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Income Tax Appellate Tribunal, HYDERABAD ‘A’ BENCH, HYDERABAD.
Per Shri Bhagirath Mal Biyani, A.M.: This appeal by the assessee is directed against the order dated 18/05/2018 passed by the learned Commissioner of Income Tax (Appeals)-3, Hyderabad [“Ld. CIT(A)” in short] in Appeal No. ITA No. 0173/ITO- 3(3)/Hyd/CIT(A)-3/2015-16, which in turn arises out of the
2 ITA No.50/Hyd/2022 assessment-order dated 30.03.2015 passed by the learned ITO, Ward-3(3), Hyderabad [“Ld. AO” in short] u/s 143(3) of Income Tax Act, 1961 [“the Act” in short] for Assessment-Year 2012-13.
The assessee has raised the following grounds:
“1. The order of Ld. CIT(A) dismissing the appeal on account of non-appearance and also on merits without considering the grounds urged relying on case law not relevant to the facts of instant case and confirming the AO's Order is erroneous in law, contrary to facts, probabilities of the case and against the principles of equity and natural justice.
The Ld. CIT(A) erred in law and facts by not appreciating in proper perspective that the expenditure of Rs. 14,97,686/- towards Coal Handling Charges through account payee cheques to three persons apart from the transport charges incurred wholly and exclusively for the purpose of business and hence to allowed under section 37 of the Income tax act, 1961.
The Ld. CIT(A) further erred in law in invoking the provisions of section 40(a)(ia) and relying on case law pertaining to the said provision where in-fact the order of AO has never mentioned the invoking of said provisions and addition was made solely by disbelieving the genuine expenditure incurred wholly and exclusively for the purpose of business despite providing PAN numbers, bank statements reflecting the said payments through account payee cheques etc. and simply by alleging that the three persons were not produced for cross examination without invoking the vested powers u/s 133(6) and 131 of the Act.
For these and other reasons that may be urged at the time of hearing, the appellant prays the Honorable Tribunal to kindly
3 ITA No.50/Hyd/2022 condone the delay in filing the appeal and delete the addition made by AO and sustained by CIT(A) in accordance with law.” 3. At the start of hearing the Ld. AR submitted that the present appeal ought to have been filed by 17/07/2018 but the same could be filed only on 02/03/2022, after a delay of 1324 days. The Ld. AR submitted that the assessee has moved an application for condonation of delay supported by the requisite affidavit. The reason of delay, as submitted by the assessee, is that the order of Ld. CIT(A) was passed on 18/05/2018. But the counsel of the assessee to whom the work of first-appeal before Ld. CIT(A) was entrusted, had mentioned his own name, address, phone number and email in the space titled “Address to which notices may be sent to the appellant” in Form No. 35 [Form of Appeal to CIT(A)]. But neither the counsel appeared before the Ld. CIT(A) in appeal-proceeding nor informed the assessee about the fixation or disposal of the appeal. Thereafter it is on receipt of the notice of penalty on 20/01/2022 from National Faceless Assessment Centre that the assessee initiated enquiries in the matter and came to know that the appeal had already been disposed of on 18/05/2018. It is
4 ITA No.50/Hyd/2022 further submitted that since the assessee was not aware of the “Date of Service of the order” of Ld. CIT(A), it has mentioned the same date i.e. 18/05/2018 against not only the space titled “Date of order” but also against the “Date of service or communication of the order” in the Form No. 36 [Form of Appeal to the Appellate Tribunal] submitted to this Bench. The Ld. AR submitted that being unaware of the disposal of first-appeal by the Ld. CIT(A), the assessee was not in a position to institute the present appeal to this Tribunal within 60 days from 18/05/2018, but immediately after becoming aware of it on 20/01/2022, the assessee engaged another counsel and filed the present appeal on 02/03/2022 which is well within 60 days from 20/01/2022. The Ld. AR submitted that by delayed filing, the assessee does not stand to derive any benefit or advantage. The Ld. AR also submitted that the delay is due to the sufficient cause and there is no malafides on the part of the assessee. In these circumstances, relying upon the decision of Hon’ble Apex Court in Collector, Land Acquisition Vs. MST Katiji and Others (1987) 167 ITR
5 ITA No.50/Hyd/2022 471, Hon’ble Karnataka High Court in (2013) 263 CTR (Kar) 549 and Hon’ble ITAT in (2021) 212 TTJ (Bang) 261 Natural Remedies (P) Ltd. Vs. ACIT, the Ld. AR prayed to condone the delay. We find sufficient strength in the submission of Ld. AR. We confronted the Ld. DR, who without demonstrating any objection, left the matter to the wisdom of the Bench. Taking into account that there was a sufficient cause of delay as explained by the assessee and having regard to the decision of Hon’ble Apex Court, we condoned the delay and proceeded for hearing of the appeal.
The solitary grievance of the assessee emerging out of the various grounds is the disallowance of Rs. 14,97,686/- made by the Ld. AO on account of coal handling charges.
Precisely stating the facts are such that the assessee is a company engaged in the business of coal transportation. During the assessment proceeding, the Ld. AO found that the assessee has claimed a deduction of Rs. 14,97,686/- on account of “coal handling charges”. When
6 ITA No.50/Hyd/2022 the Ld. AO called for the details of the expenditure, the assessee submitted the following details:
The assessee also submitted that the payees are tipper owners to whom the above payments aggregating to Rs. 14,97,686/- had been made in addition to the normal transportation charges. These additional payments, which are called as “coal handling charges” have been paid in the course of carrying on the transportation business and thus incurred wholly and exclusively for the purpose of business. The Ld. AO asked the assessee as to whether these persons have offered the impugned payments in their respective returns for income tax purpose. In response, the assessee informed the Ld. AO that although these persons have not filed returns but non-filing of returns does not make the expenditure disallowable because the expenditure is incurred for the purpose of business carried on by the
7 ITA No.50/Hyd/2022 assessee. The assessee also provided PANs of these persons to the Ld. AO and requested the Ld. AO to make a reporting to the Assessing Officers holding jurisdiction over these persons about non-filing of returns. Rejecting the submission of the assessee, the Ld. AO completed the assessment after disallowing the claim of Rs. 14,97,686/- with the reasoning mentioned in Para 2.2 of the Assessment-Order, the main reason being the non- production of the demonstrable and irrefutable evidence justifying the incurring of the expenditure. Additionally, the Ld. AO also mentioned in the assessment-order “The nature of payment i.e. coal handling charges is tried to be explained away as “Additional transportation charges” to avoid compliance with TDS provisions”. Being aggrieved by this action of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A).
The Ld. CIT(A) has, in Para No. VI of his order, noted about the non-participation of the appellant in the appeal proceeding and thereafter, in Para No. VII of his order, dealt with the claim of deduction of Rs. 14,97,686/-. Finally, the
8 ITA No.50/Hyd/2022 Ld. CIT(A) confirmed the disallowance and dismissed the appeal of assessee. Against the order of Ld. CIT(A), the assessee is now in appeal before us.
Before us, the Ld. AR submitted that the assessee is a company whose accounts were duly audited and the audited financial statements were submitted. The Ld. AR further submitted that during the course of assessment- proceeding, the assessee has produced books of account, bank statements and other documents as required by the Ld. AO. Regarding the claim of expenditure of Rs. 14,97,686/-, the assessee submitted names of the payees and their PANs as also the nature and basis of payment and these details are recorded in the order of assessment itself. The Ld. AR submitted that despite these submissions, the Ld. AO has made disallowance primarily on the premise that sufficient evidences in support of the expenditure were not adduced. The Ld. AR submitted that the assessee has claimed a very genuine deduction of expenditure incurred by it for the purpose of business and if the Ld. AO had any doubt at all, he could have directed the assessee to produce
9 ITA No.50/Hyd/2022 further evidences, before making disallowance. The Ld. AR submitted that even as of now the assessee is willing to provide the evidences whatever in its possession, for the satisfaction of the Ld. AO. The Ld. AR carried our attention to the order of Ld. CIT(A) and submitted that the Ld. CIT(A) has passed the order on merit but exparte qua the assessee due to non-appearance of the counsel and in his order, he has focused squarely on the section 40(a)(ia), though the very basis of disallowance by the Ld. AO was the lack of evidences and not the application of section 40(a)(ia). The Ld. AR expressed readiness to produce evidences, whatever it has in possession, to the Ld. AO even now in support of the claim. With these submissions, the Ld. AR prayed that the assessee will get justice only if the matter is remanded back to the Ld. AO to enable the assessee to produce the evidences in support of the claim.
Ld. DR, placing reliance on the assessment-order, argued that the Ld. AO has considered the submissions made by the assessee during assessment proceedings and thereafter made the disallowance, which is not faulty and
10 ITA No.50/Hyd/2022 hence the disallowance must be upheld. The Ld. DR, however, not only agreed to the contention put forward by the Ld. AR but also himself stressed that the disallowance is not made by Ld. AO on application of section 40(a)(ia); it was due to non-furnishing of evidences in support of the claim of expenditure.
We have considered the submission and contentions of both sides and perused the material available on record. Firstly, we observe that both sides agreed that the disallowance is not made on the premise of 40(a)(ia) of the Act, the observation made by Ld. AO with respect to non- deduction of tax at source was only a passing-remark. Stepping further, the consensus generated from the submission of both sides is that the Ld. AO has made disallowance for non-production of adequate evidences by the assessee in support of claim. We observe that neither the assessee could get proper opportunity to furnish sufficient evidences before the Ld. AO, nor it was adequately represented before the Ld. CIT(A) due to non-participation by the counsel. We also observe that the Ld. AR has made
11 ITA No.50/Hyd/2022 a fair willingness to adduce the evidences to the Ld. AO so that the Ld. AO shall be taking a proper conclusion. We, therefore, consider it appropriate to remit the matter back to the Ld. AO who shall give adequate opportunity to the assessee to submit the evidences. We also direct the assessee to avail the opportunity given by Ld. AO without fail and place the evidences in support of his claim. With this, the grievance of the assessee is adequately resolved.
In the result, this appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 24th Mar., 2022.
Sd/- Sd/- (K. NARASIMHA CHARY) (BHAGIRATH MAL BIYANI) Judicial Member Accountant Member Hyderabad, Dt. 24.03.2022. * Reddy gp Copy to : 1. M/s. Srimaan Industries Pvt. Ltd., C/o Anjaneyulu & Co., 30, Bhagyalakshmi Nagar, Gandhinagar, Hyderabad-500 080 2. ITO, Ward 3(3), Hyderabad. 3. Pr. C I T-3, Hyderabad. 4. CIT(Appeals)-3, Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File.