ITO, Ward-2, Gudur, Gudur V. Sri Kumaraswamy Silica Mines, Gudur, Gudur

ITA 852/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2452 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: C KAMESHWAR RAO
• Keywords: Condonation of delay
• Section: 40A(3); 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 852/HYD/2017 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER, WARD-2, GUDUR VS M/S. SRI KUMARASWAMY SILICA MINES, GUDUR [PAN: AAIFS0995G] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT N. SWAPNA, DR FOR ASSESSEE : SHRI C. KAMESHWAR RAO, AR DATE OF HEARING : 30-10-2017 DATE OF PRONOUNCEMENT : 31-10-2017 O R D E R THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-TIRUPATI, DATED 14-03-2017 FOR THE AY. 2009-10. 2. THE GROUNDS RAISED BY REVENUE ARE AS UNDER: 1. THE ORDER OF THE CIT(APPEALS) IS ERRONEOUS BOTH IN LAW AND IN THE FACTS OF THE CASE. 2. THE CIT(APPEALS) ERRED IN ALLOWING THE APPEAL WH ICH WAS FILED WITH CONDONATION OF DELAY AFTER A GAP OF 4 YEARS 9 MONTH S THAT TOO AFTER DISMISSING THE APPEAL OF THE ASSESSEE ON THE RECTIF ICATION MADE TO THE ASSESSMENT IN APPEAL ORDER U/S.154 AT THE LEVEL OF CIT (APPEALS) AND HON'BLE ITAT. 3. THE C1T(APPEALS) OUGHT TO HAVE CONSIDERED THE FA CT THAT THE APPEAL OF THE ASSESSEE ON THE ORDER U/S.154 WAS DISMISSED BOT H BY THE CIT (A) AND THE HON'BLE ITAT. I.T.A. NO. 852/HYD/2017 :- 2 - : 4. THE CIT(APPEALS) OUGHT TO HAVE GRANTED AN OPPORT UNITY TO THE ASSESSING OFFICER UNDER RULE 46A SO AS TO GET THE FACTS APPRA ISED ON THE APPEAL FILED BY THE ASSESSEE ON THE ORDER U/S.154. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE. 3. BEFORE ADJUDICATING THE MERITS OF THE ORDER OF LD.C IT(A), THE FACTS OF THE CASE ARE TO BE NARRATED FIRST. THE ASSESS EE IS A FIRM, INVOLVED IN THE BUSINESS OF MINING CONTRACTS. FOR THE AY. 2009-10, ASSESSEE FILED RETURN OF INCOME DECLARING NET INCOME OF RS. 2,51,617/-. IN THE SCRUTINY PROCEEDINGS, THE ASSESS ING OFFICER (AO) NOTICED THAT ASSESSEE HAD MADE PAYMENTS IN CASH WHICH VIOLATED THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT [ACT]. THE AR, WHO APPEARED HAS NO OBJECTION FOR DISALLOWANCE O F EXPENDITURE U/S. 40A(3). AO HAS DISALLOWED 20% OF THE AMOUNT I NVOLVED BY STATING AS UNDER: ON VERIFICATION OF THE INFORMATION PRODUCED WITH R EFERENCE TO THE BOOKS OF ACCOUNT, IT IS NOTICED THAT THE ASSESSEE C LAIMED EXPENDITURE UNDER THE HEADS SALARIES, FREIGHT AND OTHER EXPENDI TURE WHICH INCLUDES THE EXPENDITURE UNDER THE HEAD BATWADA. THE RECEIPT S/VOUCHERS PRODUCED TOWARDS THESE EXPENDITURES ARE VERIFIED. THE ASSESS EE HAS CLAIMED AN EXPENDITURE OF RS. 67,43,923/- TOWARDS BATWADA. DU RING THE COURSE OF SCRUTINY PROCEEDINGS, IT IS NOTICED THAT THE ASSESS EE HAS MADE CASH PAYMENTS TO THE TUNE OF RS. 37.50 LAKHS WHICH CLEAR LY ATTRACTS PROVISIONS OF SEC.40A(3). HENCE 20% OF RS. 37.50 LAKHS WHICH WORKS OUT TO RS. 7,50,000/- WAS DISALLOWED, FOR WHICH THE ASSESSEES AR HAS NO OBJECTION. THERE WAS NO APPEAL BY ASSESSEE ON THIS ORDER DT. 31- 03-2011 AT THAT POINT OF TIME. 3.1. HOWEVER, AO NOTICED THAT DISALLOWANCE OF 20% OF THE AMOUNT INVOLVED IS NOT CORRECT AS THE PROVISIONS OF SECTION 40 A(3) I.T.A. NO. 852/HYD/2017 :- 3 - : MANDATES DISALLOWANCE AT 100%. HE ACCORDINGLY ISSUED A NOTICE U/S. 154 AND FULL AMOUNT WAS DISALLOWED, VIDE ORDER DT. 14-12- 2013. 3.2. THIS ORDER U/S. 154 WAS SUBJECT MATTER OF APPEAL BY ASSESSEE BEFORE THE LD.CIT(A) AND ITAT AS WELL. THE ISSUE WA S DECIDED IN FAVOUR OF REVENUE BY THE ITAT IN ITS ORDER DT. 31-07- 2015. THE ITAT CONFIRMED THE ACTION OF AO/CIT(A) STATING AS UNDE R: 4. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE OPINION THAT THERE IS NO MERIT IN ASSESSEE'S APPEAL. AS FA R AS THE DISALLOWANCE U/S. 40A(3) IS CONCERNED, ASSESSEE'S AR IN THE COUR SE OF ASSESSMENT PROCEEDINGS ACCEPTED THAT THE PROVISIONS OF SECTION 40A(3) ARE APPLICABLE TO THE AMOUNT QUANTIFIED BY THE AO. IT IS A FACT T HAT ONCE THE PROVISIONS ARE ATTRACTED, 100% OF THE AMOUNT INVOLVED HAS TO B E DISALLOWED. BY MISTAKE ONLY 20% WAS DISALLOWED IN THE ORDER, MAY B E FOLLOWING THE PROVISION IN EARLIER YEARS IGNORING THE CHANGE IN L AW. THEREAFTER, SINCE THE AMOUNT TO BE DISALLOWED AS PER THE PROVISIONS OF TH E ACT WAS AT 100%, THE ORDER U/S. 154 IS CERTAINLY CALLED FOR, AS IT IS A CLEAR MISTAKE IN APPLICATION OF LAW. IN VIEW OF THIS, WE DO NOT FIND ANY MISTAK E IN EXERCISING JURISDICTION U/S. 154. ASSESSEE'S OBJECTIONS ON ME RITS AND CONTENTIONS THAT PROVISIONS ARE NOT APPLICABLE CANNOT BE CONSID ERED IN THE PROCEEDINGS US 154, AS A FINDING BY THE AO WAS GIVEN IN THE ORD ER U/S. 143(3) WHICH WAS NOT CONTESTED. THEREFORE APPLICATION OF PROVISI ONS OF SEC.40A(3) ON THE QUANTUM DETERMINED IN THE ORDER HAS BECOME FINAL. IN VIEW OF THIS, WE UPHOLD THE ORDER OF CIT(A) AND REJECT ASSESSEE'S CO NTENTIONS. 4. AFTER DISMISSAL OF APPEAL ON THE ORDER U/S. 154, A SSESSEE PREFERRED AN APPEAL ON THE ORDER U/S. 143(3) DT. 31-0 3-2011 BEFORE THE LD.CIT(A), TIRUPATI ON 26-10-2015. HOWEVER, LD.C IT(A) TOOK THE DATE OF FILING APPEAL ON 01-04-2011 AND DECIDED THE APPEAL ALLOWING THE ASSESSEES CONTENTIONS. REVENUE IS AGGRI EVED ON THE IMPUGNED ORDER OF LD.CIT(A). 5. SINCE IT IS NOTICED THAT THE ORDER OF LD.CIT(A) HAS NOT STATED ANYTHING ABOUT THE CONDONATION OF DELAY AS CONTENDED I N GROUNDS I.T.A. NO. 852/HYD/2017 :- 4 - : OF APPEAL, THE DR WAS DIRECTED TO DETAIN A REPORT FROM THE AO/CIT(A) AS THE LD.AR ACCEPTED THAT THE APPEAL WAS FIL ED BELATEDLY. THE REPORT OF THE PRESENT CIT(A) DT. 03-10 -2017 IS AS UNDER: (1) DATE OF FILING OF APPEAL NO.0217/2015-16 AGAIN ST 143(3) ORDER WAS 26.10.2015. IT IS EVIDENT FROM THE ORDER SHEET ENTR Y AVAILABLE IN APPEAL FOLDER OF 0/O. COMMISSIONER OF INCOME TAX (APPEALS) (COPY ENCLOSED). APPEAL WAS NOT FILED IN TIME IS CONFIRMED BY THE EN TRY IN CHECK LIST OF APPEAL NO.217/2015-16 (COPY ENCLOSED). COPY OF ITNS -51 ALSO CONFIRMED THE DELAY IN FILING OF APPEAL (COPY ENCLOSED). (2) FROM THE ABOVE, IT IS CLEAR THAT THE DATE OF IN STITUTION WAS WRONGLY MENTIONED IN THAT APPEAL ORDER AS 01.04.2011. THIS IS AN ERROR. WHILE TYPING THE DATE, DATE OF SERVICE OF THE ASSESSMENT ORDER ON APPELLANT (I.E.) 01.04.2011 WAS WRONGLY TYPED IN THE APPEAL ORDER AS THE DATE OF INSTITUTION OF APPEAL INSTEAD OF CORRECT DATE OF IN STITUTION OF APPEAL (I.E.) 26.10.2015. (3) APPELLANT IN THE CONDONATION PETITION FILED ALO NG WITH APPEAL PAPERS ON 26.10.2015 ADMITTED THAT THE APPEAL WAS FILED WITH A DELAY OF 4 YEARS, 5 MONTHS AND 26 DAYS (COPY OF AFFIDAVIT FILED FOR CON DONATION OF DELAY IS ENCLOSED). (4) IT IS A FACT THAT THERE WAS NO MENTION OF DELAY AND NO DISCUSSION ON THE CONDONATION OF DELAY IN THE ORDER OF COMMISSIONER O F INCOME TAX(APPEALS) DATED 14.03.2017. HOWEVER, COMMISSIONER OF INCOME T AX(APPEALS) IN HIS ORDER SHEET ENTRY DATED 01.11.2016 MENTIONED ABOUT DELAY OF 4 YEARS 5 MONTHS AND 26 DAYS. (5) RELEVANT APPEAL FOLDER MAINTAINED IN THE 0/0. C OMMISSIONER OF INCOME TAX (APPEALS), TIRUPATI, IN ORIGINAL IS SENT TO YOU R OFFICE FOR PRODUCTION BEFORE HON'BLE ITAT. (6) PRIMA FACIE, IT APPEARS THAT APPELLANT FILED AP PEAL AGAINST ORIGINAL ASSESSMENT ORDER DATED 31.03.2011 ONLY ON 26.10.201 5, THAT TOO, AFTER DISMISSAL OF APPELLANT'S APPEAL ON 31.07.2015 BY HO N'BLE ITAT, BENCH A IN ITS ORDER IN ITA NO.563/HYD/2015. (7) THE ABOVE REPORT IS SENT BY THE UNDERSIGNED AS I AM HOLDING THE ADDITIONAL CHARGE OF COMMISSIONER OF INCOME TAX (AP PEALS), TIRUPATI SINCE 18.08.2017. I.T.A. NO. 852/HYD/2017 :- 5 - : LD.CIT(A) ALSO ENCLOSED THE ORDER SHEET WHEREIN LD.CI T(A) HAS RECORDED THE ORDER SHEET ENTRY DT. 01-11-2016 AS UNDER : 01/11/2016. SHRI KAMESHWAR RAO, CHALLA A/R APPEARE D. CASE DISCUSSED. THERE IS A DELAY OF 4 YEARS 5 MONTHS AN D 26 DAYS. APPELLANT FILED CONDONATION FOR DELAY WITH REASONS. A/R FILE D WRITTEN SUBMISSIONS. A/R SUBMITTED THAT ENTIRE EXPENDITURE TOWARDS BATWA DA IS EXPENDED IN CASH. THERE WAS NO BANKING FACILITIES NEAR THE SIL ICA MINES WITHIN 11 KM RADIUS. HENCE RULE 6DD(G) ARE INVOKED BY APPELLANT IN HIS FAVOUR. CASE HEARD. SD/- SD/- 1/11/16 1/11/16 LD.CIT(A) ALSO ENCLOSED THE ITNS-51 SENT BY AO AND THE COPY OF CONDONATION PETITION FILED BY ASSESSEE-FIRM. 6. IT WAS THE CONTENTION OF LD.DR THAT THE ORDER OF LD.CI T(A) IS BAD IN LAW. IT WAS SUBMITTED THAT THE ORDER OF AO U/S. 1 43(3) WAS SUBSEQUENTLY MODIFIED U/S. 154 AND THE SAME WAS CONFI RMED BY ITAT. THERE SEEMS TO BE NO FURTHER APPEAL, CONSEQUEN TLY THE ISSUE HAS BECOME FINAL. FURTHER, AS CAN BE SEEN FROM THE O RDER OF THE AO, THE ADDITION IS AGREED AS THE LD.AR HAS STATED THAT PROVISIONS OF SECTION 40A(3) ARE ATTRACTED TO THE PAYMENTS MADE IN C ASH. THE APPEAL WAS FILED AFTER DISMISSAL BY ITAT ON APPEAL AGAINST ORDER U/S. 154 AND THESE FACTS ARE NOT CONSIDERED BY THE LD.C IT(A). THE APPEAL WAS ALSO BELATED AND THERE IS NO DISCUSSION ON THE ISSUE OF CONDONATION IN FILING A BELATED APPEAL. IT WAS STATED THAT THE LD.CIT(A) HAS NOT CALLED FOR ANY REPORT FROM THE AO ON THE ISSUE OF EXCEPTIONS PROVIDED UNDER CLAUSE (9) OF RULE 6DD AND ACCEPTED ALL THE CONTENTIONS, WHEN THE ORDER INDICATES THAT AO HAS EXAM INED AND LD.AR ACCEPTED FOR ADDITION AS THE PROVISIONS OF SECTION 40A(3) I.T.A. NO. 852/HYD/2017 :- 6 - : ARE ATTRACTED. IT WAS THE SUBMISSION THAT THE ORDER OF LD .CIT(A) REQUIRES TO BE SET ASIDE. 7. LD. COUNSEL IN REPLY SUBMITTED THAT THE APPEAL WAS FI LED BELATEDLY WITH A CONDONATION PETITION AND LD.CIT(A) HA S CONDONED THE SAME AS CAN BE SEEN FROM THE ORDER SHEET NOTING. I T WAS FURTHER CONTENDED THAT THE ITAT CONFIRMED ONLY ACTION U /S. 154 BUT ON MERITS, ASSESSEE HAS A CASE WHICH LD.CIT(A) HA S ACCEPTED. HE SUPPORTED THE ORDER OF LD.CIT(A). 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS AND REPORTS PLACED ON RECORD. THE ORDER OF L D.CIT(A) CANNOT BE ACCEPTED FOR THE FOLLOWING REASONS: A) EVENTHOUGH THE LD.CIT(A) HAD CONDONED THE DELAY, THE REASONS FOR CONDONATION IS NOT FORTHCOMING FROM THE O RDER. IT IS A FACT THAT ASSESSEE PREFERRED THE IMPUGNED APPEAL ON THE ORDER U/S. 143(3) BELATEDLY, THAT TOO AFTER THE DISMISS AL OF APPEAL BY ITAT ON THE ORDER U/S. 154. SINCE THE DAT E OF INSTITUTION OF APPEAL IS NOTED AS 01-04-2011 (ERRONEOU SLY AS STATED IN THE REPORT) ON THE FACE OF ORDER, IT GIVES AN IMPRESSION THAT THE APPEAL WAS INSTITUTED IN TIME, WHERE AS IT WAS FILED BELATEDLY. B) THE REASON FOR DELAY IN FILING THE APPEAL AS STATED I N THE PETITION IS AS UNDER: 3. THAT THE FIRM WAS NOT ABLE TO FILE THE APPEAL W ITHIN 30 DAYS OF RECEIVING THE ASSESSMENT ORDER SINCE THE THEN MANAG ING PARTNER MR. V. SUNDARA RAMI REDDY, MY FATHER WAS SUFFERING FROM SEVERE I.T.A. NO. 852/HYD/2017 :- 7 - : HEART-ATTACK AND LATER EXPIRED ON 9 TH OCTOBER 2011 (COPY OF DEATH CERTIFICATE IS ENCLOSED). 4. THOUGH THE FIRM HAD FILED APPEAL CONTESTING THE ORDER PASSED UNDER SECTION 154 OF THE ACT, IT HAD NOT FILED AN A PPEAL IN RESPECT OF THE ORIGINAL ASSESSMENT ORDER; THE REASONS ARE PRIMA-FACIE CONTRADICTORY AS THE ASSESSEE WAS PERUSING THE APPEAL ON THE ORDER U/S. 154 AND SO THE CIT(A) SHOULD HAVE EXAMINED THE MERITS OF THE REASONS GIVEN. C) THE ISSUE WHETHER ORDER GOT MERGED, CONSEQUENT TO CONFIRMATION OF ORDER U/S. 154 BY ITAT HAS NOT BEEN EXAMINED. THE APPEAL FILED WAS ONLY ON AN AMOUNT OF RS. 7,50,000/- MADE AS AN ADDITION IN THE SAID ORDER. IF THE LD.CIT(A) ALLOWED THE SAME, WHETHER ASSESSEE GETS RELI EF OF THE SAID AMOUNT OR FULLY (BALANCE IS COVERED BY THE OR DER U/S. 154 WHICH WAS CONFIRMED BY ITAT) HAS NOT BEEN CONSID ERED. THERE IS ALSO A FINDING IN ITAT ORDER THAT THE ORDER U /S. 143(3) HAS BECOME FINAL. IT SEEMS LD.CIT(A) HAS NOT NOTICED THAT ORDER AT ALL. D) IT IS ON RECORD THAT THE AR HAS ACCEPTED THAT THE PROVISIO NS OF SECTION 40A(3) ARE ATTRACTED AND NO OBJECTION FOR ADDITIO N. HOWEVER, THE ASSESSEE CAME UP WITH DIFFERENT CONTENTION S BEFORE THE LD.CIT(A) WHICH WERE ACCEPTED BY THE LD.CI T(A) WITHOUT SUBJECTING THE SAME FOR VERIFICATION. THERE IS VIOLATION OF RULE 46A IN THIS REGARD. E) LAST BUT NOT THE LEAST, THE APPEAL BY THE LD.CIT(A) SEEM S TO HAVE BEEN HEARD ON 01-11-2016 AS PER THE ORDER SHE ET COPY PLACED ON RECORD. HOWEVER, THE ORDER OF THE LD.CIT(A) I.T.A. NO. 852/HYD/2017 :- 8 - : INDICATES THAT THE CASE WAS POSTED ON 25-01-2017 AND 28- 02- 2017 AND THE IMPUGNED ORDER WAS PASSED ON 14-03-201 7. NO EXPLANATION IS FORTHCOMING ABOUT THIS. WHY LD.CIT(A ) HAS GIVEN FURTHER POSTINGS AFTER THE CASE IS HEARD ON 01- 11-2017 AND THE REASONS THEREON ARE NOT VERIFIABLE ON THE BASIS OF THE REPORT AND COPIES PLACED ON RECORD. 8.1. FOR THE REASONS STATED ABOVE, I AM OF THE OPINIO N THAT THE ORDER OF LD.CIT(A) CANNOT BE SUSTAINED AS IT SUFFERS FOR MANY OMISSIONS AND COMMISSIONS. IN VIEW OF THAT, I HEREBY SET ASIDE THE ORDER WITH A DIRECTION TO CONSIDER THE APPEAL MEMO AFRE SH, INCLUDING THE ISSUE OF CONDONATION. LD.CIT(A) IS A LSO DIRECTED TO GRANT DUE OPPORTUNITY TO AO AS WELL AS TO ASSESSEE, BEF ORE DECIDING THE ISSUES. CIT(A) IS FREE TO CONSIDER ALL THE ISSUES AFRESH, INCLUDING THE OBJECTION RAISED BY THE REVENUE IN THIS APPEAL. THE IMPUGNED ORDER OF THE LD.CIT(A) IS HEREBY SET ASIDE A ND THE MATTER IS RESTORED TO THE FILE OF CIT(A) FOR FRESH CONSIDERATI ON. 9. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST OCTOBER, 2017 TNMM I.T.A. NO. 852/HYD/2017 :- 9 - : COPY TO : 1. THE INCOME TAX OFFICER, WARD-2, GUDUR. 2. M/S. SRI KUMARASWAMY SILICA MINES, D.NO. 15/175, NEHRU NAGAR, GUDUR. 3. COMMISSIONER OF INCOME TAX(APPEALS)-TIRUPATI. 4. THE PR. COMMISSIONER OF INCOME TAX, TIRUPATI. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.