RIFAH SHOES P LTD.,CHENNAI vs. DCIT CORPORATE CIRCLE 5(2), CHENNAI

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

As per the ld. Authorised Representative, the directions given by this Tribunal was to ascertain whether the expenditure made by the assessee, claimed by it as repairs and renewal of compound walls, relaying of connecting roads and construction of temporary dining hall for the workers, were actually incurred for these purpose or were capital outgoes. As per the ld. Authorised Representative, the matter when taken up by the ld. Assessing Officer afresh to give effect to the order of the Tribunal, he had issued a show cause notice on 07.09.2016 to the assessee, requiring it to produce the ledger copy, copies of bills and to explain the nature of the construction. Contention of the ld. Authorised Representative was that assessee was given time only upto 12.09.2016 and effectively denied opportunity to represent its case. Ld. Authorised Representative further submitted that assessee in its appeal before ld. Commissioner of Income Tax (Appeals) furnished various records proving the nature of the construction and also the evidence for expenditure incurred. However, as per the ld. Authorised Representative, ld. Commissioner of Income Tax (Appeals) refused to consider such evidence holding that assessee had not availed the opportunity given by the ld. Assessing Officer. Ld. Authorised Representative submitted that assessee was denied natural justice and hence the orders of the lower authorities had to be set aside.

Per contra, ld. Departmental Representative submitted that 3.

ld. Commissioner of Income Tax (Appeals) had specifically noted the failure of the assessee to file any reply or atleast a letter seeking adjournment to the show cause notice issued by the ld. Assessing Officer. Thus, according to the ld. Departmental Representative, assessee was not correct in saying that there was any violation of natural justice.

‘’10. Sh. Raghav Prasad, the Ld. representative. submitted that the assessee-company debited an amount of �25,88,711/- under the head “repairs and renewals”. According to the Ld. representative, the assessee incurred expenditure for construction of compound wall and relaying of connecting roads. According to the Ld. representative, major expenses had been used for construction of wall and relaying of connecting roads. According to the Ld. representative, the compound wall was damaged due to heavy rain. The assessee has also constructed temporary dining hall for the workers in the factory. The Ld. representative submitted that the Assessing Officer disallowed the claim of the assessee on estimate basis and disallowed the sum of �15,53,226/-. However, on appeal by the assessee, the CIT(Appeals) found that the expenditure disallowed by the Assessing Officer is in the nature of capital, therefore, the Assessing Officer should allow depreciation. According to the Ld. representative, these expenses are revenue in nature. Therefore, the entire expenditure ought to have been allowed.

When the matter was taken up by the ld. Assessing Officer, ld. Assessing Officer indeed issued a show cause notice to the assessee which read as under:-

‘’In your case for the Asst. Year 2010-2011, the ITAT has setaside the assessment and given direction to examine the books of accounts of the assessee so as to verify issue of repairs and renewals. In this regard you are requested to furnish ledger copy, nature of construction and copy of bills in the head of ‘’repairs and renewals’’ of compound wall and construction of temporary dining hall for an amount of �25,88,711/- and any other supporting evidences for these expenses are in capital in nature.

The above details to be furnished on or before 12.09.2016. No further opportunity would be granted. Failure to furnish the evidences, the assessment will be completed disallowing the expenses relating to ‘’repairs and renewals’’.

The above show cause notice was issued on 07.09.2016. The date on which it was served to the assessee is not clear from the records.

However, time given to the assessee was only upto 12.09.2016 viz about five days. When the matter reached the ld. Commissioner of Income Tax (Appeals), ld. Commissioner of Income Tax (Appeals) relied on the definition of natural justice as given by Shri. K.J. Aiyar in his ‘’Judicial dictionary’’. Whatever may be the definition of natural justice given by Shri. K.J. Aiyar in his book, we find that ld. Assessing Officer was not fair in giving only five days to the assessee, which included the date of notice, for furnishing evidence on its claim of repairs and renewals. Assessee had filed documents before ld. Commissioner of Income Tax (Appeals) who refused to consider it for a sole reason that assessee had not replied to the show cause notice issued by the ld. Assessing Officer nor furnished an adjournment application. In the circumstances, we are of the opinion that ld. Assessing Officer needs to relook the issue after giving proper opportunity to the assessee to explain its case. We set aside the orders of the lower authorities and remit the issue regarding the claim of repairs and renewals back to the file of the ld. Assessing Officer for consideration afresh in accordance with law.

Order pronounced on Tuesday, the 17th day of July, 2018, at Chennai.