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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-19, Chennai, dated 08.10.2021 and pertains to assessment year 2017-18. 2. The assessee has raised the following grounds of appeal:
:-2-: ITA. No: 545/Chny/2021 1. The order of the Learned Commissioner of Income Tax (Appeals)-19 [CIT(A)] is arbitrary, incorrect and also against the facts and circumstances of the appellant's case.
The Learned CIT(A) has erred in upholding the order of Assessing Officer [A.O.] in regard to additions made and assessment made thereon.
On the facts the Learned CIT(A) ought to have accepted the explanation and submissions made by the appellant and refrained from upholding the impugned additions.
The Learned CIT(A) had failed to follow the correct position of law and the order passed by him is bad in law for want of findings and reasons for addition.
The Learned CIT(A) has erred in restricting the ad-hoc disallowance of vehicle related expenses to 5 percent.
6. The Learned CIT (A) had failed to appreciate that the A.O. has neither pointed out any discrepancies in the books of accounts maintained by the appellant nor rejected them and accepted the hire charges income but disallowed the expenses on ad- hoc basis without any cogent material on record.
7. The disallowance of expenses was made merely on surmises, conjectures as well as without any supporting evidences and deserves to be set aside.
8. The Learned CIT(A) erred in not considering the submissions of the appellant and the case law cited to support his case while upholding the addition and accordingly the order of the Learned CIT(A) was opposed to law and liable to be set aside.
9. The order of the CIT (Appeals) deserves to be set aside for deviating from binding precedents of the Hon'ble Supreme Court in the case of J.J. Enterprises Vs. CIT [ (2002) 254 ITR 216 (SC)] and Dhakeswari Cotton Mills Ltd. Vs CIT [ (1954) 26 ITR 775 (SC)] wherein the apex court has held that the A.O. is not entitled to make a pure guess and make estimated ad-hoc additions/disallowances to the income returned without reference to any evidence or any material at all.
10. The Learned CIT(A) had erred both in law and on the facts of the case in treating the Cash deposits during Demonetization as unexplained money under Sec.69A of the Income Tax Act, 1961 [ 'the Act].
The Learned CIT (Appeals) has erred in sustaining the order of A.O. in disallowing cash deposits based only on analysis, assumptions and conjectures of A.O. rather than on any material evidence.
The Learned CIT(A) failed to appreciate that section 69A and section 115BBE of the Act is intended to tax unaccounted :-3-: ITA. No: 545/Chny/2021 cash not recorded in the books of accounts. In the appellant's case, they are very much recorded in the books of accounts and additions were made on the ground that the deposits were Specified Bank Notes.
The appellant prays to delete the additions sustained by the Learned CIT(A). For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allow.
The appellant craves leave to add, amend any/all grounds of appeal before or during the course of the hearing of the appeal.”
3. The brief facts of the case are that, the assessee is a proprietor of M/s. Sivamayam Transport, Akilam Transport, Sharah Transport and Sathiyam Transport, and is engaged in the business of transportation. The assessee had filed its return of income for the assessment year 2017-18 on 05.01.2018 declaring a total income of Rs. 65,75,640/-. The case has been selected for scrutiny. During the course of assessment proceedings, the AO called upon the assessee to produce necessary bills and vouchers in respect of vehicles charges, unloading and halting charges and vehicle hire charges. Since, the assessee could not file necessary evidence, the AO has made 10% adhoc disallowance on expenses and made addition of Rs. 50,66,637/-.
4. Further, during the course of assessment proceedings, the AO noticed that the assessee has made cash deposits of :-4-: ITA. No: 545/Chny/2021 Rs. 49,52,000/- during the demonetization period in its bank account maintained at State Bank of India (SBI). The assessee was called upon to explain source for cash deposits, and in response to notice, the assessee submitted that out of accumulated cash balance of business receipt a sum of Rs. 56.01 Lakhs was available on 18.11.2016 and out of said cash balance, he has made cash deposits to bank accounts. The AO, however was not convinced with the explanation furnished by the assessee. According to the AO, the assessee could not satisfactorily explain cash deposits found in his bank account during the demonetization and thus, made addition of Rs. 49,52,000/- u/s. 69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).
5. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated its arguments made before the AO along with certain judicial precedence and contended that the AO has made adhoc disallowance of expenditure. The assessee had also contended addition made towards cash deposits. The CIT(A) for the reasons stated in their appellate order dated 08.10.2021, after considering relevant submissions of the :-5-: ITA. No: 545/Chny/2021 assessee, has restricted the adhoc disallowance of vehicle charges, unloading and halting charges and vehicle hire charges from 10% to 5% of total expenditure. However, confirmed the addition made towards cash deposits into bank account during demonetization period. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The Ld. Counsel for the assessee referring to the assessment order submitted that, the AO had made adhoc disallowance of expenses in absence of necessary evidence. However, fact remains that the assessee has explained the nature of business and expenditure incurred and further, requested the Assessing Officer to give time to submit physical copies of the invoices. However, the AO without considering the request of the assessee has made adhoc disallowance. Similarly, as regards cash deposits, the assessee has explained source for cash deposits and also argued that he has maintained books of accounts and drawn cash flow statement. If at all the AO wants to verify the books of accounts and cash flow statement an opportunity may be give. However, the AO without giving an opportunity made addition. Therefore, the :-6-: ITA. No: 545/Chny/2021 appeal may be set aside to the file of the AO to give one more opportunity of hearing to the assessee.
The Ld. DR, on the other hand supporting the order of the CIT(A) submitted that the assessee could not file necessary evidence, even though the AO has given sufficient opportunity to the assessee. Therefore, there is no reason to set aside appeal to give one more opportunity of hearing to the assessee.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee is in the business of transportation and in the process, has hired vehicles from open market and paid transportation charges in cash. The assessee has incurred huge expenses for vehicle charges, unloading and halting charges and explained that he is providing transportation service to a particular client and as per agreement, the assessee has to first pay loading and unloading charges and halting charges and get reimbursement from their principals. These facts has been explained to AO, but the AO ignored explanation furnished by the assessee and made adhoc :-7-: ITA. No: 545/Chny/2021 disallowance. We find that the assessee has explained the nature of business vide its letter dated 22.12.2019 and further upload sample invoices in the e-portal. The assessee had also requested the AO to permit to submit the physical copies of the invoices in person. The AO ignored the specific request of the assessee and made adhoc disallowance on the ground that the assessee could not produced any documentary evidence in support of his explanation. In our considered view, when the assessee has asked the AO to give sufficient time to produce physical copies of invoices, the AO ought to have given one opportunity to the assessee to file those evidences. The AO without providing an opportunity, completed assessment and made adhoc disallowance. Therefore, we are of the considered view that this issue needs to be set aside to the file of the AO and thus, we set aside the adhoc disallowance of expenses to the file of the AO and direct the AO to re-examine the claim of the assessee, after providing reasonable opportunity of hearing to the assessee.
Coming back to cash deposits during demonetization period, the assessee has made cash deposits to the tune of Rs. 49,52,000/- during the demonetization period in his bank :-8-: ITA. No: 545/Chny/2021 account maintained with SBI, Jafferkhanpet Branch, Chennai. Before the AO, the assessee explained the source for cash deposits and argued that he has accumulated cash balance of Rs. 56.01 lakhs as on 18.11.2016 and the same was deposited into the bank account on various dates during the demonetization period. The assessee could not upload the invoices for the service rendered during the year in e- proceedings portal due to size constraints and requested the AO to permit for submission of physical copies of invoices in person. The AO disregarded the request of the assessee and completed assessment and made addition towards cash deposits. In our considered view, the assessee has made a specific request for submission of physical copies of invoice and other relevant details to prove availability of cash balance as on 18.11.2016, and thus, the AO ought to have given one opportunity to the assessee to file those evidences. Since, the AO has not followed the principle of natural justice in providing reasonable opportunity of hearing to the assessee, we are of the considered view that the issue needs to go back to the file of the AO and thus, we set aside the issue to the file of the AO and direct the Assessing Officer to re-examine the issue after providing one more opportunity of hearing to the assessee.
:-9-: ITA. No: 545/Chny/2021 Needless to say, the assessee shall furnish all evidence with regard to both the issues and further shall not seek adjournment, unless otherwise necessary.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the court on 21st October, 2022 at Chennai.