DRVK TRADERS PVT. LTD.,KOLKATA vs. I.T.O., WARD - 1(1), KOLKATA, KOLKATA

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ITA 57/KOL/2023Status: DisposedITAT Kolkata17 April 2023AY 2016-20175 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was bad in law as the information did not suggest escapement of income. The ad-hoc disallowance on an issue not forming the basis of reopening was also unsustainable, following the Jet Airways case.

What were the facts?

The assessee's appeals were against orders passed by the CIT(A). The reopening of assessment was based on information about significant financial transactions, but the Assessing Officer made an ad-hoc disallowance on rake handling charges, which was not the basis for reopening.

What were the issues?

Whether the reopening of assessment was validly initiated and whether ad-hoc disallowances can be made on issues not forming the basis of reopening.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 144B,Section 250

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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA

Before: Shri Sanjay Garg & Shri Girish Agrawal

order : April 17, 2023 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: Both the appeals have been preferred by the assessee against the separate orders dated 15.12.2022 of the National Faceless Appeal Centre [hereinafter referred to as the ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). Since, common issues are involved in all the appeals, hence these have heard together and are being disposed of by this common order.

2.

The appeal in for assessment year 2016-17 is taken as lead case for the purpose of narration of facts. The assessee in this appeal has taken the following grounds of appeal:

1.

1. BECAUSE the compliance to the notices issued by the CIT(A) could not be made by the appellant as it was completely unaware of the notices having been issued for the hearing of the appeal and in the absence of I.T.A. Nos.57&58/Kol/2023 Assessment Years: 2016-17 & 2017-18 DRVK Traders Pvt. Ltd. such information, it could not instruct it's counsel to represent the case on its behalf before the first appellate authority, ignorance being bona fide and not intentionally, an ex-parte order dated 15.12.2022 passed by the first appellate authority deserves to be set aside for re-adjudication of the matter, and principles of natural justice be applied so that justice be done to the appellant. WITHOUT PREJUDICE TO THE AFORESAID 2. BECAUSE the proceedings under section 147 of the Act, by the issuance of notice dated 30.03.2021 under section 148 of the Act, has neither been validly initiated nor concluded in accordance with the law, assessment order dated 14.03.2022 passed under section 147 read with section 144B of the Act is wholly erroneous and the addition made in consequence of the said order is liable to be deleted and the income disclosed by the appellant deserves to be accepted.

3. BECAUSE no addition towards the alleged. 'reasons recorded' for initiation of proceedings under section 147 of the Act by the issuance of notice dated 30.03.2021, having been made in the Assessing Officer in the assessment order dated 14.03.2022, the entire variation made by him in the said assessment order in the form of addition of Rs.14,24,073/- is invalid, being beyond his jurisdiction.

4. BECAUSE, without prejudice to the aforesaid, the Assessing Officer after having observed in the assessment order dated 14.03.2022 that "Although the expenditure incurred under the head Rake Handling Charges cannot be gainsaid, but it cannot be ruled out that the assessee has not overstated the expenses”, the adhoc disallowance @10% of the overall expenditure of Rs.1,20,09,865/- towards rake handling charges is without any basis.

5. BECAUSE the appellant after having submitted the entire details before the Assessing Officer during the course of assessment proceedings, the Assessing Officer has erred in observing in the assessment order dated 14.03.2022 that the appellant has failed to establish the expenses claimed by it with the intent of suppressing the facts.

6. BECAUSE entire expenditure incurred by the appellant towards Rake Handling Charges and Service Charges (Labour) were fully verifiable from the books of account maintained by the appellant, disbelieving the same and disallowing 10% of the overall expenses of Rs.1,42,40,733/- (Rake Handling Charges - Rs.1,20,09,865/- and Service Charges Rs.22,30,868/-) on adhoc basis is farfetched and without any cogent reason. &58/Kol/2023 Assessment Years: 2016-17 & 2017-18 DRVK Traders Pvt. Ltd.

7. BECAUSE after taking into consideration the adhoc disallowance of Rs.14,24,073/- (which is disputed in the present appeal) in the Profit & Loss Account, the percentage of the profit of the appellant shall steeply rise to 19.75% (i.e. an increase in profit percentage by almost 7.50%) which is highly excessive in the trade carried out by the appellant, on this score too the disallowance made by the Assessing Officer on adhoc basis deserves to be deleted by this hon'ble court.

8.

BECAUSE in any case the disallowance made by the Assessing Officer is much too high and excessive. 9. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice.” 3. At the outset, the ld. counsel for the assessee invited our attention to the impugned assessment order to submit that in this case, the reopening of the assessment u/s 147 r.w.s 148 was made by the Assessing Officer on the following ground:

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