Bajrang Bahadur Singh, Gorakhpur V. ACIT, Circle - 1, Gorakhpur

MA 2/VNS/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9661 (ITAT-VARANASI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-08-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 26-06-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SHUKLA
• Keywords: Business income; Revision of order; Business expenditure
• Section: 263; 40A(3); 143(3); 145(3)

Judgement Text

MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI CIRCUIT BENCH, VARANASI BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER Miscellaneous Application (M.A.) No.02/VNS/2022 [Arising out of ITA No.49/VNS/2018] Assessment Year: 2012-13 Shri Bajrang Bahadur Singh Marhatha, Campierganj Gorakhpur-273001, U.P. v. The Assistant Commissioner of Income- tax, Circle-1 Aayakar Bhawan, Civil Lines, Gorakhpur- 273001, U.P. PAN: AFXPS6284G (Appellant) (Respondent) Appellant by: Mr. Arvind Shukla, Advocate Respondent by: Shri A K Singh, Sr. DR Date of hearing: 26.08.2022 Date of pronouncement: 27.10.2022 O R D E R PER: SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This Miscellaneous Application(MA) bearing MA No. 02/VNS/2022 arising out of ITA no. 49/VNS/2018 for assessment year(ay) 2012-13 has been filed by assessee on the grounds that Revenue appeal in ITA no. 49/VNS/2018 for ay: 2012-13 was decided ex-parte by Income-Tax Appellate Tribunal, Varanasi Circuit Bench, U.P.,vide appellate orders dated 31.05.2022, as the assessee and/ or his counsel did not appear on the date of hearing before Division Bench on 23 rd May, 2022 nor any adjournment application was MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 2 filed by or on behalf of the assessee , while the appeal was heard and decided by Division Bench(DB) of ITAT, after hearing ld. CIT-DR and perusing the material on record. The assessee has raised grievance that, it did not received any notice of hearing for 23 rd May, 2022 , and hence the assessee could not appear on the date of hearing on 23 rd May, 2022. In-fact, this appeal came up for hearing before Division Bench on earlier occasions also viz. on 17.10.2019, and notice of hearing dated 27.09.2019 was duly issued to the assessee by Registry (placed on record in file), but the assessee and/or his counsel did not appear for hearing before DB on 17.10.2019 nor any adjournment application was filed by or on behalf of the assessee when this matter was called for hearing before DB, and the Bench adjourned the hearing. Thereafter, this matter was again fixed for hearing before DB on 23 rd March, 2022 , for which the notice of hearing dated 25 th February 2022(placed on record in file) was issued by Registry to the assessee, but again the assessee and/or his counsel did not enter appearance before the DB on 23 rd March, 2022 nor any adjournment application was filed by or on behalf of the assessee, and the Bench again adjourned the hearing to 13 th April, 2022. Since, the Bench was not functioning on 13 th April , 2022, the matter got posted for hearing before DB on 20 th April, 2022, and notice of hearing dated 08 th April, 2022(placed on record in file) was issued by Registry to the assessee, intimating date of next hearing to be 20 th April, 2022 . On 20 th April, 2022, when this matter came up for hearing before DB, the assessee and/or his counsel did not appeared before the DB but the Registry placed before DB, an adjournment application dated 18.04.2022(placed on record in file) filed by the assessee, and the Bench adjourned the hearing to 09 th May, 2022. Since, on 09 th May, 2022 there was no Bench functioning, the matter was adjourned to 23 rd May, 2022. The Registry duly issued notice of hearing dated 12.05.2022 to the assessee(placed on record in file) , intimating to the assessee next date of hearing before DB on 23.05.2022. The assessee and/or his counsel did not enter appearance on 23 rd May, 2022 nor any adjournment application was filed by or on behalf of the assessee when this matter was called for MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 3 hearing before DB, and the appeal was heard by DB ex-parte in the absence of the assessee and after hearing ld. CIT-DR. The tribunal has decided the appeal filed by Revenue on merits after considering entire material on record and after hearing ld. CIT- DR wherein detailed order on merit was pronounced by tribunal, vide appellate order dated 31.05.2022 in ITA No. 49/VNS/2018. This appeal was filed by Revenue way back in 2018 and this is an old appeal , and the matter was first posted for hearing before DB , on 17 th October, 2019. We have already enumerated above in this order as to how the assessee responded to notices for hearing issued by Registry from time to time , as on all occasions when this appeal came up for hearing before DB the assessee remained non- compliant. Since 2018, when this appeal was filed by the Revenue, the assessee never filed any paper book and/or evidences/submissions before the tribunal to substantiate and support his contentions, which itself shows the casual approach of the assessee towards statutory matters. The assessee has to remain vigilant as to its rights as well duties, once it has come to its notice that Revenue has filed an appeal challenging the relief granted by ld. CIT(A). Moreover, whenever any Bench is constituted , apart from sending notices through postal authorities to the litigants , ITAT duly publishes the Constitution of Bench as well cause lists by pasting the same as Public Notice in the concerned office of the ITAT , as well simultaneous publication of Constitution and Cause Lists in the website/webportal of ITAT, to make aware the litigants as well their counsels about the upcoming Benches as well the cause lists containing list of cases to be dealt with by the Benches. Thus, through multiple channels of communication, the intimation about the upcoming Benches as well cause lists containing list of cases, are published for the convenience of the litigants. Thus, to say that the assessee or its counsels are not aware of the date of hearing is not correct, rather the assessee is negligent and is taking the matter in a very casual manner and is not at all vigilant to its rights as well its duties. The assessee did file adjournment application dated 18 th April, 2022 for hearing before DB of its matter posted before DB on 20 th April, 2022, and hence the assessee cannot say that it MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 4 is not aware of the appeal filed by Revenue, rather the assessee is negligent . The assessee is engaged in the business as Civil Contractor having large business transactions, and the assessee has itself reported gross turnover of Rs. 10,18,28,011/-. The assessee’s accounts are subject to tax audit under the provisions of the 1961 Act, which can be done by a qualified chartered accountant. The assessee was in assessment as well appellate proceedings before ld. CIT(A) , was duly represented by ld. Advocates as is emanating from the orders of the authorities below. Thus, the assessee has all the support of lawyers/chartered accountants, but still the assessee is taking the matter very casually and is not at all vigilant to its rights/duties, rather the assessee is negligent. The assessee did not co-operated with the authorities below, as the books of accounts, vouchers, cash book, invoices etc. were never produced by the assessee before authorities below, and rather the AO detected manipulation and falsification in the ledger account submitted by the assessee before the authorities, as two different set of ledger accounts were furnished by the assessee in two different proceedings, for the same impugned assessment year. There was a clear violation of Section 40A(3) , Section 40A(1) carries non-obstante clause, and hence consequences has to follow, howsoever harsh they may be , as the 1961 Act is a code in itself and it is well settled that there is no equity in taxing matters. The relevant extract of tribunal order dated 31.05.2022 in ITA No. 49/VNS/2018 , is reproduced hereunder: “8. We have heard the contentions of the ld. CIT-DR and perused the material on record. The brief facts of the case are that assessee is a civil contractor. This assessee filed its return of income declaring total income of Rs. 64,87,970/-, on 29.09.2012 . The assessment was completed by Assessing Officer by assessing total income of Rs.67,43,840/- in original assessment proceedings conducted u/s 143(3) read with Section 143(2), vide assessment order dated 29.09.2012 passed u/s 143(3) of the 1961 Act , wherein certain expenses were disallowed by the AO . The ld. Pr. CIT, Gorakhpur invoked revisionary powers u/s. 263 of the Act , and set aside the assessment order dated 29.09.2012 passed by the AO u/s 143(3) by MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 5 treating the same as erroneous so far as prejudicial to the interest of Revenue and directing AO to conduct fresh assessment, vide revisionary order dated 29.03.2017 passed by ld. Pr. CIT u/s 263 of the 1961 Act, by holding as under: “From the above it clear that assessment was completed without due proper and adequate enquiries, making the order erroneous and prejudicial to the interest of revenue, and he also did not cooperate in the assessment proceedings as noted by the AO in his order, and therefore, I set is aside to the file of the AO to be done afresh.” Perusal of the assessment order dated 12.12.2017 passed by the Assessing Officer in consequence to revisionary order passed by ld. Pr. CIT u/s. 263 of the Act , dated 29.03.2017 , categorically records that the assessee did not produced books of account in the original proceedings as also that the assessee did not produced any books of account even during the assessment proceedings conducted by the Assessing Officer in consequence of the revisionary order passed by ld. Pr. CIT u/s. 263 of the Act. The AO observed that the assessee has wrongly stated in his reply that books of accounts were produced before the AO during original assessment proceedings, while no books of accounts were produced by the assessee before AO in original assessment proceedings , as found mentioned in the order sheet entry dated 24.02.2015. The AO further observed that no books of accounts were also produced in the assessment proceedings conducted by AO in consequence of the revisionary order passed by ld. Pr. CIT u/s 263. The AO further observed that no bills and vouchers were produced by the assessee during assessment proceedings conducted by AO in pursuance to revisionary order passed by ld. Pr. CIT u/s 263, and it was noted by AO in his order that except written submissions, nothing else was produced by the assessee. The AO observed that even in original assessment proceedings, the assessee has filed merely photocopies of some ledger accounts, while no bills and vouchers were produced. The AO observed that the assessee has submitted ledger account of material purchases , and it was observed by the AO that the assessee has made payments to the tune of Rs. 5,80,12,836/- towards material purchases which were paid in cash. The AO further observed that the ledger account submitted in original assessment proceedings and in the assessment proceedings in pursuance to revisionary order passed by ld. Pr. CIT , the assessee has submitted two different sets of material consumed ledger accounts, which were enclosed by the AO as annexure A and annexure B, both enclosed to the assessment order.The AO observed that the assessee MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 6 has tried to bifurcate these cash payments to bring down below the threshold limit of Rs. 20,000/- per day. The AO observed that the assessee has not produced cash book, receipt book , bills or voucher(s), so that the payments could be verified. The AO observed that the assessee has changed the ledger account of material consumed to bring down cash payments within threshold limit of Rs. 20,000/- per day, in order to avoid being hit by provisions of Section 40A(3). The AO observed that in the material consumed ledger filed during assessment proceedings consequent to the revisionary order passed by ld. Pr. CIT, even names of the payee is changed. Further, the AO observed that none of the cash payments towards material purchases made by the assessee are supported by vouchers. This led to the additions to the tune of Rs.5,13,57,520/- being made by the AO to the income of the assessee on account of such payments been made in cash otherwise than through account payee cheque, by invoking provision of Section 40A(3) by the AO and the material consumed to the tune of Rs. 5,13,57,520/- was added to the income of the assessee. We have carefully gone through these two different sets of ledger accounts, and observes that the assessee has manipulated and falsified the records by making wrong entries in the second set of ledger account filed in assessment proceedings conducted by AO in consequences to revisionary order passed by ld. Pr. CIT, in order to bring itself out of clutches of provisions of Section 40A(3).Similarly, the AO observed that the assessee has made payment to the tune of Rs. 2,16,67,364/- towards labour charges. The AO observed from the ledger of labour payments, that cash payments in excess of Rs. 20000/- in a day were made towards labour charges, to the tune of Rs. 1,81,47,450/- . The details are extracted by AO in its assessment order dated 12.12.2017 , at page 4 and 5. The AO asked the assessee to explain these cash payments. The assessee submitted muster roll before the AO, and it was observed by the AO that there are several inconsistencies in the muster roll and further the details of payees are not there. The AO further observed from the muster roll that it is an afterthought by the assessee. The AO rejected muster roll by observing as under: “1. On going through the muster roll it is seen that numbers of labour employed by the assessee in a day is more than 20. The assessee has not paid any ESI, Gratuity, etc. as required under labour laws. Had this much strength of labours the assessee should have certainly taken permission of the concerned authority of labour department. MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 7 2. From this muster roll is it not clear that the same actually belong to the assessee. Even the assessee has not certified that the same pertains to him. 3. On these muster role the payments have been made at the end of the month only. However, in labour charges payment ledger it is seen that apart from the above payment of Rs. 1,81,47,450/- the remaining payment of Rs. 35,19,914/- has also been made on different dates other than month ending. This muster role does not contain the details such of payments made dates other than month ending. Therefore, this muster role is not reliable. 4. The work has been conducted on three or four sites , who has supervised the work or who has made such payment to labours is not clear. 5. It has also not been clarified by the assessee that he has made payments to somebody who disbursed the amounts to the labours concerned. 6. It seems that this muster roll is an afterthought of the assessee.” The AO observed that the assessee has not produced books of accounts, the availability of cash in hand cannot be verified. The AO observed that the payments have been made exceeding Rs. 20000/- in cash on single day, and no explanation has been offered by the assessee, which led AO to invoke provisions of Section 40A(3) and cash payments to the tune of Rs. 1,81,47,450/- towards labour payments, stood added to the income of the assessee , vide assessment order dated 12.12.2017 passed by AO u/s 143(3) read with Section 263 of the 1961 Act.The ld. CIT(A) has given erroneous finding that the books of accounts were produced by the assessee before the AO. Infact no vouchers, invoices, cash book, books of accounts were produced, and merely ledger accounts were produced and that too were changed by assessee in assessment proceedings conducted in consequences to revisionary order passed by ld. Pr. CIT u/s 263.The assessee is claiming deduction towards material purchases and labour payments from its income chargeable to tax, and thus the onus is on the assessee to bring on record cogent material to substantiate the same , as well that compliances of statutory provisions such as Section 40A(3) were made, before being allowed deduction by Revenue. Reference is drawn to provisions of Section 40A(1) as was applicable for the relevant assessment year under consideration , which carries a non obstante clause, which reads as under: ”Expenses or payments not deductible in certain circumstances. MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 8 40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". *** (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. *** ***” Section 40A(1) contain a non obstante clause, that provisions of Section 40A shall have effect not withstanding anything to the contrary contained in any other provisions of the 1961 Act , relating to computation of income under the head “Profits and Gains of Business or Profession” . Section 40A(3) requires that where the assessee incurs any expenditure in respect to which payment or aggregate of payments made to a person in a day, is made otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeding Rs. 20000/- , then no deduction of such cash expenses shall be allowed in respect of such expenditure while computing income chargeable to tax . It transpires that the assessee has admittedly made cash payments exceeding Rs.20,000/- towards material purchases and labour payments in cash in a day, which clearly is made otherwise than through account payee cheque or account payee bank draft, and there is clearly an infringement of Section 40A(3). Thus, no deduction of these cash expenses exceeding threshold limit in a day , can be allowed, in view of clear infringement/violation of Section 40A(3) , wherein Section 40A(1) contains a non obstante clause which stipulates that provisions of Section 40A(1) shall have effect notwithstanding anything to the contrary contained in any other provisions of the 1961 Act , relating to computation of income under the head “Profits and Gains of Business or Profession”. It was for the assessee to have led evidences to substantiate that no such cash payments in excess of Rs. 20000 in a day was made, rather the assessee in assessment proceedings conducted by AO u/s 263 read with Section 143(3) instead of explaining that these cash payments MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 9 are not hit by Section 40A(3) read with Section 40A(1), falsified the record by bringing on record second set of ledger’s of material purchases and labour payments. The assessee has tried to wriggle out of clutches of Section 40A(3) by producing second set of ledger account in the assessment proceedings conducted by AO consequent to revisionary order passed by ld. Pr. CIT u/s 263. Once there is a clear infringement of provision of Section 40A(3) and the assessee is not able to demonstrate that its case falls under exceptions as contained in Rule 6DD of Income-tax Rules, 1962, the authorities are bound to make additions u/s 40A(3) , which is to be read with Section 40A(1) which carries a non obstante clause. It could not be demonstrated that the assessee case falls under exceptions as are contained in Rule 6DD of the 1961 Act, and by ld. CIT(A) erroneously granted relief to the assessee by applying Rule 6DD of the 1962 Rules although the assessee was not able to demonstrate that its case falls under exception as carved out in Rule 6DD of the 1962 Rules. The 1961 Act is an code in itself. In case of non compliances of various applicable provisions of the 1961 Act, consequential penal provisions are prescribed in the 1961 Act itself which will get attracted and which has direct bearing on computing income chargeable to tax. The assessee has clearly infringed provisions of Section 40A(3) and made cash payments in excess of threshold limits with respect to material purchases and labour payments, and claimed these expenses as business expenses deductible from business income. It could not be demonstrated that the assessee case fell into exceptions as are contained in Rule 6DD of the 1962 Rules. The assessee also failed to produce books of accounts, cash book , vouchers and invoices , and merely ledger accounts of material consumed and labour payments made were produced, and further that two different sets of ledger accounts were produced by the assessee in two different assessment proceedings , firstly in original assessment proceedings wherein the assessee admitted to have made cash payments in a day of more than Rs. 20000/- in violation of Section 40A(3) , towards material purchases and labour payments, secondly while in assessment proceedings consequent to revisionary order passed by ld. Pr. CIT u/s 263 of the 1961 Act, wherein the assessee produced different ledger accounts of material purchases and labour payments to show lower cash payments per day below threshold limit u/s 40A(3) to avoid being penalized u/s 40A(3). The AO rightly made additions u/s 40A(3), while ld. CIT(A) rejected books of accounts of the assessee and invoked provisions of Section 145(3) of the 1961 Act to frame best judgment assessment to bring to tax income @6% of gross receipts without any basis, despite clear mandate of Section 40A(3) read with Section 40A(1) which starts with non obstante clause . The ld. CIT(A) fell into an error in relying on Rule 6DD of the 1962 Rules and granting relief to the assessee, without appreciating that the MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 10 assessee is not able to explain and make out its case for falling into exception as carved out by Rule 6DD of the 1962 Rules, and rather in fact the assessee instead of explaining its case on merits, manipulated and came out with second set of ledger for material purchases and labour charges wherein it claimed that no cash payments exceeding Rs. 20000 was made in a day to a person, in assessment proceedings conducted by AO u/s 143(3) read with Section 263. While in first of ledger of material purchases and labour payments, filed by the assessee in original assessment proceedings conducted by AO u/s 143(3) read with Section 143(2), the assessee filed ledgers of material purchases and labour payments, where the cash payment in a day exceeding Rs. 20000/- in infringement of Section 40A(3) and no explanation was made rather the assessee falsified and manipulated the records by bringing altogether different set of ledger of material purchased and labour payments. The AO has enclosed both the sets of ledger accounts in its assessment order. It was for the assessee to have demonstrated that It did not infringed provisions of Section 40A(3) , or to make out its case to fall under exceptions under Rule 6DD of the 1962 Rule , but no such case was made out by the assessee, while ld. CIT(A) fell into an error by granting relief to the assessee by granting relief by applying Rule 6DD of the 1962 Rules, without any basis or justification or any material whatsoever on record. We do not find any infirmity in the order of the Assessing Officer , the ld. CIT(A) has misdireted itself by applying net profit rate , despite the assessee having admitted to have cash payment in violation of Section 40A(3) of the Act and the case also does not fall under exceptions as are provided in Rule 6DD of the 1962 Rules. Under these circumstances, the appellate order passed by ld. CIT(A) cannot be sustained and is reversed and the assessment order passed by the Assessing Officer is confirmed so far as additions disallowance u/s. 40A(3) with respect to material consumed and labour payments are concerned. This disposes of ground number 2 and 3 raised by Revenue in its memo of appeal filed with tribunal , which stood allowed. We order accordingly.” Thus, keeping in view our aforesaid discussions, we are of the view that the tribunal has passed appellate order dated 31.05.2022 on merits , and the assessee is not able to demonstrate sufficient cause for recalling the aforesaid appellate order dated 31.05.2022 passed by tribunal in ITA no. 49/VNS/2018, and further that the assessee could not establish that there was any mistake in the appellate order dated 31.05.2022 passed by MA No. 02/VNS/2022 arising out of ITA No. 49/VNS/2018 Bajrang Bahadur Singh, Gorakhpur v. ACIT, Circle-1, Gorakhpur Assessment Year: 2012-13 11 tribunal , and hence this MA application filed by assessee stand dismissed.We order accordingly. 2. In the result, M.A. No. 02/VNS/2022 arising out of ITA no. 49/VNS/2018, for ay: 2012-13 stands dismissed. Order pronounced on 27/10/2022 at Allahabad in accordance with Rule 34(4) of Income Tax (Appellate Tribunal) Rules, 1963 Sd/-Sd/ - Sd/- Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27/10/2022 Allahabad/Varanasi, U.P. Copy forwarded to: 1. Appellant – Mr. Bajrang Bahadur Singh,Marhatha, Campierganj, Gorakhpur- 273001, U.P. 2. Respondent – The ACIT, Circle-1, Aayakar Bhawan, Civil Lines, Gorakhpur- 273001, U.P. 3. The ld. CIT(A) , Gorakhpur, U.P. 4. the ld. CIT, Gorakhpur, U.P. 5. The ld. CIT- DR, ITAT, Varanasi, U.P. 6. The Guard File //True Copy// By order Assistant Registrar