VINOD AGRAWAL,KAWARDHA vs. ASSISSTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE BILASPUR, BILASPUR

Brief facts in this case are as follows: “3. Brief Facts of the Case: - The appellant, M/s Vinod Agrawal is a partnership firm duly constituted and engaged in the business of works contracts. The assessee firm filed ITR for FY 2018-19 and get its books audited u/s 44AB of the Act. During the FY 2018-19 the appellant has declared total receipts of Rs.6,36,48,579.49/- and net profit of Rs.12,76,722/- after payment of interest and remuneration to the partners. A search and seizure action were conducted u/s 132 of the Income Tax Act, 1961 on 09/03/2022. Subsequently case of assessee for AY 2019-20 was reopened u/s 147 of the Act. Notice u/s 148 of the Act was issued under clause (i) of Explanation 2 of section 148 of the IT Act, 1961 as per which AO is deemed to have information in possession, which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year. Notice u/s 148 of the Act was issued on 118.11.2022 after taking due approval from the Pr Commissioner of Income tax (Central), Bhopal u/s 151(i) of the IT Act. In the assessment order AO has made addition of Rs.35,70,000/- on account of disallowance to sub- contracting expenditure.”

It is also further noted in the order of the Ld. CIT(Appeals) itself that the assessee had made following submissions before the First Appellate Authority:

That in the finding of the Ld. CIT(Appeals), it was held and observed as follows: “I have carefully perused the submission of assessee and find that appellant's contention that the impugned receipts have been assessed in the hands of the alleged subcontractors and, therefore, sustaining the addition would amount to double taxation is equally untenable. The assessment of income in the hands of the recipient and the disallowance of expenditure in the hands of the payer operate in different fields and are governed by distinct charging and computation provisions. Taxability of receipts in the hands of one person does not automatically confer deductibility of corresponding expenditure in the hands of another person. The allowability of expenditure must independently satisfy the statutory requirements prescribed under the Act. Even assuming that the recipient has offered the receipts to tax, such assessment merely determines the tax liability of the recipient in respect of receipts declared by him. It does not establish that the payer has incurred genuine and allowable business expenditure. The doctrine of "double taxation" has no application where the same amount is subjected to tax in the hands of different assessee under different charging provisions and on account of different taxable events. Accordingly, the plea of double taxation is rejected. Thus, ground of appeal is not tenable and is dismissed.”

The assessee has clearly written that so far as assessments in the hands of the sub-contractors are concerned, as per their relevant assessments, tax liabilities have been completed for the said transaction. That at the same time, the Ld. CIT(Appeals) had also conclusively not denied this fact that as per assessment of income in the hands of recipients, tax liability has been completed. There is no enquiry done by the Ld. CIT(Appeals) in terms with Section 250(4) & (6) of the Act. The First Appellate Authority had rested her findings on the submissions put forth by the assessee without following mandate of the Act and no independent reasoning has been arrived at through proper verification. The findings of the Ld. CIT(Appeals) are vague and is not matching with the submissions put forth by the assessee since there has been no independent enquiry by the First Appellate Authority regarding contentions assailed by the assessee.

In view thereof, the order of the Ld. CIT(Appeals) is set aside and matter is remanded back to her file for denovo adjudication as per law and the said authority shall come up with a speaking order in terms with Section 250(4) & (6) of the Act after complying with the principles of natural justice. The assessee shall also comply with the hearing notices issued by the First Appellate Authority.

In the result, appeal of the assessee is allowed for statistical purposes.