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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR (SMC
Before: SH. SANJAY ARORA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No. 430/Asr/2014 Assessment Year: 2007-08
Northern Steel Industries, Vs. I.T.O., Ward 3(2), Srinagar, Kashmir Srinagar, Kashmir (J&K) [PAN: AABFN 1016E] (Appellant) (Respondent)
Appellant by : None Respondent by: Sh. Rahul Dhawan (D.R.) Date of Hearing: 07.06.2018 Date of Pronouncement: 18.06.2018
ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Jammu ('CIT(A)' for short) dated 25.03.2014, disallowing the assessee’s appeal contesting its’ assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 21.12.2009 for the Assessment Year (AY) 2007-08.
The appeal was posted for hearing for the captioned date as last opportunity, in view of the abundant opportunity for hearing having been granted in the past, which though remained un-responded despite notices of hearing having been served. In fact, even the last date of hearing, i.e., 26.04.2018, was reserved as a final opportunity, and the matter adjourned once again only in the interest of justice, noting that there had been no representation throughout in this case. The
2 ITA No.430/Asr/2014 (AY 2007-08) Northern Steel Industries v. ITO notice of hearing for today instant has come back unserved with the postal remarks ‘addressee left, return to the sender’ dated 25.05.2018. In fact, the appeal, which was dismissed on an earlier occasion for want of prosecution, stood recalled by the Tribunal (vide order in M.A. No. 23/Asr/2017, dated 27.10.2017) only with a view to afford opportunity to the assessee, a partnership firm, for representing its case before it. There is also no authorization on record; the counsel, Shri Abdul Majid Zargar FCA, authorized vide power of attorney dated 25.06.2014, having since withdrawn himself, issuing a No Objection Certificate (NOC) dated 03.06.2015 (copy on record). Though there is a letter dated 10.08.2015 (received by the registry on 19.08.2015) on record, stating that CA Nazir Ahmad Shikar has now been engaged to represent the assessee, there is no authorization in his favour on record. Under the circumstances, it is only considered proper to proceed with the hearing in the matter, i.e., qua the respondent-Revenue, so as to enable adjudication on merits based on the material on the record after hearing the party before me. A perusal of the record, however, reveals that the appeal is delayed by a period of 36 days. The assessee has filed a condonation petition dated 26.06.2014, which states of serious indisposition and hospitalization as the reasons for the delay in filing the appeal. The same is neither evidenced nor accompanied by an affidavit. The ground is however found reasonable, with the ld. Departmental Representative (DR) also, I must say fairly, not raising any serious objection thereto. The appeal was accordingly admitted for being decided on merits, i.e., after hearing the party before me.
The appeal raises the following grounds (revised): ‘1. The Hon’ble CIT(A) was not justified in deciding the appeal at the back of the appellant without giving him an opportunity of being heard. 2. The Hon’ble CIT(A) was not justified in enhancing the assessment without affording a reasonable opportunity to the appellant of showing cause against such enhancement.
3 ITA No.430/Asr/2014 (AY 2007-08) Northern Steel Industries v. ITO 3. The Hon’ble CIT(A) was not justified in relying on the submissions made by Appellant before Ld. ITO against the additions made by him and deciding the case solely on the basis of such submissions. In this way, the appellant was prevented from submitting further arguments in his defense. 4. The Hon’ble CIT(A) was not justified in upholding the addition of Rs.2,76,890/- u/s. 40(a)(ia) made by the Ld. ITO. 5. The Hon’ble CIT(A) was not justified in upholding the addition of Rs 2,23,200/- made by Ld. ITO on account of unvouched labor expenses. 6. The Hon’ble CIT(A) was not justified in upholding the addition of Rs.15,000/- made by Ld. ITO on account of unvouched staff tea and food expenses. 7. The Appellant craves leave to add, amend, alter or substitute any other ground necessary to meet ends of justice.’ 4. The first (and third) ground pleads lack of opportunity of being heard by the ld. CIT(A). I find no basis for the said contention, and neither has any material in support thereof been brought on record. On the contrary, para 3 of the impugned order notes of opportunity for presenting its’ case being granted on different dates, which though remained unavailed. An authority can only grant opportunity, and it is for the appellant/litigants (parties) to avail the same. Surely, if the time granted was found short, or proper representation not possible for any other reason, the assessee could have requested for further time, indicating his preference which, in that case, I am sure would have been acceded to by the first appellate authority. Further, the assessee, if unable or unwilling to expend time and effort to prosecute its’ appeal before the first appellate authority, located at Jammu, which is at a distance from its location at Srinagar, could have preferred written submissions, even as noted by the ld. CIT(A) upon the assessee indicating its’ disinclination to attend the proceedings at Jammu. The assessee has even before the Tribunal not made any arrangement for proper representation, with even the counsel appointed for the same withdrawing himself. I therefore find no merit in the assessee’s said grounds, which are accordingly dismissed.
4 ITA No.430/Asr/2014 (AY 2007-08) Northern Steel Industries v. ITO 5. Ground 2 of the appeal states of an enhancement having been effected by the ld. CIT(A) without affording proper opportunity, i.e., show causing the assessee in its respect. The ld. DR would during hearing explain that it would be incorrect, and in fact a misrepresentation, to state of the relevant direction to the Assessing Officer (AO) by the ld. CIT(A) as being in respect of an ‘enhancement’. He observing the AO to have made a disallowance of Rs.17,358 u/s. 40A(3), vide para 2.3.2 of the assessment order, which though had inadvertently been omitted to be included while computing the assessee’s taxable income, directed the AO to do so. I find no basis in the assessee’s claim for non-grant of opportunity, as made per its’ Ground 2. This is particularly so as the assessee has itself failed to avail the opportunities of hearing granted to it by the ld. CIT(A) and, further, that it had through its’ representative (Sh. A.M. Zargar) on 18.11.2009, itself acceded to the said disallowance u/s. 40A(3) on being required by the AO to show cause as to why the same, in view of clear contravention of section 40A(3) (as noted at para 2.3.1 of his order), be not effected. The assessee, it may be noted, has not contested the disallowance on merits, either in appeal before the first appellate authority or even before the tribunal. So, however, to accord with the principle of natural justice, the AO shall, at the time of appeal-effect giving order, require the assessee to show of any prejudice having been caused to it by the AO in not computing the assessee’s income correctly, i.e., by including the said disallowance of Rs.17,358, and dispose the matter accordingly, i.e., meeting the assessee’s objection, if any, raised before him, and in accordance with law. I decide accordingly.
Ground 4 agitates the disallowance of Rs.2,76,890/- u/s. 40(a)(ia) of the Act. The assessee, a manufacturer of conductors, steel tubular poles, as well as undertaking fabrication work, was observed to have incurred freight expenditure in the said sum without deducting tax at source, exigible to tax deduction u/s. 194C.
5 ITA No.430/Asr/2014 (AY 2007-08) Northern Steel Industries v. ITO The same was accordingly disallowed non-accepting the assessee’s explanation that the disallowance u/s. 40(a)(ia) would arise only qua the amount payable as at the relevant year-end. The same was confirmed in appeal in-as-much as the assessee failed to improve its’ case in any manner, with the plea taken being not acceptable in view of the decision in CIT v. Crescent Export Syndicate [2013] 262 CTR 525 (Cal). The position continues to be the same before me as well, with, rather, the view of the Hon'ble High Court in Crescent Export Syndicate (supra) having been since confirmed in Palam Gas Service v. CIT [2017] 394 ITR 300 (SC). Be that as it may, if the assessee can show that the tax on the relevant income has been paid, i.e., as where the payee/service provider has included the sum under reference while computing and returning his income, there is no question of the assessee being deemed to be in default qua the same and, therefore, liable for disallowance u/s. 40(a)(ia), which stands since amended to incorporate the said condition. Though no such contention stands made at any stage, I state so only as the matter of abundant caution, so as to avoid any miscarriage of justice. The assessee shall be given a reasonable and final opportunity for the same by the AO, i.e., prior to giving appeal-effect to this order. The AO shall verify the assessee’s claim so as to satisfy himself with regard to the veracity thereof, i.e., where made, before closing the matter, deciding the same in accordance with law. I decide accordingly.
The next and fifth ground of appeal is in respect of expenditure booked as labour expenditure, stated to be paid to one, Sh. Umesh Choudhary, i.e., on the assessee being unable to substantiate the same in any manner. The absence of any material vouching the said expenditure being admitted (refer para 2.4.2 of the assessment order), the disallowance was effected, and sustained in appeal in view of no improvement in its’ case by the assessee before the ld. CIT(A). There is even
6 ITA No.430/Asr/2014 (AY 2007-08) Northern Steel Industries v. ITO no explanation as to why the expenditure is not evidenced. The position continues to be the same before me as well and, therefore, the impugned disallowance merits being confirmed. I decide accordingly.
The last and the sixth ground is in respect of disallowance of expenditure on tea and food for staff, made in the absence of any vouchers to substantiate the same. The position being the same before the first as well me, the second appellate authority, the same, sustained in first appeal, is liable to be confirmed. However, considering that vouchers in respect thereof are not readily forthcoming, I direct restriction of the disallowance to 50% of the impugned amount.
In the result, the assessee’s appeal is partly allowed. Order pronounced in the open court on 18th June, 2018
Sd/- (Sanjay Arora) Accountant Member Date: 18.06.2018 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Northern Steel Industries, Srinagar, Kashmir (2) The Respondent: I.T.O., Ward 3(2), Srinagar, Kashmir (J&K) (3) The CIT(Appeals) Jammu (4) The CIT concerned (5) The Sr. DR, I.T.A.T